Henry V Cash Biz - Response To Petition For Review

FILED
16-0854
12/30/2016 7:36:58 AM
tex-14500944
SUPREME COURT OF TEXAS
BLAKE A. HAWTHORNE, CLERK
NO. 16-0854
IN THE SUPREME COURT OF TEXAS
HIAWATHA HENRY, ADDIE HARRIS, MONTRAY NORRIS,

and ROOSEVELT COLEMAN, JR., on behalf of
themselves and for all other similarly situated
Petitioner
v.
CASH BIZ, LP, CASH ZONE, LLC

D/B/A CASH BIZ and REDWOOD FINANCIALS, LLC
Respondent
FROM THE COURT OF APPEALS FOR THE FOURTH DISTRICT OF TEXAS

NO. 04-15-00469-CV
RESPONDENT’S RESPONSE TO PETITION FOR REVIEW
Edward S. Hubbard Patrick E. Gaas

State Bar No. 10131700 State Bar No. 07562790
ehubbard@coatsrose.com pgaas@coatsrose.com
COATS ROSE, P.C.

9 Greenway Plaza, Suite 1100
Houston, Texas 77046
(713) 651-0111
(713) 651-0220 Facsimile
COUNSEL FOR RESPONDENTS

_____________________________________________________________________
STATEMENT OF THE CASE

_____________________________________________________________________
Although the Petitioner’s Statement of the Case accurately presents certain
portions of the procedural history of the case, it is not complete. The following
Statement of the Case supplements the Petitioner’s Statement of the Case.
The Petition seeks review of a decision of the Fourth Court of Appeals,
which resolved an interlocutory appeal brought by Respondents Cash Biz, LP,
Cash Zone, LLC d/b/a Cash Biz, and Redwood Financials, LLC (“Respondents”)
pursuant to Sections 51.016 and 171.098(a)(1) of the Texas Civil Practice and
Remedies Code, and in accordance with Rule 28.1 of the Texas Rules of Appellate
Procedure.
This case arises from separate, individual credit services agreements and
credit services disclosures statements, between each of the Petitioners and the
Respondents, as well as Loan Disclosures, Promissory Note and Security
Agreements (hereinafter collectively referred to as “Loan Contracts”). Each of the
Loan Contracts with each Petitioner was in writing and contained a provision
requiring arbitration, and waiving class action lawsuits and arbitrations. After the
Petitioners defaulted on the repayment obligation under their respective Loan
Contracts, the Respondents conducted separate investigations that, in each
i
instance, uncovered information that led them to believe that each Petitioner had
engaged in separate, specific criminal acts during the formation and performance
of their respective Loan Contracts. Based on the concerns raised by the
information that the Respondents uncovered, they separately reported this
information to each state prosecutor with jurisdiction over each Petitioner.
Prosecutors subsequently pursued criminal actions against some of the Petitioners.
Meanwhile, the Respondents took no action against any of the Petitioners in any
civil proceeding.
The Petitioners joined together and filed this malicious prosecution, fraud
and statutory action against Cash Biz, seeking class action status, in the 224th
District Court of Bexar County, Texas. The core of the Petitioners’ claim is that
when the Respondents provided information or complaints to state prosecutors,
they engaged in improper loan collection activities. In response to this suit, the
Respondents filed a motion to compel arbitration, to enforce the contractual waiver
of class action lawsuits, and to stay the litigation pursuant to the Texas Arbitration
Act (“TAA”), Sections 171.001-171.098 of the Texas Civil Practice and Remedies
Code, and the Federal Arbitration Act (“FAA”), 9 U.S.C.A. §§ 1-16.
The motion was assigned for hearing to the 166th District Court of Bexar
County, Texas. After conducting an oral hearing on the motion, the trial court
denied the motion in its entirety and signed the order from which the Respondents
ii
appealed.
The interlocutory appeal was submitted for ruling after oral argument and
full briefing, including several supplemental briefs filed by both parties. A three-
judge panel of the Fourth Court of Appeals reversed the ruling of the trial court,
and rendered judgment in favor of arbitration and the waiver of the class actions,
with one justice dissenting. After the ruling was issued, Petitioners’ moved for
rehearing and en banc review. Both motions were considered by the appellate
court (together with the Respondents’ response) and were denied.
iii
TABLE OF CONTENTS
STATEMENT OF THE CASE .................................................................................. i

SUMMARY OF THE ARGUMENT ........................................................................9
STATEMENT OF FACTS ......................................................................................12
ARGUMENT ...........................................................................................................13
A. The Majority Opinion correctly applied the proper standards of review to

questions of law and findings of fact.................................................................13
B. The Majority Opinion correctly applied the law governing the burdens of proof
on the issues raised by the parties in the trial court ...........................................17
C. There is no split of authority justifying further review by this Court ...............21
I. The PLS Memorandum Opinion ..................................................................22
II. The Harrison Opinion ...................................................................................25

CONCLUSION ........................................................................................................26
PRAYER ..................................................................................................................27
CERTIFICATE OF COMPLIANCE .......................................................................28
CERTIFICATE OF SERVICE ................................................................................29
iv
TABLE OF AUTHORITIES
Page(s)
Cases
Amalgamated Local No. 55, United Automobile, Aerospace &
Agricultural Implement Workers of Am. v. Metal and Alloy Div. of
Silver Creek Precision Corp.,
396 F.Supp. 667 (W.D. N.Y. 1975) .................................................................... 16
AT&T Mobility v. Concepcion,

563 U.S. 333 (2011) .......................................................................................... 2, 9
AT&T Technologies, Inc. v. Communications Workers of Am.,
475 U.S. 643 (1986) ................................................................................1, 3, 7, 11
Capital Income Properties v. Blackmon,
843 S.W.2d 22 (Tex. 1992)................................................................................... 9
Consorcio Rive, S.A. De C.V. v. Briggs of Cancun, Inc.,

134 F.Supp.2d 789 (E.D. La. 2001) .................................................................... 16
Cooper Indus., LLC v. Pepsi-Cola Metro. Bottling Co., Inc.,

2015 Tex. App. LEXIS 8882 (Tex. App.—Houston [14th Dist.],
August 25, 2015)................................................................................................... 9
DirectTV, Inc. v. Imburgia,

___ U.S. ___, 136 S.Ct. 463 (2015).................................................................. 2, 9
G.T. Leach Builders, LLC v. Sapphire V.P., L.P.,
458 S.W.3d 502 (Tex. 2015) ......................................................................6, 7, 12
Garcia v. Huerta,
340 S.W.3d 864 (Tex. App.—San Antonio 2011, pet. denied) ............................ 7
Gatlin v. P.O.A. Criscione Star #16195,

2008 WL 2745956 .............................................................................................. 16
Griffin v. Burlington Volkswagon, Inc.,

411 N.J.Super. 515, 988 A.2d 101 (NJ. App. Div. 2010) .................................. 16
v
Horizon Health Corp. v. Tyler-Holmes Memorial Hosp.,
284 F. Supp. 2d 439 (N.D. Miss. 2003)........................................2, 3, 5, 8, 10, 11
In re Amos,
397 S.W.3d 309 (Tex. App.—Dallas 2013, orig. proceeding)
(following Bell v. State, 2006 WL 3628916, at *5 (Tex. App.—
Houston [1st Dist.] 2006, no pet.)....................................................................... 15
In re Christus Spohn Health System Corp.,

231 S.W.3d 475 (Tex. App.—Corpus Christi-Edinburg 2007, orig.
proceeding) ...................................................................................................14, 15
In re Fleetwood Homes,
257 S.W.3d 692 (Tex. 2008) ................................................................................ 7
In re Flores,
2016 WL 890969 (Tex. App.—Dallas 2016, orig. proceeding) ......................... 15
In re Jeffory Blackard,
Cause Nos. 5-16-00478, 5-16-00479, 5-16-00480 (Tex. App.—
Dallas, April 29, 2016, orig. proceeding) ........................................................... 15
In re Kellogg Brown & Root,
166 S.W.3d 732 (Tex. 2005) ................................................................................ 6
In re Labatt Food Serv., L.P.,

279 S.W.3d 640 (Tex. 2009) (orig. proceeding) .................................................. 7
In re Rubiola,
334 S.W.3d 220 (Tex. 2011) ................................................................................ 6
In re Weekley Homes, L.P.,

180 S.W.3d 127 (Tex. 2005) ................................................................................ 9
In re Wingfield, 171 S.W.3d 374, 381 (Tex. App.—Tyler 2005, orig.

proceeding) ......................................................................................................... 15
J.M. Davidson, Inc. v. Webster,

128 S.W.3d 223 (Tex. 2003) ......................................................................6, 7, 11
Kennedy Hodges, L.L.P. v. Gobellan,
433 S.W.3d 542 (Tex. 2014) ................................................................................ 7
vi
McReynolds v. Elston,
222 S.W.3d 731 (Tex. App.—Houston [14th Dist.] 2007, orig.
proceeding) ......................................................................................................... 11
Mendelsohn v. A&D Catering Corp.,

119 Misc.2d 581, 464 N.Y.S.2d 331 (N.Y. 1983) .............................................. 16
Municipal Energy Agency of Mississippi v. Big Rivers Elec. Corp.,
804 F.2d 338 (5th Cir. 1986) ............................................................2, 3, 7, 10, 11
Myers v. Rosenberg,
1986 WL 3329 (N.D. Ill. 1986) .......................................................................... 16
NCP Finance Ltd. Partnership v. Escatiola,

350 S.W.3d 152 (Tex. App.—San Antonio 2011, no pet.) ........................2, 9, 17
Perry Homes v. Cull,
258 S.W.3d 580 (Tex. 2008) .............................................................................. 12
Pilot Travel Ctrs., LLC v. McCray,
416 S.W.3d 168 (Tex. App.—Dallas 2103, no pet.) .......................................... 11
Prescott-Follett & Assocs., Inc. v. Delasa/Prescott Folett & Assocs.,

2002 WL 31528463 (E.D. La. 2002) .................................................................. 16
Preston v. Ferrer,
552 U.S 346 (2008) ............................................................................................... 9
Primerica Life Ins. Co. v. Brown,
304 F.3d 469 (5th Cir. 2002) ........................................................2, 3, 5, 7, 10, 11
Principal Investments v. Harrison,

2016 WL 166011, 132 Nev. Adv. Op. 2, ___ P.3d ___ (2016).......................... 17
Smith Barney Shearson, Inc. v. Boone,

838 F. Supp. 1156 (N.D. Tex. 1993) ................................................2, 3, 8, 10, 11
Snap-On Tools Corp. v. Mason,

18 F.3d 1261 (5th Cir. 1994) ..................................................................2, 3, 7, 11
Southland Corp. v. Keating,

465 U.S. 1 (1984) .................................................................................................. 9
vii
Southwind Group, Inc. v. Landwehr,
188 S.W.3d 730 (Tex. App.—Eastland 2006, orig. proceeding) ....................... 11
Suburban Leisure Center, Inc. v. AMF Bowling Products, Inc.,

468 F.3d 523 (8th Cir. 2006) .............................................................................. 10
Subway Equip. Leasing Corp. v. Forte,

169 F.3d 324 (5th Cir. 1999) .............................................................................. 16
Taft v. Burttram,
254 Ga. 687, 333 S.E.2d 585 (1985) .................................................................. 17
Tuscan Builders, L.P. v. 1437 SH6 L.L.C.,

438 S.W.3d 717 (Tex. App.—Houston [1st Dist.] 2014, pet.
denied)............................................................................................................. 7, 11
Venture Cotton Co-op v. Freeman,
435 S.W.3d 222 (Tex. 2014) ................................................................................ 6
Statutes
Federal Arbitration Act (FAA) ................................. 3, 5, 7, 9, 10, 11, 13, 14, 17, 18
Texas Arbitration Act (TAA)..................................................................... iii, 5, 9, 11
TEX. CIV. PRAC. & REM. CODE § 51.016 .....................................................................i
TEX. CIV. PRAC. & REM. CODE § 171.021(b) ...................................................6, 7, 11

TEX. CIV. PRAC. & REM. CODE §§ 171.001-171.098 ................................................ ii
9 U.S.C.A. §§ 1-16.................................................................................................... ii
Other Authorities
Federal Rules of Civil Procedure Rule 12(b).........................................10, 11, 12, 14
Texas Rules of Appellate Procedure Rule 28.1 ........................................................ ii
viii
TO THE HONORABLE SUPREME COURT:
Respondents, Cash Biz, LP, Cash Zone, LLC d/b/a Cash Biz, and Redwood
Financials, LLC (“Respondents”), present this Response in opposition to the
Petition for Review filed by Petitioners, Hiawatha Henry, Addie Harris, Montray
Norris, and Roosevelt Coleman, Jr., on behalf of themselves and for all other
similarly situated (“Petitioners”).
_____________________________________________________________________
SUMMARY OF THE ARGUMENT

_____________________________________________________________________
The Respondents recognize that they are members of an industry whose
business model and practices have been the subject of recent public criticism. This
criticism, regardless of its accuracy or fairness, has fostered a negative public
perception of the industry. The Petitioners’ (as well as the Amicus’) substantive
allegations about the merit of the underlying action (including their reliance on
materials such as a Texas Appleseed Report and various newspaper articles)
present arguments, inferences, conclusions and unverified quotes from out-of-court
interviews that build-on and re-enforce this public perception. The Petitioners
promote this public perception as a reason for granting their Petition for Review.
However, the merit of the Petitioners’ underlying allegations was not for the
lower courts, or for this Court, to decide at this stage of the proceeding. AT&T
Technologies, Inc. v. Communications Workers of Am., 475 U.S. 643, 649 (1986);
Primerica Life Ins. Co. v. Brown, 304 F.3d 469, 471 (5th Cir. 2002); Snap-On Tools
Corp. v. Mason, 18 F.3d 1261, 1267 (5th Cir. 1994); Municipal Energy Agency of
Mississippi v. Big Rivers Elec. Corp., 804 F.2d 338, 342 (5th Cir. 1986); Horizon
Health Corp. v. Tyler-Holmes Memorial Hosp., 284 F. Supp. 2d 439, 441 (N.D.
Miss. 2003); Smith Barney Shearson, Inc. v. Boone, 838 F. Supp. 1156, 1158 (N.D.
Tex. 1993). The Fourth Court of Appeals’ Majority Opinion (“Majority
Opinion”), and its decisions to deny a rehearing or en banc review, are consistent
with this principle, as well as federal and Texas law enforcing arbitration and
waiver-of-class-action provisions. See DirectTV, Inc. v. Imburgia, ___ U.S. ___,
136 S.Ct. 463 (2015); AT&T Mobility v. Concepcion, 563 U.S. 333 (2011); NCP
Finance Ltd. Partnership v. Escatiola, 350 S.W.3d 152, 155 (Tex. App.—San
Antonio 2011, no pet.).
In fact, the fallacy at the heart of the Petitioners’ (and Amicus’) argument
has been, and continues to be, their total reliance upon the alleged merit of the
underlying case to establish defenses to substantive arbitrability. That is, the
Petitioners argue that the alleged operative facts giving rise to their causes of
action (i.e., that the Respondents’ presentation of information and criminal
complaints to various district attorneys allegedly constituted an improper attempt
to collect a civil debt in violation of tort and statutory law) prove their defenses to
10
substantive arbitrability. Actually, the Petitioners presented no defense to
substantive arbitrability other than their reliance on the operative facts of their
underlying claim. So, when it denied the motion to compel arbitration based on
the Petitioners’ arguments, the trial court necessarily analyzed and pre-judged the
merit of the Petitioners’ underlying allegations. Unfortunately, the dissenting
opinion in the Fourth Court of Appeals makes this same fundamental error.
When deciding the issue of arbitrability under the Federal Arbitration Act
(“FAA”), a trial court is legally prohibited from considering the merits of an
underlying claim or defense. AT&T Technologies, Inc., 475 U.S. at 649; Primerica
Life Ins. Co., 304 F.3d at 471; Snap-On Tools Corp., 18 F.3d at 1267; Municipal
Energy Agency of Mississippi, 804 F.2d at 342; Horizon Health Corp., 284 F.
Supp. 2d at 441; Smith Barney Shearson, Inc., 838 F. Supp. at 1158. Applying this
rule to the present case, the Petitioners never presented a cognizable defense to
substantive arbitrability to either the trial court, or the Court of Appeals. Instead,
they simply have argued the merit of their allegations in underlying case as the
reason for denying arbitration.1
1
Petitioners now refer to a recent, pre-election newspaper article from the San Antonio Express-
News, which prominently contained an interview with Petitioners’ counsel. This self-serving
article discusses the Fourth Court’s decision, and campaign contributions to the authoring justice
of the Majority Opinion by the law firm representing the Respondents, largely from the
perspective of Petitioners’ counsel. Petitioners argue that the mere existence of this article is
evidence as to why this Court should grant review. This tactic of impugning the integrity of
those who refuse to adopt the Petitioners’ arguments adds nothing to the merit of the Petition.
The reference to the article is not evidence, and should be disregarded by this Court.
11
Consequently, the Majority Opinion correctly avoided wading into the merit
of the Petitioners’ underlying allegations, and correctly applied the well-
established Texas and Federal law governing substantive arbitrability to reverse the
trial court’s order.
Because the Majority Opinion correctly applied the law to this case, this
Petition for Review should be denied.
_____________________________________________________________________
STATEMENT OF FACTS
_____________________________________________________________________
It is the Respondents’ position that the Petitioners’ Statement of Facts is
essentially a lengthy argument of the allegations they believe support their
underlying lawsuit. As such, that section of the Petition is mostly irrelevant to the
resolution of the issue of substantive arbitrability before this Court, regardless of
its accuracy—which the Respondents vehemently contest.
Instead, the Respondents present the following uncontested facts, which are
relevant to the issue before this Court:
 the Petitioners entered into transactions with the Respondents memorialized

by the Loan Contracts, which contained a broad-form arbitration and waiver-
of-class-action provision;
 the Respondents submitted information and complaints to various state

prosecutors concerning behavior of the Petitioners, which the Respondents
12
believed constituted criminal conduct, but otherwise did not pursue any civil
proceedings against the Petitioners;
 the Petitioners brought the present action alleging that they were damaged as
result of the Respondents’ conduct, which the Petitioners allege constituted
an improper attempt to collect a civil debt in violation of tort and statutory
law;
 the Respondents sought to enforce the Loan Contracts by moving to compel

arbitration and enforce the waiver-of-class action provision;
 the trial court denied the motion, finding that the Respondents conduct
giving rise to the Petitioners’ substantive allegations also waived
enforcement of the arbitration provision; and
 the Fourth Court of Appeals, in a 2-1 opinion, reversed the trial court order,
and rendered judgment enforcing the arbitration and waiver-of-class action
provision of the Loan Contracts.
_____________________________________________________________________
ARGUMENT
_____________________________________________________________________
A. The Majority Opinion correctly applied the proper standards of

review to questions of law and findings of fact
Under both the TAA and the FAA, the movant seeking to compel has the
initial burden to prove, and the court must initially decide, only two issues:2
1. Is there a valid arbitration agreement; and
2. If so, does the agreement encompass the claim.

2
Federal Courts also recognize another step, which requires the trial court to determine whether
arbitration of the dispute would be prohibited by another law. Primerica Life Ins. Co., 304 F.3d
at 471; Horizon Health Corp., 284 F. Supp. 2d at 441. The Appellees did not raise this issue in
the trial court, or to this Court, and they have not presented any such law to this Court in their
Motion.
13
In re Rubiola, 334 S.W.3d 220, 223 (Tex. 2011); In re Kellogg Brown & Root, 166
S.W.3d 732, 737 (Tex. 2005); J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223,
227 (Tex. 2003). Once the movant meets its burden on these two elements, the
burden of proof shifts to the non-movants to prove defenses to arbitrability,
including waiver and prejudice. Venture Cotton Co-op v. Freeman, 435 S.W.3d
222, 227 (Tex. 2014); J.M. Davidson, Inc., 128 S.W.3d at 227.
As the Majority Opinion correctly noted, the first element of the
Respondents’ burden of proof—whether a valid arbitration agreement existed
between the parties—was not contested by the Petitioners. Therefore, the only
element of the Respondents’ initial burden of proof contested by the Petitioners in
the trial court was whether the dispute fell within the scope of the arbitration
provision. Once that burden was met by the Respondents, the burden of proof
shifted to the Petitioners to provide relevant evidence of waiver and prejudice,
which this Court has found to be a “high hurdle” to overcome. G.T. Leach
Builders, LLC v. Sapphire V.P., L.P., 458 S.W.3d 502, 512 (Tex. 2015).
The questions as to whether the disputes come within the scope of the
arbitration provision, and whether the relevant evidence presented by the non-
movant proves waiver and prejudice, are questions of law to be resolved by the
trial court. TEX. CIV. PRAC. & REM. CODE § 171.021(b); J.M. Davidson, Inc., 128
S.W.3d at 227; G.T. Leach Builders, LLC, L.P., 458 S.W.3d at 519-20. Then,
14
appellate courts apply the de novo standard of review to the trial court’s
determinations of these legal questions. G.T. Leach, Builders L.L.C., 458 S.W.3d
at 511; Kennedy Hodges, L.L.P. v. Gobellan, 433 S.W.3d 542, 545 (Tex. 2014); In
re Fleetwood Homes, 257 S.W.3d 692, 694 (Tex. 2008) (citing Perry Homes v.
Cull, 258 S.W.3d 580, 590, 598 (Tex. 2008)); J.M. Davidson, Inc., 128 S.W.3d at
227.
If the trial court has to make findings of fact in order to resolve the questions
of law, the trial court makes those findings by comparing the arbitration provision
with the pleadings and any supporting affidavits or discovery. TEX. CIV. PRAC. &
REM. CODE § 171.021(b); J.M. Davidson, Inc., 128 S.W.3d at 227. Although the
appellate courts defer to the trial court’s findings of fact under the “abuse of
discretion” standard, that deference is limited to those fact findings supported by
the record. In re Labatt Food Serv., L.P., 279 S.W.3d 640, 643 (Tex. 2009) (orig.
proceeding); Garcia v. Huerta, 340 S.W.3d 864, 868 (Tex. App.—San Antonio
2011, pet. denied). Federal law governing the FAA further limits the trial court’s
scope of review by prohibiting courts from considering the merits of the
underlying action when making findings of fact and resolving questions of law.
AT&T Technologies, Inc., 475 U.S. at 649; Primerica Life Ins. Co., 304 F.3d at
471; Snap-On Tools Corp., 18 F.3d at 1267; Municipal Energy Agency of
15
Mississippi, 804 F.2d at 342; Horizon Health Corp., 284 F. Supp. 2d at 441; Smith
Barney Shearson, Inc., 838 F. Supp. at 1158.
The Majority Opinion correctly applied these standards of review, and the
legal presumptions that strongly favor arbitration, by considering the factual
findings of the trial court relevant to the legal questions that were addressed and
decided by the trial court. Applying the de novo standard to the second element of
the Respondents’ burden, the Majority found that the dispute as pled by the
Petitioners fell within the scope of the broad-form arbitration provision. Then, the
Majority looked at the relevant factual evidence produced by the Petitioners to
support their claim of waiver and prejudice—proof that the Respondents were the
complainants in several criminal actions involving the Petitioners—and correctly
determined that those facts do not clear the “high hurdle” of proof required to show
waiver or prejudice.
What the Petitioners continue to seek is not a proper application of the
“abuse of discretion” standard to the trial court’s factual findings, but rather a
ruling on the merit of their underlying action by relying on third-party reports and
newspaper articles to argue that their claims have merit, and that the merit of those
claims should defeat enforcement of the arbitration provision. Instead, the
Majority Opinion correctly refused to follow the trial court’s fact findings to the
extent that they were based on an analysis of the merits of the underlying action.
16
Because the Majority Opinion correctly applied both the proper standards of
review to the trial court’s order, this Petition for Review should be denied.
B. The Majority Opinion correctly applied the law governing the

burdens of proof on the issues raised by the parties in the trial
court
The Respondents seek to enforce the arbitration agreement containing the
waiver-of-class-action provision under both the TAA and the FAA. When
applying FAA, state courts must recognize and apply the federal substantive law of
arbitrability. Preston v. Ferrer, 552 U.S 346, 349 (2008); see Southland Corp. v.
Keating, 465 U.S. 1 (1984). For example, Texas courts applying the FAA are
generally required to enforce broad-form arbitration provisions that contain
waiver-of-class clauses. See generally, DirectTV, Inc., supra.; AT&T Mobility,
supra.; see also, NCP Finance Ltd. Partnership, 350 S.W.3d at 155.
Consistent with this requirement, this Court has found that the federal
substantive law of arbitration embodied in the FAA is part of the substantive law
of Texas. Capital Income Properties v. Blackmon, 843 S.W.2d 22, 23 (Tex. 1992).
Therefore, when applying the FAA, Texas trial courts are required to apply the
procedural rules and substantive law of Texas, which includes the federal
substantive law of embodied in the FAA, to determine whether the parties must
arbitrate. In re Weekley Homes, L.P., 180 S.W.3d 127, 130 (Tex. 2005); Cooper
17
Indus., LLC v. Pepsi-Cola Metro. Bottling Co., Inc., 2015 Tex. App. LEXIS 8882,
*6-8 (Tex. App.—Houston [14th Dist.], August 25, 2015).
The Petitioners note that Federal courts procedurally treat a motion to
compel arbitration as a form of motion to dismiss under Rule 12(b) of the Federal
Rules of Civil Procedure. In accordance with that rule, Federal courts treat the
non-movants factual pleadings as true when reviewing the motion to compel. See
Suburban Leisure Center, Inc. v. AMF Bowling Products, Inc., 468 F.3d 523, 525
(8th Cir. 2006). But, this Federal rule of procedure is neither a substantive rule of
law under the FAA, nor is it used by the Federal courts to expand the evidence that
is relevant to the issues of arbitrability, waiver, or prejudice. See, e.g., Id., at 525-
27. Simply put, Rule 12(b) of the Federal Rules of Civil Procedure is not part of
the federal substantive law of arbitrability embodied in the FAA.
In fact, even Federal courts limit the application of the rule that the factual
pleadings are to be taken as true in the arbitration context to the legal
determination as to whether the nature of the dispute falls within the scope of the
arbitration provision. Primerica Life Ins. Co., 304 F.3d at 471; Municipal Energy
Agency of Mississippi, 804 F.2d at 342; Horizon Health Corp., 284 F. Supp. 2d at
441; Smith Barney Shearson, Inc., 838 F. Supp. at 1158; see, e.g., Suburban
Leisure Center, Inc., 468 F.3d at 525-27. In making that determination, the
Federal courts focus only on the nature of the dispute as pled and are prohibited
18
from analyzing the merits of the underlying action. AT&T Technologies, Inc., 475
U.S. at 649; Primerica Life Ins. Co., 304 F.3d at 471; Snap-On Tools Corp., 18
F.3d at 1267; Municipal Energy Agency of Mississippi, 804 F.2d at 342; Horizon
Health Corp., 284 F. Supp. 2d at 441; Smith Barney Shearson, Inc., 838 F. Supp. at
1158.
This application of the pleading rule under Federal Rule 12(b) is consistent
with the burdens each party has during the summary proceeding on substantive
arbitrability as applied by Texas courts. The two initial elements for which the
movant has the burden are satisfied by a review of the pleadings and the arbitration
provision. TEX. CIV. PRAC. & REM. CODE § 171.021(b); J.M. Davidson, Inc., 128
S.W.3d at 227. Once the movant’s burden is met, however, the non-movant has
the burden to present additional evidence of waiver and prejudice to defeat
enforcement of the arbitration provision, and the standard for determining waiver
is the same under both the FAA and the TAA (the non-movant must show that the
movant substantially invoked the judicial process). Tuscan Builders, L.P. v. 1437
SH6 L.L.C., 438 S.W.3d 717, 720 (Tex. App.—Houston [1st Dist.] 2014, pet.
denied); Pilot Travel Ctrs., LLC v. McCray, 416 S.W.3d 168, 182 (Tex. App.—
Dallas 2103, no pet.); McReynolds v. Elston, 222 S.W.3d 731, 741 (Tex. App.—
Houston [14th Dist.] 2007, orig. proceeding); Southwind Group, Inc. v. Landwehr,
188 S.W.3d 730, 735 (Tex. App.—Eastland 2006, orig. proceeding). Courts are to
19
determine whether the non-movant met its burden using the “totality of the
circumstances” standard. G. Leach Builders, LLC, 458 S.W.3d at 512; Perry
Homes, 258 S.W.3d 589-90. Because this portion of the proceeding requires the
presentation of “additional evidence,” the Federal pleading rule is simply
inapplicable to determining whether the burden has been met by the non-movant.
So, even assuming that a rule of pleading similar to the rule under Federal
Rule 12(b) applies to a proceeding in a Texas state court, it does not apply as
broadly as the Petitioners argue so as to relieve them from producing admissible
relevant evidence on the issues of waiver and prejudice. Again, the only relevant
evidence presented in the trial court by the Petitioners to meet their high burden on
the issues of waiver and prejudice was a compilation of online records showing
that the Respondents were complainants in several criminal cases—a point that
Respondents concede. The other materials presented to the trial court by the
Petitioners—the Petitioners’ conclusory pleadings, the Texas Appleseed Report
and newspaper articles—contain arguments, inferences, conclusions and unverified
quotes from out-of-court interviews that, at most, support the alleged merit of the
Petitioners’ underlying claims; they present no admissible evidence relevant to the
“totality of the circumstances” standard applicable to the issue of waiver or
prejudice. G. Leach Builders, LLC, 458 S.W.3d at 512; Perry Homes, 258 S.W.3d
589-90.
20
Based on this record from the trial court, the Majority Opinion correctly
applied the law pertaining to waiver and prejudice to find that being the
complainant in criminal proceedings pre-dating the Petitioners’ current suit does
not constitute waiver or prejudice of the contractual right to arbitrate the
Petitioners’ underlying civil action. To have considered the arguments, inferences,
conclusions and unverified quotes from out-of-court interviews submitted by the
Petitioners as evidence of waiver and prejudice, the appellate court would have had
to analyze and pre-judge the merit of the Petitioners’ underlying action, which it is
legally prohibited from doing under federal law when resolving the issue of
substantive arbitrability.
Therefore, the Majority Opinion correctly applied the pleading rules to
review the trial court’s order, and this Petition for Review should be denied.
C. There is no split of authority justifying further review by this

Court
Although Texas courts look to the decisions of Federal courts and other
sister-state courts when construing and applying the FAA, they are not bound by
distinguishable decisions by those courts. Again, the Petitioners want this Court to
find that the Majority Opinion conflicts with the decisions of one Federal district
court and one sister-state court, when those opinions are clearly distinguishable
21
and when both courts impermissibly analyzed and pre-judged the merits of the
non-movants’ underlying actions.
I. The PLS Memorandum Opinion

The federal district court’s memorandum opinion in Lucinda Vine, Kristy
Pond, on behalf of themselves and for all others similarly situated v. PLS Financial
Services, Inc. and PLS Loan Store of Texas, Inc., Civil Action No. 3:16-cv-00031-
PRM (W.D. Tex. [El Paso Division] June 6, 2016) (“PLS Opinion”), is
distinguishable for several reasons.
First, the district court broadly applied the Federal rule of pleading under
Rule 12(b) beyond a review of the movant’s initial burden on the two elements of
arbitrability, to find that the non-movants met their burden of proof on the issues of
waiver and prejudice simply based on the allegations contained in their pleading.
By reaching its decision in this way, the district court relied on a federal procedural
rule, rather than the federal substantive law embodied in the FAA. Moreover, by
using the procedural rule in this way, the district court arguably misapplied the
pleading rule to relieve the non-movants of their burden to produce evidence of
waiver and prejudice and impermissibly analyzed and pre-judged the merit of the
underlying action. In fact, the district court even delved into an analysis of the
elements of the underlying action as it made its determination, which federal law
prohibits.
22
Second, the PLS Opinion relies too extensively on In re Christus Spohn
Health System Corp., 231 S.W.3d 475 (Tex. App.—Corpus Christi-Edinburg 2007,
orig. proceeding), which was briefed and argued extensively to the appellate court.
The circumstances that gave rise to the ruling in Christus Spohn are extraordinarily
unique, because a private party was inexplicably allowed to intervene in a criminal
case to pursue a contempt motion when Texas law prohibits such an intervention
by a private party. See In re Amos, 397 S.W.3d 309, 314 (Tex. App.—Dallas
2013, orig. proceeding) (following Bell v. State, 2006 WL 3628916, at *5 (Tex.
App.—Houston [1st Dist.] 2006, no pet.), and In re Wingfield, 171 S.W.3d 374, 381
(Tex. App.—Tyler 2005, orig. proceeding)); In re Flores, 2016 WL 890969, at *1
(Tex. App.—Dallas 2016, orig. proceeding); In re Jeffory Blackard, Cause Nos. 5-
16-00478, 5-16-00479, 5-16-00480 (Tex. App.—Dallas, April 29, 2016, orig.
proceeding). This factor alone makes the Christus Spohn opinion an outlier with
little or no precedential value beyond its unique facts.
However, the PLS Opinion also ignores the fact that the court in Christus
Spohn narrowed the application of its ruling by stating that the civil litigant’s
intervention in the criminal case would not alone establish waiver of the right to
arbitration. Id., at 481-82. Instead, the PLS Opinion read Christus Spohn as
broadly concluding “that a party can invoke the judicial process by strategically
23
filing a contempt motion in a related criminal matter.” That conclusion is a
misreading of Christus Spohn.
Third, the PLS Opinion misapplies the definition of “invoking” provided by
the Fifth Circuit in Subway Equip. Leasing Corp. v. Forte, 169 F.3d 324, 328 (5th
Cir. 1999). Although the opinion contains a correct quotation of the Subway
definition, it ignores Texas law by assuming that a private party can implement or
enforce the criminal judicial process when it presents a complaint to a district
attorney, and by failing to address the many analogous Texas cases (cited in the
Majority Opinion) that have found that the mere filing of pleadings in a civil case
does not constitute a “substantial invocation of the judicial process.” Instead, the
majority of courts that have ever addressed the question of the whether the filing of
a criminal complaint can constitute “substantial invocation of the judicial process,”
have followed the reasoning of Subway to determine that it does not. See, e.g.,
Griffin v. Burlington Volkswagon, Inc., 411 N.J.Super. 515, 988 A.2d 101, 104
(NJ. App. Div. 2010); Gatlin v. P.O.A. Criscione Star #16195, 2008 WL 2745956,
at *3; Prescott-Follett & Assocs., Inc. v. Delasa/Prescott Folett & Assocs., 2002
WL 31528463, *4-5 (E.D. La. 2002); Myers v. Rosenberg, 1986 WL 3329, *2
(N.D. Ill. 1986); Amalgamated Local No. 55, United Automobile, Aerospace &
Agricultural Implement Workers of Am. v. Metal and Alloy Div. of Silver Creek
Precision Corp., 396 F.Supp. 667, (W.D. N.Y. 1975); c.f., Mendelsohn v. A&D
24
Catering Corp., 119 Misc.2d 581, 464 N.Y.S.2d 331 (N.Y. 1983); c.f., Consorcio
Rive, S.A. De C.V. v. Briggs of Cancun, Inc., 134 F.Supp.2d 789, 795-97 (E.D. La.
2001); but see, Taft v. Burttram, 254 Ga. 687, 333 S.E.2d 585, 586 (1985)
(analyzing the facts in the context of the rules of the National Association of
Securities Dealers, rather than the FAA).
For these reasons, the PLS Opinion is distinguishable from the present case,
and it should not be given weight by this Court in determining whether to grant the
Petition.
II. The Harrison Opinion

In Principal Investments v. Harrison, 2016 WL 166011, 132 Nev. Adv. Op.
2, ___ P.3d ___ (2016), the Nevada Supreme Court was not dealing with a criminal
case, and the movant had been the plaintiff in the prior civil actions at issue.
Moreover, the arbitration provision had allowed the plaintiff to choose whether to
proceed in a justice court or arbitration, and the proceeding being reviewed was
analogous to a Bill of Review proceeding under Texas law. So, unlike the present
case, the Court in Harrison found that the lender had invoked the judicial process
in a civil proceeding within the scope of the arbitration agreement. Therefore,
25
Harrison is distinguishable, but not inconsistent with, the Majority Opinion in this
case.3
CONCLUSION
Although the allegations involving prior criminal proceedings make the
underlying factual dispute in this case somewhat unique, the law to be applied to
the question of arbitrability is well-settled, and was correctly analyzed and applied
by the appellate court. Therefore, this case does not involve an issue of importance
to the jurisprudence of this State, which would require this Court’s review and
resolution.
Instead, the Majority Opinion of the Fourth Court of Appeals carefully and
correctly avoided pre-judging the merits of the Petitioners’ underlying action, and
was subject to further review and sustained by the full appellate court when it
denied rehearing and en banc review. The lower court correctly applied Texas and
Federal law construing and applying the FAA to the relevant evidence in the trial
court record.
In reality, what the Appellees seek is a de facto exception to the law
governing substantive arbitrability based on the nature of the allegations giving rise
to their underlying action. However, Federal and Texas law are clear that the
3
Finally, the Fourth Court’s prior decision in NCP Finance Ltd. Partnership is itself evidence
that there is no real split of authority in Texas on how to apply the broad-form provision at issue
in this case.
26
consideration of the merits is for the ultimate trier of fact—the arbitrator—not for
the court to decide in a summary proceeding to determine substantive arbitrability.
Therefore, this Petition for Review should be denied.
PRAYER
WHEREFORE, PREMISES CONSIDERED, Respondents request that the
Petition for Review be denied, and that they receive such other and further relief to
which they are justly entitled.
Respectfully submitted,
COATS ROSE, P.C.
By: /s/ Edward S. Hubbard

Edward S. Hubbard
State Bar No. 10131700
ehubbard@coatsrose.com
Patrick E. Gaas
pgaas@coatsrose.com
Sam Arora
sarora@coatsrose.com
9 Greenway Plaza, Suite 1100
Houston, Texas 77046-0307
(713) 651-0111
(713) 651-0220 facsimile
27
ATTORNEYS FOR THE APPELLANTS
CERTIFICATE OF COMPLIANCE
Pursuant to Rule 9.4(i)(3) of the Texas Rules of Appellate Procedure, the
undersigned certifies that this Response complies with the 4,500 word limit for this
Response in accordance with Rule 9.4(i)(2)(D). The word count from page 1
through the Prayer on page 19 is 4,266 words, excluding the parts of the brief
exempted by Rule 9.4(i)(1). This word court is based on the count provided by the
“word count” function of Microsoft Word 2010, which is the computer program
used to prepare this Response.
/s/ Edward S. Hubbard

Edward S. Hubbard
28
CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the foregoing document has
been sent to the following counsel via e-filing in accordance with the Texas Rules
of Appellate Procedure, on this 30th day of December, 2016:
Daniel R. Dutko
Hanszen LaPorte, L.L.P.
11767 Katy Freeway, Suite 850
Houston, Texas 77079
Counsel for Petitioners
Ricardo G. Cedillo
Davis, Cedillo & Mendoza, Inc.
755 E. Mulberry, Suite 500
San Antonio, Texas 78212
Counsel for Amicus Curiae Texas Appleseed
/s/ Edward S. Hubbard

Edward S. Hubbard
29
APPENDIX
Attached and incorporated by reference in Respondent’s Response to

Petition for Review is the following:
TAB 1 Memorandum Opinion in In re Jeffory Blackard

Amalgamated Local No. 55, United Auto., Aerospace and..., 396 F.Supp. 667 (1975)
89 L.R.R.M. (BNA) 2922, 77 Lab.Cas. P 11,051
Cases that cite this headnote

396 F.Supp. 667
United States District Court, W.D. New York.
[2] Labor and Employment
AMALGAMATED LOCAL NO. 55, UNITED Pensions and Other Benefits
AUTOMOBILE, AEROSPACE & AGRICULTURAL Arbitration clause in collective bargaining
IMPLEMENT WORKERS OF AMERICA, Plaintiff, agreement requiring arbitration of all issues
v. regarding interpretation or application of any
METAL AND ALLOY DIVISION OF SILVER term of the agreement applied to dispute
CREEK PRECISION CORPORATION, Defendant. as to whether there were arrearages of
employer's contributions to union welfare
No. Civ-74-397. fund required by the contract. Labor
| Management Relations Act, 1947, § 301, 29
June 19, 1975. U.S.C.A. § 185.
Union brought action to compel arbitration under 3 Cases that cite this headnote
collective bargaining agreement. On union's motion for
summary judgment, the District Court, Curtin, Chief
Judge, held that arbitration clause applied to dispute as
Waiver and Estoppel
to whether there were arrearages in payments to union
welfare fund required by the contract; and that union had Union did not waive arbitration under
not waived arbitration either by filing a criminal charge collective bargaining agreement by filing
against one of the employer's officers or by filing unfair criminal charge against one of employer's
labor practice charge with the NLRB. officers under state labor law with respect to
the subject matter of the dispute, particularly
Plaintiff's motion for summary judgment granted. where union had already informed employer
of intention to arbitrate, or by filing unfair
labor practice charge with the NLRB,
particularly where the NLRB dismissed the
West Headnotes (3) charge because union's remedy was deemed
to be under contract arbitration provision.
Labor Law N.Y. § 198–c.
Arbitration Favored; Presumption of 2 Cases that cite this headnote
Arbitrability
Labor and Employment
Scope of Inquiry; Merits of Controversy
Where party seeks to compel arbitration Attorneys and Law Firms
under a collective bargaining agreement,
court's role is narrowly limited to a *667 Lipsitz, Green, Fahringer, Roll, Schuller & James,
consideration whether the reluctant party did Buffalo, N.Y. (Richard Lipsitz, and Stuart M. Pohl,
agree to arbitrate the grievance, and order Buffalo, N.Y., of counsel), for plaintiff.
to arbitrate particular grievance should not
Moot, Sprague, Marcy, Landy, Fernbach & Smythe,
be denied unless it may be said with positive
Buffalo, N.Y. (John J. Phelan, Buffalo N.Y., of counsel),
assurance that the arbitration clause is not
for defendant.
susceptible of an interpretation that covers
the asserted dispute. Labor Management Opinion
Relations Act, 1947, § 301, 29 U.S.C.A. § 185.
CURTIN, Chief Judge.
© 2016 Thomson Reuters. No claim to original U.S. Government Works. 1

89 L.R.R.M. (BNA) 2922, 77 Lab.Cas. P 11,051
arbitrate the grievance.’ United Steelworkers of America

This is an action brought by Amalgamated Local No. 55 v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582, 80
pursuant to § 301 of the Labor Management Relations S.Ct. 1347, 1353, 4 L.Ed.2d 1409 (1960). Furthermore,
Act, 29 U.S.C. § 185, to compel arbitration under a
collective bargaining agreement. The agreement, which
was executed in 1968 and amended on September 1, 1972, an order to arbitrate the particular grievance should not
*668 contains an arbitration clause requiring all issues be denied unless it may be said with positive assurance
regarding interpretation or application of any term of that the arbitration clause is not susceptible of an
the agreement upon which the parties cannot agree to be interpretation that covers the asserted dispute. Doubts
submitted to the office of the New York State Board of should be resolved in favor of coverage. Id. at 582-83, 80
Mediation for a panel of nine names, from which the name S.Ct. at 1353.
of an arbitrator could be chosen to arbitrate the dispute. 1
In another case, United Steelworkers of America v.
The issue the plaintiff seeks to submit to arbitration
American Mfg. Co., 363 U.S. 564, 567-68, 80 S.Ct. 1343,
stems from defendant's alleged failure to contribute to an
1346, 4 L.Ed.2d 1403 (1960), decided on the same day as
employee welfare fund, as required by Article XI, Section
the above cited case, the role of the court was similarly
5 of the amended agreement. 2 The case is now before delineated:
the court on plaintiff's motion for summary judgment
brought pursuant to Rule 56 of the Federal Rules of Civil The function of the court is very limited when the
Procedure. parties have agreed to submit all questions of contract
interpretation to the arbitrator. It is confined to
The facts in this case are not in dispute. Defendant ascertaining whether the party seeking arbitration is
corporation terminated its manufacturing operations on making a claim which on its face is governed by the
or about August 13, 1973, at which time employees contract. Whether the moving party is right or wrong is
represented by plaintiff were laid off. 3 On September 14, a question of contract interpretation for the arbitrator.
1973, plaintiff union informed defendant that an arrearage In these circumstances the moving party should not be
in its contributions payable to the Local 55 UAW Welfare deprived of the arbitrator's judgment, when it was his
Fund, pursuant to Article XI, Section 5 of their collective judgment and all that it connotes that was bargained for.
bargaining agreement, had developed. Plaintiff received
no response and, therefore, again notified defendant Under the standards set forth above, and reiterated in
of the arrearage on February 27, 1974. At that time other Supreme Court cases, 4 this court must therefore
plaintiff also stated that if the amount was not paid initially make a determination whether the company
within ten days, the plaintiff would submit the dispute contractually bound itself to arbitrate. John Wiley & Sons,
to arbitration. Further letters followed in March and Inc. v. Livingston, 376 U.S. 543, 547, 84 S.Ct. 909, 11
April 1974, reiterating plaintiff's intention to arbitrate the L.Ed.2d 898 (1964); Atkinson v. Sinclair Refining Co.,
dispute. Thereafter plaintiff contacted the New York State 370 U.S. 238, 241, 82 S.Ct. 1318, 8 L.Ed.2d 462 (1962);
Mediation Board on March 26, 1974 and requested that Necchi v. Necchi Sewing Machine Sales Corp., 348 F.2d
a panel of nine names be submitted to the parties from 693 (2d Cir. 1965), cert. denied, 383 U.S. 909, 86 S.Ct. 892,
which an arbitrator could be selected pursuant to their 15 L.Ed.2d 664 (1966). After this primary determination
agreement. On April 11, 1974, plaintiff was informed by has been made, the decision of whether or not arbitration
both the Mediation Board and defendant's attorney that should be compelled can be made.
defendant refused to arbitrate the dispute. This action was [2] Plaintiff has submitted both the text of the arbitration
then begun on August 16, 1974. clause, Article VI, Section 4, and the insurance provision,
[1] The precise question raised by the plaintiff's summary Article XI, Section 5, contained in the September 1, 1972
judgment motion is whether the defendant's alleged failure contract, as amended. 5 Defendant has acknowledged
to pay into the union's welfare fund is an arbitrable dispute both the existence of this contract and the provisions
subject to the arbitration clause. In deciding this *669 in question. An issue has clearly arisen regarding
question, the role of the court under § 301 of the Labor
contributions to the welfare fund. 6 The arbitration
Management Relations Act has been narrowly limited to a
clause, in concise, unambiguous language, requires that all
consideration of ‘whether the reluctant party did agree to
disputes regarding any such term of the agreement must

89 L.R.R.M. (BNA) 2922, 77 Lab.Cas. P 11,051
be submitted to arbitration. Since defendant has not given dispute between the parties; nor could it have served that
purpose since it was a criminal complaint based upon
the court any positive assurance that the insurance issue
different issues than those before this court and brought
is not covered by the arbitration clause, it is clear that
against an individual, Manuel Llop, not the defendant
the company has agreed to arbitrate disputes such as this.
corporation. The criminal court action was brought
John Wiley & Sons, Inc. v. Livingston, supra.
after plaintiff had informed defendant of its intention
to arbitrate the dispute if the amount was not paid
[3] Defendant has argued that plaintiff's motion for
to the welfare fund, clearly indicating that the criminal
summary judgment directing defendant to submit to
action was not brought in lieu of arbitration. Nor can
arbitration should not be granted because plaintiff has
plaintiff's action in filing a charge with the National Labor
repudiated its right to arbitration. This repudiation
Relations Board be construed as a waiver of their contract
occurred, according to defendant, through plaintiff's filing
rights to arbitration, Glass Bottle Blowers Association
of a criminal information *670 in the City Court
of the United States and Canada, AFL-CIO, et al. v.
of Buffalo on December 12, 1973, charging one of
Arkansas Glass Container Corp., 183 F.Supp. 829, 830-31
defendant's officers with a violation of § 198-c of the New
(E.D.Ark.1960), especially since the N.L.R.B. dismissed
York State Labor Law, 7 and through plaintiff's filing
the charge because defendant's remedy was deemed to be
an unfair labor practice charge with the National Labor
under the contract provision for arbitration. 9
Relations Board on April 18, 1974. 8 The court finds no
merit to defendant's argument that plaintiff has waived
arbitration. Only one circuit court of appeals has found Therefore, since it appears from the record that there is a
that a union's action in bringing suit in a federal district valid collective bargaining agreement between the parties
court against their employer for back wages, instead of which provides for arbitration of the present dispute,
seeking arbitration, was a waiver of the union's right to summary judgment *671 is granted for the plaintiff
compel arbitration. Morales Rivera v. Sea Land of Puerto against the defendant directing the defendant to submit to
Rico, Inc., 418 F.2d 725 (1st Cir. 1969). However, the arbitration. Plaintiff shall prepare judgment and present it
Morales Rivera case differs from the instant case in that to the court after notice to defendant.
the union had decided to file suit in the district court
instead of compelling arbitration under the collective So ordered.
bargaining agreement. In this case the action in City Court
All Citations
was not brought instead of arbitration. To the contrary,
plaintiff had informed defendant of the arrearage at the 396 F.Supp. 667, 89 L.R.R.M. (BNA) 2922, 77 Lab.Cas.
time the complaint was filed. The action instituted in P 11,051
City Court was not instituted to resolve the merits of the
Footnotes
1 Article VI, § 4 of the collective bargaining agreement, as amended, provides:
4. If the third step should fail to secure satisfactory settlement, the grievance may be submitted to the office of the New
York State Board of Mediation for a panel of nine (9) names.
(a) In the event that an arbitrator is required, he shall be selected from the arbitration panel provided either by mutual
agreement or by each party alternately striking off a name from the panel. The remaining name shall be the arbitrator
who shall arbitrate the grievance or grievances pending.
(b) The arbitrator shall fix and notify the parties of the time and place for arbitration of the grievance.
(c) Any issue involving the interpretation or application of any term of this agreement shall be initiated by the Union directly
at step 3. Upon the failure of the parties to agree, the Union may then appeal the issue to arbitration for a decision.
(d) The decision of the arbitrator shall be final and binding upon both parties, but he shall have no power either to
add to, subtract from or modify any of the terms, conditions or limitations of this agreement or any agreement made
supplementary hereto . . ..
2 Article XI, § 5 of the collective bargaining agreement, as amended, provides:
5. INSURANCE:

89 L.R.R.M. (BNA) 2922, 77 Lab.Cas. P 11,051
(a) Effective February 1, 1972, the Company shall continue as a contributing employer to Local 55, UAW Welfare
Fund which has been established under an Agreement and Declaration of Trust dated September 1, 1958 which said
Agreement and Declaration of Trust the Company hereby ratifies and is deemed to be a part of this Agreement. The
Company will contribute the cost of $26.46 for each single, active working employee and $52.62 for each married, active
working employee to the Local 55, UAW Welfare Fund including employees on sick leave not to exceed twelve (12)
months for any one sick leave with an initial master list and subsequent monthly supplemental list for those for whom
premiums have been paid by the fifth (5th) day of each calendar mont . . ..
3 Defendant, in P6 of his answer, filed October 8, 1974, denies that the plaintiff's employee members were laid off.
4 For the third case in the famous Steelworkers' trilogy, see United States Steelworkers of America v. Enterprise Wheel
and Car Corp., 363 U.S. 593, 80 S.Ct. 1358, 4 L.Ed.2d 1424 (1960). The Second Circuit has applied the standard set
in the Steelworkers' trilogy, stating:
Only the most forceful evidence of a purpose to exclude the claim from arbitration can prevail. Strauss v. Silvercup Bakers,
353 F.2d 555, 557 (2d Cir. 1965). See also Publishers Association of New York City v. New York Mailers Union No. 6,
317 F.2d 624 (2d Cir. 1963).
5 Supra, nn. 1 and 2.
6 Plaintiff has stated that there have been arrearages in payments to the welfare fund, while defendant has denied the
allegation. Although it is not within the province of this court to pass on the merits of the allegation, it is clear that a
dispute does exist.
7 N.Y. Labor Law § 198-c (McKinney's Supp.1975) states:
1. In addition to any other penalty or punishment otherwise prescribed by law, any employer who is party to an agreement
to pay or provide benefits or wage supplements to employees or to a third party or fund for the benefit of employees
and who fails, neglects or refuses to pay the amount or amounts necessary to provide such benefits or furnish such
supplements within thirty days after such payments are required quired to be made, shall be guilty of a misdemeanor, and
upon conviction shall be punished as provided in section one hundred ninety-eight-a this article. Where such employer
is a corporation, the president, secretary, treasurer or officers exercising corresponding functions shall each be guilty
of a misdemeanor. 2. As used in this section, the term ‘benefits or wage supplements' includes, but is not limited to,
reimbursement for expenses; health, welfare and retirement benefits; and vacation, separation or holiday pay.
This charge was dismissed on February 24, 1974 because the court felt that plaintiff should seek other means of collecting
the monies due.
8 This charge was dismissed on May 24, 1974.
9 The reasons for the dismissal of the unfair labor charge by the National Labor Relations Board, similar to the reasons
of the City Court judge, did not go to the merits. According to a letter of the National Labor Relations Board dated May
24, 1974, the reasons for dismissal were as follows:
As a result of the investigation, it does not appear that further proceedings on the charge are warranted inasmuch as the
investigation revealed that all employees represented by the Charging Party were terminated more than eight months
ago as the Respondent closed its business for economic reasons. Furthermore, there was no successor to take over
and honor the collective bargaining agreement negotiated on behalf of the predecessor. It is also noted that the Union's
remedy for an enforcement of a contract in the circumstances herein is not within the jurisdiction of this Agency. I am,
therefore, refusing to issue complaint in this matter.
End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.

AT & T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643 (1986)
106 S.Ct. 1415, 121 L.R.R.M. (BNA) 3329, 89 L.Ed.2d 648, 54 USLW 4339...
[2] Alternative Dispute Resolution

KeyCite Yellow Flag - Negative Treatment Existence and Validity of Agreement
Not Followed on State Law Grounds Local No. 1119, American
Unless parties clearly and unmistakably
Federation State, County, and Mun. Employees, AFL-CIO v. Mesabi
provide otherwise, question of whether parties
Regional Medical Center, Minn.App., November 20, 1990
agreed to arbitrate is to be decided by court,
106 S.Ct. 1415
not arbitrator.
Supreme Court of the United States
2505 Cases that cite this headnote
AT & T TECHNOLOGIES, INC., Petitioner
v.
COMMUNICATIONS [3] Alternative Dispute Resolution
WORKERS OF AMERICA et al. Merits of Controversy
In deciding whether parties have agreed to
No. 84-1913. submit particular grievance to arbitration,
| court is not to rule on potential merits of
Argued Jan. 22, 1986. underlying claims.
|
Decided April 7, 1986. 2258 Cases that cite this headnote
Union sought intervention of court to compel arbitration

of dispute concerning company's layoff of employees. The [4] Alternative Dispute Resolution
United States District Court for the Northern District Construction in Favor of Arbitration
of Illinois, John F. Grady, J., ordered arbitration of Order to arbitrate particular grievance should
arbitrability issue, and employer appealed. The Court not be denied unless it may be said with
of Appeals, 751 F.2d 203, affirmed, and certiorari positive assurance that arbitration clause is
was granted. The Supreme Court, Justice White, held not susceptible of interpretation that covers
that it was for court, not arbitrator, to decide in asserted dispute; doubts should be resolved in
first instance whether parties to collective bargaining favor of coverage.
agreement intended to arbitrate grievances concerning
layoffs predicated on “lack of work” determination by
company.
Vacated and remanded. Discharge and Layoff
It was for court, not arbitrator, to decide
Justice Brennan filed concurring opinion in which Chief in first instance whether parties to collective
Justice Burger and Justice Marshall joined. bargaining agreement intended to arbitrate
grievances concerning layoffs predicated on
“lack of work” determination by company.
West Headnotes (5)

Contractual or Consensual Basis
Arbitration is matter of contract and party
cannot be required to submit to arbitration **1415 *643 Syllabus *
any dispute which he has not agreed so to
Petitioner employer and respondent Union are parties
submit.
to a collective-bargaining agreement covering telephone
1596 Cases that cite this headnote equipment installation workers. Article 8 of the agreement

provides for arbitration of differences arising over bargaining agreements and arbitration clauses, or to
interpretation of the agreement. Article 9 provides that consider any other evidence that might demonstrate that
subject to certain limitations, but otherwise not subject to a particular grievance was not subject to arbitration. P.
the arbitration clause, petitioner is free to exercise certain 1420.
management functions, including the hiring, placement,
and termination of employees. Article 20 prescribes the 751 F.2d 203 (CA 7th 1984), vacated and remanded.
order in which employees will be laid off “[w]hen lack of
work necessitates Layoff.” The Union filed a grievance WHITE, J., delivered the opinion for a unanimous Court.
challenging petitioner's decision to lay off 79 installers BRENNAN, J., filed a concurring opinion, in which
from its Chicago location, claiming that there was no BURGER, C.J., and MARSHALL, J., joined, post, p. ---.
lack of work at that location and that therefore the
layoffs would violate Article 20. But petitioner laid off
the installers and refused to submit the grievance to Attorneys and Law Firms
arbitration on the ground that under Article 9 the layoffs
Rex E. Lee argued the cause for petitioner. With him on
were not arbitrable. The Union then sought to compel
the briefs were David W. Carpenter, Gerald D. Skoning,
arbitration by filing suit in Federal District Court, which,
Charles C. Jackson, Howard J. Trienens, Alfred A. Green,
after finding that the Union's interpretation of Article 20
and Joseph Ramirez.
was at least “arguable,” held that it was for the arbitrator,
not the court, to decide whether that interpretation had Laurence Gold argued the cause for respondents. With him
merit, and, accordingly, ordered petitioner to arbitrate. on the brief were Irving M. Friedman, Stanley Eisenstein,
The Court of Appeals affirmed. Harold A. Katz, David Silberman, and James Coppess.*
Held: The issue whether, because of express exclusion or * Briefs of amici curiae urging reversal were filed for the
other evidence, the dispute over interpretation of Article Chamber of Commerce of the United States by John S.
20 was subject to the arbitration clause, **1416 should Irving, Carl L. Taylor, and Stephen A. Bokat; and for
have been decided by the District Court and reviewed by the National Association of Manufacturers by Jan S.
the Court of Appeals, and should not have been referred Admundson and Gary D. Lipkin.
to the arbitrator. Pp. 1418-20.
David E. Feller filed a brief for the National Academy of
Arbitrators as amicus curiae urging affirmance.
(a) Under the principles set forth in the Steelworkers
Trilogy (Steelworkers v. American Mfg. Co., 363 U.S. 564, Opinion
80 S.Ct. 1343, 4 L.Ed.2d 1403; Steelworkers v. Warrior
& Gulf Navigation Co., 363 U.S. 574, 80 S.Ct. 1347, Justice WHITE delivered the opinion of the Court.
4 L.Ed.2d 1409; and Steelworkers v. Enterprise Wheel
& Car Corp., 363 U.S. 593, 80 S.Ct. 1358, 4 L.Ed.2d The issue presented in this case is whether a court
1424), it was the District Court's duty to interpret the asked to order arbitration of a grievance filed under a
collective-bargaining agreement and to determine whether collective-bargaining agreement must first determine that
the parties intended to arbitrate grievances concerning the parties intended to arbitrate the dispute, or whether
layoffs predicated on a “lack of work” determination that determination is properly left to the arbitrator.
by petitioner. If the court should determine that the
agreement so provides, then it would be for the arbitrator
to determine the relative merits of the parties' substantive I
interpretations of the agreement. Pp. 1418-20.
AT & T Technologies, Inc. (AT & T or the Company), and
*644 (b) This Court will not examine the collective- the Communications Workers of America (the Union)
bargaining agreement for itself and affirm the Court are parties to a collective-bargaining agreement which
of Appeals on the ground that the parties had agreed covers telephone equipment installation workers. Article
to arbitrate the dispute over the layoffs. It is not this 8 of this agreement *645 establishes that “differences
Court's function in the first instance to construe collective- arising with respect to the interpretation of this contract

or the performance of any obligation hereunder” must by a lack of work but only whether the company *647
be referred to a mutually agreeable arbitrator upon the followed the proper order in laying off the employees.”
written demand of either party. This Article expressly does App. to Pet. for Cert. 10A.
not cover disputes “excluded from arbitration by other Finding that “the union's interpretation of Article 20 was
provisions of this contract.” 1 Article 9 provides that, at least ‘arguable,’ ” the court held that it was “for the
“subject to the limitations contained in the provisions arbitrator, not the court to decide whether the union's
of this contract, but otherwise not subject to the interpretation has merit,” and accordingly, ordered the
provisions of the arbitration clause,” AT & T is free Company to arbitrate. Id., at 11A.
to exercise certain management functions, including the
hiring and placement of employees and the termination of The Court of Appeals for the Seventh Circuit affirmed.
Communications Workers of America v. Western Electric
employment. 2 “When lack of work necessitates Layoff,”
Co., 751 F.2d 203 (1984). The Court of Appeals
Article 20 prescribes the order in which employees are to
understood the District Court to have ordered arbitration
be laid off. 3 of the threshold issue of arbitrability. Id., at 205, n. 4. The
court acknowledged the “general rule” that the issue of
**1417 On September 17, 1981, the Union filed a arbitrability is for the courts to decide unless the parties
grievance challenging AT & T's decision to lay off 79 stipulate otherwise, but noted that this Court's decisions
installers from its Chicago base location. The Union in Steelworkers v. Warrior & Gulf Navigation Co., 363
claimed that, because there was no lack of work at the U.S. 574, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960), and
Chicago location, the *646 planned layoffs would violate Steelworkers v. American Mfg. Co., 363 U.S. 564, 80 S.Ct.
Article 20 of the agreement. Eight days later, however, 1343, 4 L.Ed.2d 1403 (1960), caution courts to avoid
AT & T laid off all 79 workers, and soon thereafter, the becoming entangled in the merits of a labor dispute under
Company transferred approximately the same number of the guise of deciding arbitrability. From this observation,
installers from base locations in Indiana and Wisconsin to the court announced an “exception” to the general
the Chicago base. AT & T refused to submit the grievance rule, under which “a court should compel arbitration
to arbitration on the ground that under Article 9 the of the arbitrability issue where the collective bargaining
Company's decision to lay off workers when it determines agreement contains a standard arbitration clause, the
that a lack of work exists in a facility is not arbitrable. parties have not clearly excluded the arbitrability issue
from arbitration, and deciding the issue would entangle
The Union then sought to compel arbitration by filing the court in interpretation of substantive provisions of
suit in federal court pursuant to § 301(a) of the the collective bargaining agreement and thereby involve
Labor Management Relations Act, 29 U.S.C. § 185(a). 4 consideration of the merits of the dispute.” 751 F.2d, at
Communications Workers of America v. Western Electric 206.
Co., No. 82 C 772 (ND Ill., Nov. 18, 1983). Ruling on
cross-motions for summary judgment, the District Court **1418 All of these factors were present in this case.
reviewed the provisions of Articles 8, 9, and 20, and set Article 8 was a “standard arbitration clause,” and there
forth the parties' arguments as follows: was “no clear, unambiguous exclusion from arbitration of
terminations predicated by a lack of work determination.”
“Plaintiffs interpret Article 20 to require that there be Id., at 206-207. Moreover, although there were “colorable
an actual lack of work prior to employee layoffs and arguments” on both sides of the exclusion issue, if the
argue that there was no such lack of work in this court were to decide this question it would have to
case. Under plaintiffs' interpretation, Article 20 would interpret not only Article 8, but Articles 9 and 20 as well,
allow the union to take to arbitration the threshold both of which are “substantive *648 provisions of the
issue of whether the layoffs were justified by a lack of Agreement.” The court thus “decline[d] the invitation to
work. Defendant interprets Article 20 as merely providing decide arbitrability,” and ordered AT & T “to arbitrate
a sequence for any layoffs which management, in its the arbitrability issue.” Id., at 207.
exclusive judgment, determines are necessary. Under
defendant's interpretation, Article 20 would not allow for The court admitted that its exception was “difficult to
an arbitrator to decide whether the layoffs were warranted reconcile with the Supreme Court's discussion of a court's

duty to decide arbitrability in [John Wiley & Sons, Inc. clearly and unmistakably provide otherwise, the question
v. Livingston, 376 U.S. 543, 84 S.Ct. 909, 11 L.Ed.2d 898 of whether the parties agreed to arbitrate is to be decided
(1964) ].” The court asserted, however, that the discussion by the court, not the arbitrator. Warrior & Gulf, supra,
was “dicta,” and that this Court had reopened the issue 363 U.S., at 582-583, 80 S.Ct., at 1352-1353. See Operating
in Nolde Brothers, Inc. v. Bakery Workers, 430 U.S. 243, Engineers v. Flair Builders, Inc., 406 U.S. 487, 491, 92 S.Ct.
255, n. 8, 97 S.Ct. 1067, 1074, n. 8, 51 L.Ed.2d 300 (1977). 1710, 1712, 32 L.Ed.2d 248 (1972); Atkinson v. Sinclair
751 F.2d, at 206. Refining Co., 370 U.S. 238, 241, 82 S.Ct. 1318, 1320, 8
L.Ed.2d 462 (1962), overruled in part on other grounds,
We granted certiorari, 474 U.S. 814, 106 S.Ct. 56, 88 Boys Markets, Inc. v. Retail Clerks, 398 U.S. 235, 90 S.Ct.
L.Ed.2d 46 (1985), and now vacate the Seventh Circuit's 1583, 26 L.Ed.2d 199 (1970). Accord, Mitsubishi Motors
decision and remand for a determination of whether the Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626,
Company is required to arbitrate the Union's grievance. 105 S.Ct. 3346, 3353-3354, 87 L.Ed.2d 444 (1985).
The Court expressly reaffirmed this principle in John

Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 84 S.Ct.
II
909, 11 L.Ed.2d 898 (1964). The “threshold question”
The principles necessary to decide this case are not new. there was whether the court or an arbitrator **1419
They were set out by this Court over 25 years ago in a series should decide if arbitration provisions in a collective-
of cases known as the Steelworkers Trilogy: Steelworkers bargaining contract survived a corporate merger so as to
v. American Mfg. Co., supra; Steelworkers v. Warrior & bind the surviving corporation. Id., at 546, 84 S.Ct., at
Gulf Navigation Co., supra; and Steelworkers v. Enterprise 912. The Court answered that there was “no doubt” that
Wheel & Car Corp., 363 U.S. 593, 80 S.Ct. 1358, 4 L.Ed.2d this question was for the courts. “ ‘Under our decisions,
1424 (1960). These precepts have served the industrial whether or not the company was bound to arbitrate, as
relations community well, and have led to continued well as what issues it must arbitrate, is a matter to be
reliance on arbitration, rather than strikes or lockouts, as determined by the Court on the basis of the contract
the preferred method of resolving disputes arising during entered into by the parties.’ ... The duty to arbitrate
the term of a collective-bargaining agreement. We see no being of contractual origin, a compulsory submission to
reason either to question their continuing validity, or to arbitration cannot precede judicial determination that the
eviscerate their meaning by creating an exception to their collective bargaining agreement does in fact create such
general applicability. a duty.” Id., at 546-547, 84 S.Ct., at 912-913 (citations
omitted).
[1] The first principle gleaned from the Trilogy is that
“arbitration is a matter of contract and a party cannot [3] The third principle derived from our prior cases is
be required to submit to arbitration any dispute which that, in deciding whether the parties have agreed to submit
he has not agreed so to submit.” Warrior & Gulf, supra, a particular grievance to arbitration, a court is not to rule
363 U.S., at 582, 80 S.Ct., at 1353; American Mfg. on the potential merits of the underlying claims. Whether
Co., supra, 363 U.S., at 570-571, 80 S.Ct., at 1364-1365 “arguable” or not, indeed even if it appears to the court
(BRENNAN, J., concurring). This axiom recognizes the to be *650 frivolous, the union's claim that the employer
fact that arbitrators derive their authority to resolve has violated the collective-bargaining agreement is to be
disputes only because the parties have agreed in advance decided, not by the court asked to order arbitration,
to submit such grievances to *649 arbitration. Gateway but as the parties have agreed, by the arbitrator. “The
Coal Co. v. Mine Workers, 414 U.S. 368, 374, 94 S.Ct. 629, courts, therefore, have no business weighing the merits
635, 38 L.Ed.2d 583 (1974). of the grievance, considering whether there is equity
in a particular claim, or determining whether there
[2] The second rule, which follows inexorably from is particular language in the written instrument which
the first, is that the question of arbitrability-whether a will support the claim. The agreement is to submit all
collective-bargaining agreement creates a duty for the grievances to arbitration, not merely those which the court
parties to arbitrate the particular grievance-is undeniably will deem meritorious.” American Mfg. Co., 363 U.S., at
an issue for judicial determination. Unless the parties 568, 80 S.Ct., at 1346 (footnote omitted).

[5] With these principles in mind, it is evident that

[4] Finally, it has been established that where the contract the Seventh Circuit erred in ordering the parties to
contains an arbitration clause, there is a presumption arbitrate the arbitrability question. It is the court's duty
of arbitrability in the sense that “[a]n order to arbitrate to interpret the agreement and to determine whether the
the particular grievance should not be denied unless it parties intended to arbitrate grievances concerning layoffs
may be said with positive assurance that the arbitration predicated on a “lack of work” determination by the
clause is not susceptible of an interpretation that covers Company. If the court determines that the agreement so
the asserted dispute. Doubts should be resolved in favor provides, then it is for the arbitrator to determine the
of coverage.” Warrior & Gulf, 363 U.S., at 582-583, relative merits of the parties' substantive interpretations of
80 S.Ct., at 1352-1353. See also Gateway Coal Co. v. the agreement. It was for the court, not the arbitrator, to
Mine Workers, supra, 414 U.S., at 377-378, 94 S.Ct., at decide in the first instance whether the dispute was to be
636-637. Such a presumption is particularly applicable resolved through arbitration.
where the clause is as broad as the one employed in this
case, which provides for arbitration of “any differences The Union does not contest the application of these
arising with respect to the interpretation of this contract or principles to the present case. Instead, it urges the Court to
the performance of any obligation hereunder....” In such examine the specific provisions of the agreement for itself
cases, “[i]n the absence of any express provision excluding and to affirm the Court of Appeals on the ground that the
a particular grievance from arbitration, we think only the parties had agreed to arbitrate the dispute over the layoffs
most forceful evidence of a purpose to exclude the claim at issue here. But it is usually not our function in the
from arbitration can prevail.” Warrior & Gulf, supra, 363 first instance to construe collective-bargaining contracts
U.S., at 584-585, 80 S.Ct., at 1353-1354. and arbitration clauses, or to consider any other evidence
that might unmistakably demonstrate that a particular
This presumption of arbitrability for labor disputes grievance was not to *652 be subject to arbitration. The
recognizes the greater institutional competence issue in the case is whether, because of express exclusion or
of arbitrators in interpreting collective-bargaining other forceful evidence, the dispute over the interpretation
agreements, “furthers the national labor policy of peaceful of Article 20 of the contract, the layoff provision, is not
resolution of labor disputes and thus best accords with subject to the arbitration clause. That issue should have
the parties' presumed objectives in pursuing collective been decided by the District Court and reviewed by the
bargaining.” Schneider Moving & Storage Co. v. Robbins, Court of Appeals; it should not have been referred to the
466 U.S. 364, 371-372, 104 S.Ct. 1844, 1849-1850, arbitrator.
80 L.Ed.2d 366 (1984) (citation *651 omitted). See
Gateway Coal Co., supra, 414 U.S., at 378-379, 94 The judgment of the Court of Appeals is vacated, and the
S.Ct., at 637-638. The willingness of parties to enter case is remanded for proceedings in conformity with this
into agreements that provide for arbitration of specified opinion.
disputes would be “drastically reduced,” however, if
a labor arbitrator had the “power to determine his It is so ordered.
own jurisdiction ....” Cox, Reflections Upon Labor
Arbitration, 72 Harv.L.Rev. 1482, 1509 (1959). Were this
the applicable rule, an arbitrator would not be constrained
Justice BRENNAN, with whom THE CHIEF JUSTICE
to resolve only those disputes that the parties have agreed
and Justice MARSHALL join, concurring.
in advance to settle by arbitration, but, instead, would be
I join the Court's opinion and write separately only to
empowered “to impose obligations outside the contract
supplement what has been said in order to avoid any
limited only by his understanding and conscience.” Ibid.
misunderstanding on remand and in future cases.
This result undercuts the longstanding federal policy
of promoting industrial harmony through the use of
The Seventh Circuit's erroneous conclusion that the
collective-bargaining agreements, and is antithetical to the
arbitrator should decide whether this dispute is arbitrable
function of a collective- **1420 bargaining agreement as
resulted from that court's confusion respecting the
setting out the rights and duties of the parties.
“arbitrability” determination that we have held must be
judicially made. Despite recognizing that Article 8 of the

collective-bargaining agreement “is a standard arbitration Gulf, supra, at 582-583, 80 S.Ct., at 1352-1353 (footnote
clause, providing for arbitration of ‘any differences arising omitted).
with respect to the interpretation of this contract or
the performance of any obligation hereunder,’ ” and The Company in Warrior & Gulf relied for its argument
that “there is no clear, unambiguous exclusion [of this that the dispute was not arbitrable on a “Management
dispute] from arbitration,” the Court of Appeals thought Functions” clause which, like Article 9 of the AT &
that “there [were] colorable arguments both for and T/CWA agreement, *654 excluded “matters which are
against exclusion.” Communications Workers of America strictly a function of management,” 363 U.S., at 576,
v. Western Electric Co., 751 F.2d 203, 206-207 (1984). The 80 S.Ct., at 1349, from the arbitration provision. We
“colorable arguments” referred to by the Court of Appeals recognized that such a clause “might be thought to
were the parties' claims concerning the meaning of Articles refer to any practice of management in which, under
9 and 20 of the collective-bargaining agreement: the Court particular circumstances prescribed by the agreement, it
of Appeals thought that if the Union's interpretation of is permitted to indulge.” Id., at 584, 80 S.Ct., at 1353.
Article 20 was correct and management *653 could not However, we also recognized that to read the clause this
order layoffs for reasons other than lack of work, the way would make arbitrability in every case depend upon
dispute was arbitrable; but if AT & T's interpretation of whether management could take the action challenged
Article 20 was correct and management was free to order by the Union; the arbitrability of every dispute would
layoffs for other reasons, the dispute was not arbitrable turn upon a resolution of the merits, and “the arbitration
under Article 9. Id., at 207. Because these were the very clause would be swallowed up by the exception.” Ibid.
issues that would be presented to the arbitrator if the Therefore, we held that, where a collective-bargaining
dispute was held to be arbitrable, the court reasoned that agreement contains a standard arbitration clause and
“determining arbitrability would enmesh a court in the the “exception” found in the Management Functions
merits of th[e] dispute,” ibid., and concluded that the clause is general, “judicial inquiry ... should be limited
arbitrability issue should be submitted to the arbitrator. to the search for an explicit provision which brings the
grievance under the cover of the [Management Functions]
The Court of Appeals was mistaken insofar as it thought clause....” Steelworkers v. American Mfg. Co., 363 U.S.
that determining arbitrability required resolution of the 564, 572, 80 S.Ct. 1343, 1365, 4 L.Ed.2d 1403 (1960)
parties' dispute with respect to the meaning of Articles (BRENNAN, J., concurring); Warrior & Gulf, supra, 363
9 and 20 of the collective-bargaining agreement. This U.S., at 584, 80 S.Ct., at 1353. “In the absence of any
is clear from our opinion in Steelworkers v. Warrior express provision excluding a particular grievance from
& Gulf **1421 Navigation Co., 363 U.S. 574, 80 arbitration, ... only the most forceful evidence of a purpose
S.Ct. 1347, 4 L.Ed.2d 1409 (1960). In Warrior & Gulf, to exclude the claim from arbitration can prevail....” 363
the Union challenged management's contracting out of U.S., at 584-585, 80 S.Ct., at 1353-1354.
labor that had previously been performed by Company
employees. The parties failed to resolve the dispute The Seventh Circuit misunderstood these rules of contract
through grievance procedures, and the Union requested construction and did precisely what we disapproved
arbitration; the Company refused, and the Union sued to of in Warrior & Gulf -it read Article 9, a general
compel arbitration under § 301 of the Labor Management Management Functions clause, to make arbitrability
Relations Act, 29 U.S.C. § 185. The collective-bargaining depend upon the merits of the parties' dispute. As
agreement contained a standard arbitration clause similar Warrior & Gulf makes clear, the judicial inquiry required
to Article 8 of the AT & T/CWA contract, i.e., providing to determine arbitrability is much simpler. The parties'
for arbitration of all differences with respect to the dispute concerns whether Article 20 of the collective-
meaning or application of the contract. We held that, in bargaining agreement limits management's authority to
light of the congressional policy making arbitration the order layoffs for reasons other than lack of work. The
favored method of dispute resolution, such a provision question for the court is “strictly confined,” id., at 582,
requires arbitration “unless it may be said with positive 80 S.Ct., at 1353, to whether the parties agreed to submit
assurance that the arbitration clause is not susceptible of disputes over the meaning of Article 20 to arbitration.
an interpretation that covers the asserted dispute. Doubts Because the collective-bargaining agreement contains a
should be resolved in favor of coverage.” Warrior & standard arbitration *655 clause, the answer must be

affirmative unless the contract contains explicit language bargaining agreement only where there is some special
reason to do so. Thus, it is appropriate for this Court
stating that disputes respecting Article 20 are not subject
to construe a collective-bargaining agreement where-as
to arbitration, or unless the party opposing arbitration-
in the Steelworkers Trilogy -our decision announces a
here AT & T-adduces “the most forceful evidence” to
new principle of law, since applying this principle may
this effect from the bargaining history. Under Warrior &
help to clarify our meaning. There is no such need,
Gulf, determining arbitrability does not require the court
however, where-as here-we simply reaffirm established
even to consider which party is correct with respect to the
principles. Moreover, since the determination left for
meaning of Article 20.
the Court of Appeals on remand is straightforward and
will require little time or effort, concerns for efficient
The Court remands this case so that the court below may
judicial administration do not require us to interpret the
apply the proper standard to determine arbitrability. The
agreement. Finally, because the parties have submitted to
Court **1422 states that “it is usually not our function
us only fragmentary pieces of the bargaining history, we
in the first instance to construe collective-bargaining
are not in a position properly to evaluate whether there
contracts and arbitration clauses, or to consider any other
is “the most forceful evidence” that the parties *656
evidence that might unmistakably demonstrate that a
did not intend for this dispute to be arbitrable. Therefore,
particular grievance was not to be subject to arbitration.”
I join the Court's opinion and concur in the Court's
Ante, at 1420. Of course, we have on numerous occasions
judgment remanding to the Court of Appeals.
construed collective-bargaining agreements “in the first
instance”; we did so, for example, in the three cases
comprising the Steelworkers Trilogy. See also John Wiley
& Sons, Inc. v. Livingston, 376 U.S. 543, 552-555, 84 All Citations
S.Ct. 909, 916-917, 11 L.Ed.2d 898 (1964); Packinghouse
Workers v. Needham Packing Co., 376 U.S. 247, 249-253, 475 U.S. 643, 106 S.Ct. 1415, 89 L.Ed.2d 648, 121
84 S.Ct. 773, 774-777, 11 L.Ed.2d 680 (1964). Nonetheless, L.R.R.M. (BNA) 3329, 54 USLW 4339, 104 Lab.Cas. P
I agree with the Court that we should interpret a collective- 11,758
Footnotes
* The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the
convenience of the reader. See United States v. Detroit Lumber Co., 200 U.S. 321, 337, 26 S.Ct. 282, 287, 50 L.Ed. 499.
1 Article 8 provides, in pertinent part, as follows:
“If the National and the Company fail to settle by negotiation any differences arising with respect to the interpretation of
this contract or the performance of any obligation hereunder, such differences shall (provided that such dispute is not
excluded from arbitration by other provisions of this contract, and provided that the grievance procedures as to such
dispute have been exhausted) be referred upon written demand of either party to an impartial arbitrator mutually agreeable
to both parties.” App. 21.
2 Article 9 states:
“The Union recognizes the right of the Company (subject to the limitations contained in the provisions of this contract, but
otherwise not subject to the provisions of the arbitration clause) to exercise the functions of managing the business which
involve, among other things, the hiring and placement of Employees, the termination of employment, the assignment of
work, the determination of methods and equipment to be used, and the control of the conduct of work.” Id., at 22.
3 Article 20 provides, in pertinent part, that “[w]hen lack of work necessitates Layoff, Employees shall be Laid-Off in
accordance with Term of Employment and by Layoff groups as set forth in the following [subparagraphs stating the order
of layoff].” Id., at 23. Article 1.11 defines the term “Layoff” to mean “a termination of employment arising out of a reduction
in the force due to lack of work.” Id., at 20.
4 Section 301(a), 61 Stat. 156, 29 U.S.C. § 185(a) states:
“Suits for violation of contracts between an employer and a labor organization representing
employees in an industry affecting commerce as defined in this chapter, or between any such
organizations, may be brought in any district court of the United States having jurisdiction of the
parties, without respect of the amount in controversy or without regard to the citizenship of the
parties.”


AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011)
131 S.Ct. 1740, 179 L.Ed.2d 742, 79 USLW 4279, 161 Lab.Cas. P 10,368...
KeyCite Yellow Flag - Negative Treatment West Headnotes (13)

Disagreement Recognized by Wallace v. Red Bull Distributing Co.,
N.D.Ohio, July 23, 2013
131 S.Ct. 1740 [1] Alternative Dispute Resolution
Supreme Court of the United States Constitutional and statutory provisions
and rules of court
AT&T MOBILITY LLC, Petitioner, The provision of the Federal Arbitration Act
v. (FAA) stating that arbitration agreements in
Vincent CONCEPCION et ux. maritime transactions or contracts evidencing
transactions involving commerce are valid,
No. 09–893. irrevocable, and enforceable, save upon such
| grounds as exist at law or in equity for the
Argued Nov. 9, 2010. revocation of any contract, reflects both a
| liberal federal policy favoring arbitration and
Decided April 27, 2011. the fundamental principle that arbitration is a
matter of contract. 9 U.S.C.A. § 2.
Synopsis
Background: Customers brought putative class action 674 Cases that cite this headnote
against telephone company, alleging that company's offer
of a free phone to anyone who signed up for its cellphone
service was fraudulent to the extent that the company [2] Alternative Dispute Resolution
charged the customer sales tax on the retail value of Constitutional and statutory provisions
the free phone. The United States District Court for the and rules of court
Southern District of California, Dana M. Sabraw, J., In light of the liberal federal policy
2008 WL 5216255, denied company's motion to compel favoring arbitration and the fundamental
arbitration. Company appealed. The United States Court principle that arbitration is a matter
of Appeals for the Ninth Circuit, Carlos T. Bea, Circuit of contract, which are reflected in the
Judge, 584 F.3d 849, affirmed. Certiorari was granted. provision of the Federal Arbitration Act
(FAA) stating that arbitration agreements in
maritime transactions or contracts evidencing
[Holding:] The Supreme Court, Justice Scalia, held that
irrevocable, and enforceable, save upon such
the Federal Arbitration Act preempts California's judicial
grounds as exist at law or in equity for
rule regarding the unconscionability of class arbitration
the revocation of any contract, courts must
waivers in consumer contracts, abrogating Discover Bank
place arbitration agreements on an equal
v. Superior Court, 36 Cal.4th 148, 30 Cal.Rptr.3d 76, 113
footing with other contracts, and enforce
P.3d 1100.
them according to their terms. 9 U.S.C.A. § 2.

Reversed and remanded.
Justice Thomas filed a concurring opinion. [3] Alternative Dispute Resolution

Preemption
Justice Breyer filed a dissenting opinion, in which Justices States
Ginsburg, Sotomayor, and Kagan, joined. Particular cases, preemption or
supersession
The Federal Arbitration Act (FAA) preempts
California's judicial rule stating that a
class arbitration waiver is unconscionable

under California law if it is found in a Substantive unconscionability

consumer contract of adhesion in a setting Under California law, a finding that
in which disputes between the contracting a contract is unconscionable requires a
parties predictably involve small amounts of procedural and a substantive element, the
damages, and if it is alleged that the party with former focusing on oppression or surprise
superior bargaining power has carried out a due to unequal bargaining power, the latter
scheme to deliberately cheat large numbers of on overly harsh or one-sided results. West's
consumers out of individually small sums of Ann.Cal.Civ.Code §§ 1668, 1670.5(a).
money, because that rule stands as an obstacle
to the accomplishment and execution of the 47 Cases that cite this headnote
full purposes and objectives of Congress in
enacting the FAA, which include ensuring
the enforcement of arbitration agreements
Preemption
according to their terms so as to facilitate
States
streamlined proceedings; abrogating Discover
Particular cases, preemption or
Bank v. Superior Court, 36 Cal.4th 148, 30
supersession
Cal.Rptr.3d 76, 113 P.3d 1100. 9 U.S.C.A. § 2;
West's Ann.Cal.Civ.Code §§ 1668, 1670.5(a). When state law prohibits outright the
arbitration of a particular type of claim,
149 Cases that cite this headnote the conflicting state rule is displaced by the
Federal Arbitration Act (FAA). 9 U.S.C.A. §
[4] Alternative Dispute Resolution 2.
Validity
Alternative Dispute Resolution
Validity of assent
Preemption
Unconscionability
States
Under the saving clause in the provision
Particular cases, preemption or
of the Federal Arbitration Act (FAA)
supersession
stating that arbitration agreements in
In light of the preemptive effect of the Federal
maritime transactions or contracts evidencing
Arbitration Act (FAA), a court may not
rely on the uniqueness of an agreement to
irrevocable, and enforceable, save upon such
arbitrate as a basis for a state-law holding
grounds as exist at law or in equity for
that enforcement would be unconscionable,
the revocation of any contract, arbitration
for this would enable the court to effect what
agreements may be invalidated by generally
the state legislature cannot. 9 U.S.C.A. § 2.
applicable contract defenses, such as fraud,
duress, or unconscionability, but not by 173 Cases that cite this headnote
defenses that apply only to arbitration or that
derive their meaning from the fact that an
agreement to arbitrate is at issue. 9 U.S.C.A. [8] Alternative Dispute Resolution
§ 2. Constitutional and statutory provisions
and rules of court
888 Cases that cite this headnote While the saving clause, in the provision
of the Federal Arbitration Act (FAA)
[5] Contracts stating that arbitration agreements in
Procedural unconscionability maritime transactions or contracts evidencing
Contracts

irrevocable, and enforceable, save upon such For a class-action money judgment to bind
grounds as exist at law or in equity for absentees in litigation, class representatives
the revocation of any contract, preserves must at all times adequately represent absent
generally applicable contract defenses, class members, and absent members must be
nothing in it suggests an intent to preserve afforded notice, an opportunity to be heard,
state-law rules that stand as an obstacle to and a right to opt out of the class.
the accomplishment of the FAA's objectives.
9 U.S.C.A. § 2. 16 Cases that cite this headnote

Contractual or consensual basis
[9] States Alternative Dispute Resolution
Congressional intent Constitutional and statutory provisions
A federal statute's preemption saving clause and rules of court
cannot in reason be construed as allowing a Arbitration is a matter of contract, and
common law right, the continued existence of the Federal Arbitration Act (FAA) requires
which would be absolutely inconsistent with courts to honor parties' expectations. 9
the provisions of the act; in other words, the U.S.C.A. § 1 et seq.
act cannot be held to destroy itself.

Constitutional and statutory provisions
and rules of court **1742 *333 Syllabus *
The principal purpose of the Federal
The cellular telephone contract between respondents
Arbitration Act (FAA) is to ensure that
(Concepcions) and petitioner (AT & T) provided for
private arbitration agreements are enforced
arbitration of all disputes, but did not permit classwide
according to their terms. 9 U.S.C.A. §§ 2–4.
arbitration. After the Concepcions were charged sales
248 Cases that cite this headnote tax on the retail value of phones provided free
under their service contract, they sued AT & T in
a California Federal District Court. Their suit was
[11] Alternative Dispute Resolution consolidated with a class action alleging, inter alia,
Nature, purpose, and right to arbitration that AT & T had engaged in false advertising and
in general fraud by charging sales tax on “free” phones. The
In bilateral arbitration, parties forgo the District Court denied AT & T's motion to compel
procedural rigor and appellate review of the arbitration under the Concepcions' contract. Relying on
courts in order to realize the benefits of the California Supreme Court's Discover Bank decision,
private dispute resolution: lower costs, greater it found the arbitration provision unconscionable because
efficiency and speed, and the ability to choose it disallowed classwide proceedings. The Ninth Circuit
expert adjudicators to resolve specialized agreed that the provision was unconscionable under
disputes. California law and held that the Federal Arbitration
Act (FAA), which makes arbitration agreements “valid,
8 Cases that cite this headnote irrevocable, and enforceable, save upon such grounds
as exist at law or in equity for the revocation of any
[12] Judgment contract,” 9 U.S.C. § 2, did not preempt its ruling.
Persons represented by parties

Held: Because it “stands as an obstacle to the facilitate informal, streamlined proceedings. Parties may
accomplishment and execution of the full purposes and agree to limit the issues subject to arbitration, Mitsubishi
objectives of Congress,” Hines v. Davidowitz, 312 U.S. 52, Motors Corp. v. Soler Chrysler–Plymouth, Inc., 473 U.S.
67, 61 S.Ct. 399, 85 L.Ed. 581, California's Discover Bank 614, 628, 105 S.Ct. 3346, 87 L.Ed.2d 444, to arbitrate
rule is pre-empted by the FAA. Pp. 1745 – 1753. according to specific rules, Volt, supra, at 479, 109 S.Ct.
1248, and to limit with whom they will arbitrate, Stolt–
(a) Section 2 reflects a “liberal federal policy favoring Nielsen, supra, at ––––. Pp. 1746 – 1750.
arbitration,” Moses H. Cone Memorial Hospital v.
Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, (d) Class arbitration, to the extent it is manufactured
74 L.Ed.2d 765, and the “fundamental principle that by Discover Bank rather than consensual, interferes
arbitration is a matter of contract,” Rent–A–Center, West, with fundamental attributes of arbitration. The switch
Inc. v. Jackson, 561 U.S. ––––, ––––, 130 S.Ct. 2772, 177 from bilateral to class arbitration sacrifices arbitration's
L.Ed.2d 403 (2010). Thus, courts must place arbitration informality and makes the process slower, more costly,
agreements on an equal footing with other contracts, and more likely to generate procedural morass than
Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, final judgment. And class arbitration greatly increases
443, 126 S.Ct. 1204, 163 L.Ed.2d 1038, and enforce them risks to defendants. The absence of multilayered review
according to their terms, Volt Information Sciences, Inc. makes it more likely that errors will go uncorrected. That
v. Board of Trustees of Leland Stanford Junior Univ., 489 risk of error may become unacceptable when damages
U.S. 468, 478, 109 S.Ct. 1248, 103 L.Ed.2d 488. Section allegedly owed to thousands of claimants are aggregated
2's saving clause permits agreements to be invalidated and decided at once. Arbitration is poorly suited to these
by “generally applicable contract defenses,” but not by higher stakes. In litigation, a defendant may appeal a
defenses that apply **1743 only to arbitration or derive certification decision and a final judgment, but 9 U.S.C. §
their meaning from the fact that an agreement to arbitrate 10 limits the grounds on which courts can vacate arbitral
is at issue. Doctor's Associates, Inc. v. Casarotto, 517 U.S. awards. Pp. 1750 – 1753.
681, 687, 116 S.Ct. 1652, 134 L.Ed.2d 902. Pp. 1745 – 1746.
584 F.3d 849, reversed and remanded.
(b) In Discover Bank, the California Supreme Court held
that class waivers in consumer arbitration agreements are SCALIA, J., delivered the opinion of the Court, in which
unconscionable if the *334 agreement is in an adhesion ROBERTS, C. J., and KENNEDY, THOMAS, and
contract, disputes between the parties are likely to involve ALITO, JJ., joined. THOMAS, J., filed a concurring
small amounts of damages, and the party with inferior opinion. BREYER, J., filed a dissenting opinion, in which
bargaining power alleges a deliberate scheme to defraud. GINSBURG, SOTOMAYOR, and KAGAN, JJ., joined.
Pp. 1745 – 1747.
(c) The Concepcions claim that the Discover Bank rule is a Attorneys and Law Firms
ground that “exist[s] at law or in equity for the revocation
Andrew J. Pincus, Washington, DC, for Petitioner.
of any contract” under FAA § 2. When state law prohibits
outright the arbitration of a particular type of claim, Deepak Gupta, for Respondents.
the FAA displaces the conflicting rule. But the inquiry
is more complex when a generally applicable doctrine is Donald M. Falk, Mayer Brown LLP, Palo Alto, CA,
alleged to have been applied in a fashion that disfavors Neal Berinhout, Atlanta, GA, Kenneth S. Geller, Andrew
or interferes with arbitration. Although § 2's saving clause J. Pincus, Evan M. Tager, Archis A. Parasharami,
preserves generally applicable contract defenses, it does Kevin Ranlett, Mayer Brown LLP, Washington, DC, for
not suggest an intent to preserve state-law rules that Petitioner.
stand as an obstacle to the accomplishment of the FAA's
Opinion
objectives. Cf. Geier v. American Honda Motor Co., 529
U.S. 861, 872, 120 S.Ct. 1913, 146 L.Ed.2d 914. The **1744 Justice SCALIA delivered the opinion of the
FAA's overarching purpose is to ensure the enforcement Court.
of arbitration agreements according to their terms so as to

*336 Section 2 of the Federal Arbitration Act (FAA)

makes agreements to arbitrate “valid, irrevocable, and The Concepcions purchased AT & T service, which was
enforceable, save upon such grounds as exist at law or advertised as including the provision of free phones; they
in equity for the revocation of any contract.” 9 U.S.C. were not charged for the phones, but they were charged
§ 2. We consider whether the FAA prohibits States $30.22 in sales tax based on the phones' retail value. In
from conditioning the enforceability of certain arbitration March 2006, the Concepcions filed a complaint against
agreements on the availability of classwide arbitration AT & T in the United States District Court for the
procedures. Southern District of California. The complaint was later
consolidated with a putative class action alleging, among
other things, that AT & T had engaged in false advertising
and fraud by charging sales tax on phones it advertised as
I
free.
In February 2002, Vincent and Liza Concepcion entered
into an agreement for the sale and servicing of cellular In March 2008, AT & T moved to compel
arbitration under the terms of its contract **1745
telephones with AT & T Mobility LCC (AT & T). 1 The
with the Concepcions. The Concepcions opposed the
contract provided for arbitration of all disputes between
motion, contending that the arbitration agreement was
the parties, but required that claims be brought in the
unconscionable and unlawfully exculpatory *338 under
parties' “individual capacity, and not as a plaintiff or
California law because it disallowed classwide procedures.
class member in any purported class or representative
The District Court denied AT & T's motion. It described
proceeding.” App. to Pet. for Cert. 61a. 2 The agreement AT & T's arbitration agreement favorably, noting, for
authorized AT & T to make unilateral amendments, which example, that the informal dispute-resolution process was
it did to the arbitration provision on several occasions. “quick, easy to use” and likely to “promp[t] full or ...
The version at issue in this case reflects revisions made in even excess payment to the customer without the need to
December 2006, which the parties agree are controlling. arbitrate or litigate”; that the $7,500 premium functioned
as “a substantial inducement for the consumer to pursue
The revised agreement provides that customers may the claim in arbitration” if a dispute was not resolved
initiate dispute proceedings by completing a one-page informally; and that consumers who were members of a
Notice of Dispute form available on AT & T's Web site. class would likely be worse off. Laster v. T–Mobile USA,
AT & T may *337 then offer to settle the claim; if it Inc., 2008 WL 5216255, *11–*12 (S.D.Cal., Aug.11, 2008).
does not, or if the dispute is not resolved within 30 days, Nevertheless, relying on the California Supreme Court's
the customer may invoke arbitration by filing a separate decision in Discover Bank v. Superior Court, 36 Cal.4th
Demand for Arbitration, also available on AT & T's Web 148, 30 Cal.Rptr.3d 76, 113 P.3d 1100 (2005), the court
site. In the event the parties proceed to arbitration, the found that the arbitration provision was unconscionable
agreement specifies that AT & T must pay all costs for because AT & T had not shown that bilateral arbitration
nonfrivolous claims; that arbitration must take place in adequately substituted for the deterrent effects of class
the county in which the customer is billed; that, for claims actions. Laster, 2008 WL 5216255, *14.
of $10,000 or less, the customer may choose whether the
arbitration proceeds in person, by telephone, or based The Ninth Circuit affirmed, also finding the provision
only on submissions; that either party may bring a claim unconscionable under California law as announced in
in small claims court in lieu of arbitration; and that Discover Bank. Laster v. AT & T Mobility LLC, 584
the arbitrator may award any form of individual relief, F.3d 849, 855 (2009). It also held that the Discover
including injunctions and presumably punitive damages. Bank rule was not preempted by the FAA because that
The agreement, moreover, denies AT & T any ability to rule was simply “a refinement of the unconscionability
seek reimbursement of its attorney's fees, and, in the event analysis applicable to contracts generally in California.”
that a customer receives an arbitration award greater than 584 F.3d, at 857. In response to AT & T's argument
AT & T's last written settlement offer, requires AT & T to that the Concepcions' interpretation of California law
pay a $7,500 minimum recovery and twice the amount of discriminated against arbitration, the Ninth Circuit
the claimant's attorney's fees. 3 rejected the contention that “ ‘class proceedings will

reduce the efficiency and expeditiousness of arbitration’ agreements to arbitrate to be invalidated by “generally
” and noted that “ ‘Discover Bank placed arbitration applicable contract defenses, such as fraud, duress, or
agreements with class action waivers on the exact same unconscionability,” but not by defenses that apply only to
footing as contracts that bar class action litigation outside arbitration or that derive their meaning from the fact that
the context of arbitration.’ ” Id., at 858 (quoting Shroyer an agreement to arbitrate is at issue. Doctor's Associates,
v. New Cingular Wireless Services, Inc., 498 F.3d 976, 990 Inc. v. Casarotto, 517 U.S. 681, 687, 116 S.Ct. 1652, 134
(C.A.9 2007)). L.Ed.2d 902 (1996); see also Perry v. Thomas, 482 U.S.
483, 492–493, n. 9, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987).
We granted certiorari, 560 U.S. 923, 130 S.Ct. 3322, 176 *340 The question in this case is whether § 2 preempts
L.Ed.2d 1218 (2010). California's rule classifying most collective-arbitration
waivers in consumer contracts as unconscionable. We
refer to this rule as the Discover Bank rule.
*339 II
[5] Under California law, courts may refuse to enforce
[1] [2] The FAA was enacted in 1925 in response to any contract found “to have been unconscionable at
widespread judicial hostility to arbitration agreements. the time it was made,” or may “limit the application
See Hall Street Associates, L.L.C. v. Mattel, Inc., 552 U.S. of any unconscionable clause.” Cal. Civ.Code Ann. §
576, 581, 128 S.Ct. 1396, 170 L.Ed.2d 254 (2008). Section 1670.5(a) (West 1985). A finding of unconscionability
2, the “primary substantive provision of the Act,” Moses requires “a ‘procedural’ and a ‘substantive’ element, the
H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 former focusing on ‘oppression’ or ‘surprise’ due to
U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983), provides, unequal bargaining power, the latter on ‘overly harsh’
in relevant part, as follows: or ‘one-sided’ results.” Armendariz v. Foundation Health
Pyschcare Servs., Inc., 24 Cal.4th 83, 114, 99 Cal.Rptr.2d
“A written provision in any maritime transaction or a 745, 6 P.3d 669, 690 (2000); accord, Discover Bank, 36
contract evidencing a transaction involving commerce Cal.4th, at 159–161, 30 Cal.Rptr.3d 76, 113 P.3d, at 1108.
to settle by arbitration a controversy thereafter arising
out of such contract or transaction ... shall be valid, In Discover Bank, the California Supreme Court applied
irrevocable, and enforceable, save upon such grounds this framework to class-action waivers in arbitration
as exist at law or in equity for the revocation of any agreements and held as follows:
contract.” 9 U.S.C. § 2.
“[W]hen the waiver is found in a consumer contract
We have described this provision as reflecting both a of adhesion in a setting in which disputes between the
“liberal federal policy favoring arbitration,” Moses H. contracting parties predictably involve small amounts
Cone, supra, at 24, 103 S.Ct. 927, and the “fundamental of damages, and when it is alleged that the party with
principle that arbitration is a matter of contract,” Rent– the superior bargaining power has carried out a scheme
A–Center, West, Inc. v. Jackson, 561 U.S. ––––, ––––, 130 to deliberately cheat large numbers of consumers out
S.Ct. 2772, 2776, 177 L.Ed.2d 403 (2010). In line with of individually small sums of money, then ... the waiver
these principles, courts must place arbitration agreements becomes in practice the exemption of the party ‘from
on an equal footing with other contracts, Buckeye Check responsibility for [its] own fraud, or willful injury
Cashing, Inc. v. Cardegna, 546 U.S. 440, 443, 126 to the person or property of another.’ Under these
S.Ct. 1204, 163 L.Ed.2d 1038 (2006), and enforce them circumstances, such waivers are unconscionable under
according to their terms, Volt Information Sciences, Inc. California law and should not be enforced.” Id., at
v. **1746 Board of Trustees of Leland Stanford Junior 162, 30 Cal.Rptr.3d 76, 113 P.3d, at 1110 (quoting Cal.
Univ., 489 U.S. 468, 478, 109 S.Ct. 1248, 103 L.Ed.2d 488 Civ.Code Ann. § 1668).
(1989).
California courts have frequently applied this rule to
[3] [4] The final phrase of § 2, however, permits find arbitration agreements unconscionable. See, e.g.,
arbitration agreements to be declared unenforceable Cohen v. DirecTV, Inc., 142 Cal.App.4th 1442, 1451–1453,
“upon such grounds as exist at law or in equity for the 48 Cal.Rptr.3d 813, 819–821 (2006); Klussman v. Cross
revocation of any contract.” This saving clause permits Country *341 Bank, 134 Cal.App.4th 1283, 1297, 36

Cal.Rptr.3d 728, 738–739 (2005); Aral v. EarthLink, Inc., Discover Bank. A court might reason that no consumer
134 Cal.App.4th 544, 556–557, 36 Cal.Rptr.3d 229, 237– would knowingly waive his right to full discovery, as
239 (2005). this would enable companies to hide their wrongdoing.
Or the court might simply say that such agreements are
exculpatory—restricting discovery would be of greater
benefit to the company than the consumer, since the
III
former is more likely to be sued than to sue. See Discover
Bank, supra, at 161, 30 Cal.Rptr.3d 76, 113 P.3d, at 1109
A (arguing that class waivers are similarly one-sided). And,
the reasoning would continue, because such a rule applies
The Concepcions argue that the Discover Bank rule, the general principle of unconscionability or public-policy
given its origins in California's unconscionability doctrine disapproval of exculpatory agreements, it is applicable
and California's policy against exculpation, is a ground to “any” contract and thus preserved by § 2 of the
that “exist[s] at law or in equity for the revocation of FAA. In practice, of course, the rule would have a
any contract” under FAA § 2. Moreover, they argue disproportionate impact on arbitration agreements; but
that even if we construe the Discover Bank rule as it would presumably apply to contracts purporting to
a prohibition on collective-action waivers rather than restrict discovery in litigation as well.
simply an application of unconscionability, the rule would
still be applicable to all dispute-resolution contracts,
Other examples are easy to imagine. The same argument
since California prohibits waivers of class litigation as might apply to a rule classifying as unconscionable
well. See America Online, Inc. v. Superior **1747 Ct., arbitration agreements that fail to abide by the Federal
90 Cal.App.4th 1, 17–18, 108 Cal.Rptr.2d 699, 711–713 Rules of Evidence, or that disallow an ultimate disposition
(2001). by a jury (perhaps termed “a panel of twelve lay
arbitrators” to help avoid preemption). Such examples
[6] [7] When state law prohibits outright the are not fanciful, since the judicial hostility towards
arbitration of a particular type of claim, the analysis is arbitration that prompted the FAA had manifested itself
straightforward: The conflicting rule is displaced by the in “a great variety” of “devices and formulas” declaring
FAA. Preston v. Ferrer, 552 U.S. 346, 353, 128 S.Ct. arbitration against public policy. Robert Lawrence Co.
978, 169 L.Ed.2d 917 (2008). But the inquiry becomes v. Devonshire Fabrics, Inc., 271 F.2d 402, 406 (C.A.2
more complex when a doctrine normally thought to be 1959). And although these statistics are not definitive, it
generally applicable, such as duress or, as relevant here, is worth noting that California's courts have been more
unconscionability, is alleged to have been applied in a likely to hold contracts to arbitrate unconscionable than
fashion that disfavors arbitration. In Perry v. Thomas, other contracts. Broome, An Unconscionable Applicable
482 U.S. 483, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987), for of the Unconscionability Doctrine: How the California
example, we noted that the FAA's preemptive effect might Courts are Circumventing the Federal Arbitration Act,
extend even to grounds traditionally thought to exist “ 3 Hastings Bus. L.J. 39, 54, 66 (2006); Randall,
‘at law or in equity for the revocation of any contract.’ *343 Judicial Attitudes Toward Arbitration and the
” Id., at 492, n. 9, 107 S.Ct. 2520 (emphasis deleted). We Resurgence of Unconscionability, 52 Buffalo L.Rev. 185,
said that a court may not “rely on the uniqueness of an 186–187 (2004).
agreement to arbitrate as a basis for a state-law holding
that enforcement would be unconscionable, for this would The Concepcions suggest that all this is just a parade
enable the court to effect what ... the state legislature of horribles, and no genuine worry. “Rules aimed
cannot.” Id., at 493, n. 9, 107 S.Ct. 2520. at destroying arbitration” or “demanding procedures
incompatible with arbitration,” they concede, **1748
An obvious illustration of this point would be a case “would be preempted by the FAA because they
finding unconscionable or unenforceable as against public cannot sensibly be reconciled with Section 2.” Brief for
policy *342 consumer arbitration agreements that Respondents 32. The “grounds” available under § 2's
fail to provide for judicially monitored discovery. The saving clause, they admit, “should not be construed to
rationalizations for such a holding are neither difficult to include a State's mere preference for procedures that
imagine nor different in kind from those articulated in

are incompatible with arbitration and ‘would wholly to stay litigation of arbitral claims pending arbitration
eviscerate arbitration agreements.’ ” Id., at 33 (quoting of those claims “in accordance with the terms of the
Carter v. SSC Odin Operating Co., LLC, 237 Ill.2d 30, 50, agreement”; and § 4 requires courts to compel arbitration
340 Ill.Dec. 196, 927 N.E.2d 1207, 1220 (2010)). 4 “in accordance with the terms of the agreement” upon the
motion of either party to the agreement (assuming that
[8] [9] We largely agree. Although § 2's saving clause the “making of the arbitration agreement or the failure ...
preserves generally applicable contract defenses, nothing to perform the same” is not at issue). In light of these
in it suggests an intent to preserve state-law rules that provisions, we have held that parties may agree to limit
stand as an obstacle to the accomplishment of the FAA's the issues subject to arbitration, Mitsubishi Motors Corp.
objectives. Cf. Geier v. American Honda Motor Co., 529 v. Soler Chrysler–Plymouth, Inc., 473 U.S. 614, 628, 105
U.S. 861, 872, 120 S.Ct. 1913, 146 L.Ed.2d 914 (2000); S.Ct. 3346, 87 L.Ed.2d 444 (1985), **1749 to arbitrate
Crosby v. National Foreign Trade Council, 530 U.S. 363, according to specific rules, Volt, supra, at 479, 109 S.Ct.
372–373, 120 S.Ct. 2288, 147 L.Ed.2d 352 (2000). As we 1248, and to limit with whom a party will arbitrate its
have said, a federal statute's saving clause “ ‘cannot in disputes, Stolt–Nielsen, supra, at ––––, 130 S.Ct. at 1773.
reason be construed as [allowing] a common law right,
the continued existence of which would be absolutely The point of affording parties discretion in designing
inconsistent with the provisions of the act. In other words, arbitration processes is to allow for efficient, streamlined
the act cannot be held to destroy itself.’ ” American procedures tailored to the type of dispute. It can be
Telephone & Telegraph Co. v. Central Office Telephone, specified, *345 for example, that the decisionmaker be a
Inc., 524 U.S. 214, 227–228, 118 S.Ct. 1956, 141 L.Ed.2d specialist in the relevant field, or that proceedings be kept
222 (1998) (quoting Texas & Pacific R. Co. v. Abilene confidential to protect trade secrets. And the informality
Cotton Oil Co., 204 U.S. 426, 446, 27 S.Ct. 350, 51 L.Ed. of arbitral proceedings is itself desirable, reducing the cost
553 (1907)). and increasing the speed of dispute resolution. 14 Penn
Plaza LLC v. Pyett, 556 U.S. 247, ––––, 129 S.Ct. 1456,
*344 We differ with the Concepcions only in the 1460, 173 L.Ed.2d 398 (2009); Mitsubishi Motors Corp.,
application of this analysis to the matter before us. We supra, at 628, 105 S.Ct. 3346.
do not agree that rules requiring judicially monitored
discovery or adherence to the Federal Rules of Evidence The dissent quotes Dean Witter Reynolds Inc. v. Byrd,
are “a far cry from this case.” Brief for Respondents 470 U.S. 213, 219, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985),
32. The overarching purpose of the FAA, evident in as “ ‘reject[ing] the suggestion that the overriding goal
the text of §§ 2, 3, and 4, is to ensure the enforcement of the Arbitration Act was to promote the expeditious
of arbitration agreements according to their terms resolution of claims.’ ” Post, at 4 (opinion of BREYER,
so as to facilitate streamlined proceedings. Requiring J.). That is greatly misleading. After saying (accurately
the availability of classwide arbitration interferes with enough) that “the overriding goal of the Arbitration Act
fundamental attributes of arbitration and thus creates a was [not] to promote the expeditious resolution of claims,”
scheme inconsistent with the FAA. but to “ensure judicial enforcement of privately made
agreements to arbitrate,” 470 U.S., at 219, 105 S.Ct.
1238, Dean Witter went on to explain: “This is not to
say that Congress was blind to the potential benefit of
B the legislation for expedited resolution of disputes. Far
from it ....” Id., at 220, 105 S.Ct. 1238. It then quotes a
[10] The “principal purpose” of the FAA is to
House Report saying that “the costliness and delays of
“ensur[e] that private arbitration agreements are enforced
litigation ... can be largely eliminated by agreements for
according to their terms.” Volt, 489 U.S., at 478, 109
arbitration.” Ibid. (quoting H.R.Rep. No. 96, 68th Cong.,
S.Ct. 1248; see also Stolt–Nielsen S.A. v. AnimalFeeds Int'l
1st Sess., 2 (1924)). The concluding paragraph of this part
Corp., 559 U.S. ––––, ––––, 130 S.Ct. 1758, 1763, 176
of its discussion begins as follows:
L.Ed.2d 605 (2010). This purpose is readily apparent from
the FAA's text. Section 2 makes arbitration agreements “We therefore are not persuaded by the argument that
“valid, irrevocable, and enforceable” as written (subject, the conflict between two goals of the Arbitration Act—
of course, to the saving clause); § 3 requires courts enforcement of private agreements and encouragement

of efficient and speedy dispute resolution—must be arbitrate on behalf of individuals when they may do so for
resolved in favor of the latter in order to realize the a class and reap far higher fees in the process. And faced
intent of the drafters.” 470 U.S., at 221, 105 S.Ct. 1238. with inevitable class arbitration, companies would have
less incentive to continue resolving potentially duplicative
In the present case, of course, those “two goals” do not claims on an individual basis.
conflict—and it is the dissent's view that would frustrate
both of them. Although we have had little occasion to examine
classwide arbitration, our decision in Stolt–Nielsen is
Contrary to the dissent's view, our cases place it instructive. In that case we held that an arbitration panel
beyond dispute that the FAA was designed to promote exceeded its power under § 10(a)(4) of the FAA by
arbitration. *346 They have repeatedly described the Act imposing class procedures based on policy judgments
as “embod[ying] [a] national policy favoring arbitration,” rather than the arbitration agreement itself or some
Buckeye Check Cashing, 546 U.S., at 443, 126 S.Ct. background principle of contract law that would affect
1204, and “a liberal federal policy favoring arbitration its interpretation. 559 U.S., at ––––, 130 S.Ct. at 1773–
agreements, notwithstanding any state substantive or 1776. We then held that the agreement at issue, which
procedural policies to the contrary,” Moses H. Cone, 460 was silent on the question of class procedures, could
U.S., at 24, 103 S.Ct. 927; see also Hall Street Assocs., 552 not be interpreted to allow them because the “changes
U.S., at 581, 128 S.Ct. 1396. Thus, in Preston v. Ferrer, brought about by the shift from bilateral arbitration
holding preempted a state-law rule requiring exhaustion to class-action arbitration” are “fundamental.” Id., at
of administrative remedies before arbitration, we said: “A ––––, 130 S.Ct. at 1776. This is obvious as a *348
prime objective of an agreement to arbitrate is to achieve structural matter: Classwide arbitration includes absent
‘streamlined proceedings and expeditious results,’ ” which parties, necessitating additional and different procedures
objective would be “frustrated” by requiring a dispute to and involving higher stakes. Confidentiality becomes
be heard by an agency first. 552 U.S., at 357–358, 128 S.Ct. more difficult. And while it is theoretically possible to
978. That rule, we said, would “at the least, hinder speedy select an arbitrator with some expertise relevant to the
resolution of the controversy.” Id., at 358, 128 S.Ct. 978. 5 class-certification question, arbitrators are not generally
knowledgeable in the often-dominant procedural aspects
**1750 California's Discover Bank rule similarly of certification, such as the protection of absent parties.
interferes with arbitration. Although the rule does not The conclusion follows that **1751 class arbitration, to
require classwide arbitration, it allows any party to a the extent it is manufactured by Discover Bank rather than
consumer contract to demand it ex post. The rule is consensual, is inconsistent with the FAA.
limited to adhesion contracts, Discover Bank, 36 Cal.4th,
at 162–163, 30 Cal.Rptr.3d 76, 113 P.3d, at 1110, but [11] First, the switch from bilateral to class arbitration
the times in which consumer contracts were anything sacrifices the principal advantage of arbitration—its
*347 other than adhesive are long past. 6 Carbajal v. informality—and makes the process slower, more costly,
H & R Block Tax Servs., Inc., 372 F.3d 903, 906 (7th and more likely to generate procedural morass than
Cir.2004); see also Hill v. Gateway 2000, Inc., 105 F.3d final judgment. “In bilateral arbitration, parties forgo the
1147, 1149 (C.A.7 1997). The rule also requires that procedural rigor and appellate review of the courts in
damages be predictably small, and that the consumer order to realize the benefits of private dispute resolution:
allege a scheme to cheat consumers. Discover Bank, supra, lower costs, greater efficiency and speed, and the ability
at 162–163, 30 Cal.Rptr.3d 76, 113 P.3d, at 1110. The to choose expert adjudicators to resolve specialized
former requirement, however, is toothless and malleable disputes.” 559 U.S., at ––––, 130 S.Ct. at 1775. But
(the Ninth Circuit has held that damages of $4,000 are before an arbitrator may decide the merits of a claim in
sufficiently small, see Oestreicher v. Alienware Corp., 322 classwide procedures, he must first decide, for example,
Fed.Appx. 489, 492 (2009) (unpublished)), and the latter whether the class itself may be certified, whether the
has no limiting effect, as all that is required is an allegation. named parties are sufficiently representative and typical,
Consumers remain free to bring and resolve their disputes and how discovery for the class should be conducted.
on a bilateral basis under Discover Bank, and some may A cursory comparison of bilateral and class arbitration
well do so; but there is little incentive for lawyers to illustrates the difference. According to the American

Arbitration Association (AAA), the average consumer Third, class arbitration greatly increases risks to
arbitration between January and August 2007 resulted in defendants. Informal procedures do of course have a
a disposition on the merits in six months, four months if cost: The absence of multilayered review makes it more
the arbitration was conducted by documents only. AAA, likely that errors will go uncorrected. Defendants are
Analysis of the AAA's Consumer Arbitration Caseload, willing to accept the costs of these errors in arbitration,
online at http://www.adr.org/ si.asp?id=5027 (all Internet since their impact is limited to the size of individual
materials as visited Apr. 25, 2011, and available in Clerk disputes, and presumably outweighed by savings from
of Court's case file). As of September 2009, the AAA avoiding the courts. But when damages allegedly owed to
had opened 283 class arbitrations. Of those, 121 remained tens of thousands of potential claimants are aggregated
active, and 162 had been settled, withdrawn, or dismissed. and decided at once, the risk of an error will often
Not a single one, however, had *349 resulted in a final become unacceptable. Faced with even a small chance of a
award on the merits. Brief for AAA as Amicus Curiae devastating loss, defendants will be pressured into settling
in Stolt–Nielsen, O.T.2009, No. 08–1198, pp. 22–24. For questionable claims. Other courts have noted the risk of
those cases that were no longer active, the median time “in terrorem” settlements that class actions entail, see, e.g.,
from filing to settlement, withdrawal, or dismissal—not Kohen v. Pacific Inv. Management Co. LLC, 571 F.3d 672,
judgment on the merits—was 583 days, and the mean was 677–678 (C.A.7 2009), and class arbitration would be no
630 days. Id., at 24. 7 different.
[12] Second, class arbitration requires procedural Arbitration is poorly suited to the higher stakes of
formality. The AAA's rules governing class arbitrations class litigation. In litigation, a defendant may appeal a
mimic the Federal Rules of Civil Procedure for class certification decision on an interlocutory basis and, if
litigation. Compare AAA, Supplementary Rules for Class unsuccessful, may appeal from a final judgment as well.
Arbitrations (effective Oct. 8, 2003), online at http:// Questions of law are reviewed de novo and questions of
www.adr.org/ sp.asp? id=21936, with Fed. Rule Civ. Proc. fact for clear error. In contrast, 9 U.S.C. § 10 allows a court
23. And while parties can alter those procedures by to vacate an arbitral award only where the award “was
contract, an alternative is not obvious. If procedures are procured by corruption, fraud, or undue means”; “there
too informal, absent class members would not be bound was evident partiality or corruption in the arbitrators”;
by the arbitration. For a class-action money judgment to “the arbitrators were guilty of misconduct in refusing to
bind absentees in litigation, class representatives must at postpone the hearing ... or in refusing to hear evidence
all times adequately represent absent class members, and pertinent and material to the controversy[,] or of any
absent members must be afforded notice, an opportunity other misbehavior by which the rights of any party
to be heard, and a right to opt out of the class. Phillips have been prejudiced”; or if the “arbitrators exceeded
Petroleum Co. v. Shutts, 472 U.S. 797, 811–812, 105 S.Ct. their powers, or so imperfectly executed them that a
2965, 86 L.Ed.2d 628 (1985). At least this amount of mutual, final, and definite award ... was not made.” The
process would presumably be required for absent parties AAA rules do authorize judicial review of certification
to be bound by the results of arbitration. decisions, but this review is unlikely to have much effect
given these limitations; review under § 10 focuses on
We find it unlikely that in passing the FAA Congress misconduct *351 rather than mistake. And parties may
meant to leave the disposition of these procedural not contractually expand the grounds or nature of judicial
requirements to an arbitrator. Indeed, class arbitration review. Hall Street Assocs., 552 U.S., at 578, 128 S.Ct.
was not even envisioned by Congress when it passed the 1396. We find it hard to believe that defendants would bet
FAA in 1925; as the California Supreme Court admitted the company with no effective means of review, and even
in Discover Bank, class arbitration is a “relatively recent harder to believe that Congress would have intended to
development.” 36 Cal.4th, at 163, 30 Cal.Rptr.3d 76, 113 allow state courts to force such a decision. 8
P.3d, at 1110. And it **1752 is at the very *350 least
odd to think that an arbitrator would be entrusted with [13] The Concepcions contend that because parties may
ensuring that third parties' due process rights are satisfied. and sometimes do agree to aggregation, class procedures
are not necessarily incompatible with arbitration. But the
same could be said about procedures that the Concepcions

admit States may not superimpose on arbitration: Parties Section 2 of the Federal Arbitration Act (FAA) provides
could agree to arbitrate pursuant to the Federal Rules that an arbitration provision “shall be valid, irrevocable,
of Civil Procedure, or pursuant to a discovery process and enforceable, save upon such grounds as exist at law or
rivaling that in litigation. Arbitration is a matter of in equity for the revocation of any contract.” 9 U.S.C. §
contract, and the FAA requires courts to honor parties' 2. The question here is whether California's Discover Bank
expectations. Rent–A– **1753 Center, West, 561 U.S., rule, see Discover Bank v. Superior Ct., 36 Cal.4th 148, 30
at ––––, 130 S.Ct. 2772, 2774. But what the parties in Cal.Rptr.3d 76, 113 P.3d 1100 (2005), is a “groun[d] ... for
the aforementioned examples would have agreed to is not the revocation of any contract.”
arbitration as envisioned by the FAA, lacks its benefits,
and therefore may not be required by state law. It would be absurd to suggest that § 2 requires only
that a defense apply to “any contract.” If § 2 means
The dissent claims that class proceedings are necessary anything, it *353 is that courts cannot refuse to enforce
to prosecute small-dollar claims that might otherwise slip arbitration agreements because of a state public policy
through the legal system. See post, at 9. But States cannot against arbitration, even if the policy nominally applies
require a procedure that is inconsistent with the FAA, to “any contract.” There must be some additional limit
even if it is desirable for unrelated reasons. Moreover, the on the contract defenses permitted by § 2. Cf. ante, at
claim here was most unlikely to go unresolved. As noted 17 (opinion of the Court) (state law may not require
earlier, the arbitration agreement provides that AT & T procedures that are “not arbitration as envisioned by the
will *352 pay claimants a minimum of $7,500 and twice FAA” and “lac[k] its benefits”); post, at 5 (BREYER, J.,
their attorney's fees if they obtain an arbitration award dissenting) (state law may require only procedures that are
greater than AT & T's last settlement offer. The District “consistent with the use of arbitration”).
Court found this scheme sufficient to provide incentive for
the individual prosecution of meritorious claims that are I write separately to explain how I would find that limit
not immediately settled, and the Ninth Circuit admitted in the FAA's text. As I would read it, the FAA requires
that aggrieved customers who filed claims would be that an agreement to arbitrate be enforced unless a party
“essentially guarantee[d]” to be made whole, 584 F.3d, successfully challenges the formation of the arbitration
at 856, n. 9. Indeed, the District Court concluded that agreement, such as by proving fraud or duress. 9 U.S.C.
the Concepcions were better off under their arbitration §§ 2, 4. Under this reading, I would reverse the Court of
agreement with AT & T than they would have been as Appeals because a district court cannot follow both the
participants in a class action, which “ could take months, FAA and the Discover Bank rule, which does not relate to
if not years, and which may merely yield an opportunity defects in the making of an agreement.
to submit a claim for recovery of a small percentage of a
few dollars.” Laster, 2008 WL 5216255, at *12. **1754 This reading of the text, however, has not been
fully developed by any party, cf. Brief for Petitioner 41,
n. 12, and could benefit from briefing and argument in
an appropriate case. Moreover, I think that the Court's
***
test will often lead to the same outcome as my textual
Because it “stands as an obstacle to the accomplishment interpretation and that, when possible, it is important in
and execution of the full purposes and objectives of interpreting statutes to give lower courts guidance from
Congress,” Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. a majority of the Court. See US Airways, Inc. v. Barnett,
399, 85 L.Ed. 581 (1941), California's Discover Bank rule 535 U.S. 391, 411, 122 S.Ct. 1516, 152 L.Ed.2d 589 (2002)
is preempted by the FAA. The judgment of the Ninth (O'Connor, J., concurring). Therefore, although I adhere
Circuit is reversed, and the case is remanded for further to my views on purposes-and-objectives pre-emption, see
proceedings consistent with this opinion. Wyeth v. Levine, 555 U.S. 555, ––––, 129 S.Ct. 1187, 173
L.Ed.2d 51 (2009) (opinion concurring in judgment), I
It is so ordered. reluctantly join the Court's opinion.
Justice THOMAS, concurring.

Examining the broader statutory scheme, § 4 can be read

to clarify the scope of § 2's exception to the enforcement
I
of *355 arbitration agreements. When a party seeks to
The FAA generally requires courts to enforce arbitration enforce an arbitration agreement in federal court, § 4
agreements as written. Section 2 provides that “[a] written requires that “upon being satisfied that the making of
provision in ... a contract ... to settle by arbitration a the agreement for arbitration or the failure to comply
controversy thereafter arising out of such contract ... therewith is not in issue,” the court must order arbitration
shall *354 be valid, irrevocable, and enforceable, save “in accordance with the terms of the agreement.”
upon such grounds as exist at law or in equity for the
revocation of any contract.” Significantly, the statute Reading §§ 2 and 4 harmoniously, the “grounds ... for
does not parallel the words “valid, irrevocable, and the revocation” preserved in § 2 would mean grounds
enforceable” by referencing the grounds as exist for related to the **1755 making of the agreement. This
the “ invalidation, revocation, or nonenforcement” of would require enforcement of an agreement to arbitrate
any contract. Nor does the statute use a different unless a party successfully asserts a defense concerning the
word or phrase entirely that might arguably encompass formation of the agreement to arbitrate, such as fraud,
validity, revocability, and enforce-ability. The use of duress, or mutual mistake. See Prima Paint Corp. v. Flood
only “revocation” and the conspicuous omission of & Conklin Mfg. Co., 388 U.S. 395, 403–404, 87 S.Ct. 1801,
“invalidation” and “nonenforcement” suggest that the 18 L.Ed.2d 1270 (1967) (interpreting § 4 to permit federal
exception does not include all defenses applicable to any courts to adjudicate claims of “fraud in the inducement
contract but rather some subset of those defenses. See of the arbitration clause itself” because such claims “g[o]
Duncan v. Walker, 533 U.S. 167, 174, 121 S.Ct. 2120, to the ‘making’ of the agreement to arbitrate”). Contract
150 L.Ed.2d 251 (2001) (“It is our duty to give effect, if defenses unrelated to the making of the agreement—such
possible, to every clause and word of a statute” (internal as public policy—could not be the basis for declining to
quotation marks omitted)). enforce an arbitration clause. *
Concededly, the difference between revocability, on the

one hand, and validity and enforceability, on the other,
*356 II
is not obvious. The statute does not define the terms,
and their ordinary meanings arguably overlap. Indeed, Under this reading, the question here would be whether
this Court and others have referred to the concepts of California's Discover Bank rule relates to the making of an
revocability, validity, and enforceability interchangeably. agreement. I think it does not.
But this ambiguity alone cannot justify ignoring Congress'
clear decision in § 2 to repeat only one of the three In Discover Bank, 36 Cal.4th 148, 30 Cal.Rptr.3d 76,
concepts. 113 P.3d 1100, the California Supreme Court held that
“class action waivers are, under certain circumstances,
To clarify the meaning of § 2, it would be natural to look unconscionable as unlawfully exculpatory.” Id., at 65, 30
to other portions of the FAA. Statutory interpretation Cal.Rptr.3d 76, 113 P.3d, at 1112; see also id., at 161,
focuses on “the language itself, the specific context in 30 Cal.Rptr.3d 76, 113 P.3d, at 1108 (“[C]lass action
which that language is used, and the broader context of waivers [may be] substantively unconscionable inasmuch
the statute as a whole.” Robinson v. Shell Oil Co., 519 as they may operate effectively as exculpatory contract
U.S. 337, 341, 117 S.Ct. 843, 136 L.Ed.2d 808 (1997). clauses that are contrary to public policy”). The court
“A provision that may seem ambiguous in isolation is concluded that where a class-action waiver is found in
often clarified by the remainder of the statutory scheme ... an arbitration agreement in certain consumer contracts
because only one of the permissible meanings produces of adhesion, such waivers “should not be enforced.” Id.,
a substantive effect that is compatible with the rest of at 163, 30 Cal.Rptr.3d 76, 113 P.3d, at 1110. In practice,
the law.” United Sav. Assn. of Tex. v. Timbers of Inwood the court explained, such agreements “operate to insulate
Forest Associates, Ltd., 484 U.S. 365, 371, 108 S.Ct. 626, a party from liability that otherwise would be imposed
98 L.Ed.2d 740 (1988). under California law.” Id., at 161, 30 Cal.Rptr.3d 76, 113
P.3d, at 1108, 1109. The court did not conclude that a

customer would sign such an agreement only if under California Civil Code. The first provision makes unlawful
**1756 the influence of fraud, duress, or delusion. all contracts “which have for their object, directly or in-
directly, to exempt anyone from responsibility for his
The court's analysis and conclusion that the arbitration own ... violation of law.” *358 Cal. Civ.Code Ann. § 1668
agreement was exculpatory reveals that the Discover Bank (West 1985). The second provision authorizes courts to
rule does not concern the making of the arbitration “limit the application of any unconscionable clause” in
agreement. Exculpatory contracts are a paradigmatic a contract so “as to avoid any unconscionable result.” §
example of contracts that will not be enforced because of 1670.5(a).
public policy. *357 15 G. Giesel, Corbin on Contracts
§§ 85.1, 85.17, 85.18 (rev. ed.2003). Indeed, the court The specific rule of state law in question consists of
explained that it would not enforce the agreements the California Supreme Court's application of these
because they are “ ‘against the policy of the law.’ ” 36 principles to hold that “some” (but not “all”) “class action
Cal.4th, at 161, 30 Cal.Rptr.3d 76, 113 P.3d, at 1108 waivers” in consumer contracts are exculpatory and
(quoting Cal. Civ.Code Ann. § 1668); see also 36 Cal.4th, unconscionable under California “law.” Discover Bank v.
at 166, 30 Cal.Rptr.3d 76, 113 P.3d, at 1112 (“Agreements Superior Ct., 36 Cal.4th 148, 160, 162, 30 Cal.Rptr.3d 76,
to arbitrate may not be used to harbor terms, conditions 113 P.3d 1100, 1108, 1110 (2005). In particular, in Discover
and practices that undermine public policy” (internal Bank the California Supreme Court stated that, when a
quotation marks omitted)). Refusal to enforce a contract class-action waiver
for public-policy reasons does not concern whether the
contract was properly made. “is found in a consumer contract of adhesion in
a setting in which disputes between the contracting
Accordingly, the Discover Bank rule is not a “groun[d] ... parties predictably involve small amounts of damages,
for the revocation of any contract” as I would read § 2 and when it is alleged that the party with the
of the FAA in light of § 4. Under this reading, the FAA superior bargaining power has carried out a scheme to
dictates that the arbitration agreement here be enforced deliberately cheat large numbers of consumers out of
and the Discover Bank rule is pre-empted. individually small sums of money, then ... the waiver
becomes in practice the exemption of the party ‘from
responsibility for [its] own fraud, or willful injury
**1757 to the person or property of another.’ ” Id., at
Justice BREYER, with whom Justice GINSBURG, 162–163, 30 Cal.Rptr.3d 76, 113 P.3d, at 1110.
Justice SOTOMAYOR, and Justice KAGAN join,
dissenting. In such a circumstance, the “waivers are unconscionable
The Federal Arbitration Act says that an arbitration under California law and should not be enforced.” Id., at
agreement “shall be valid, irrevocable, and enforceable, 163, 30 Cal.Rptr.3d 76, 113 P.3d, at 1110.
save upon such grounds as exist at law or in equity for the
revocation of any contract.” 9 U.S.C. § 2 (emphasis added). The Discover Bank rule does not create a “blanket policy
California law sets forth certain circumstances in which in California against class action waivers in the consumer
“class action waivers” in any contract are unenforceable. context.” Provencher v. Dell, Inc., 409 F.Supp.2d
In my view, this rule of state law is consistent with the 1196, 1201 (C.D.Cal.2006). Instead, it represents the
federal Act's language and primary objective. It does not “application of a more general [unconscionability]
“stan[d] as an obstacle” to the Act's “accomplishment and principle.” Gentry v. Superior Ct., 42 Cal.4th 443,
execution.” Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 457, 64 Cal.Rptr.3d 773, 165 P.3d 556, 564 (2007).
399, 85 L.Ed. 581 (1941). And the Court is wrong to hold Courts applying California law have enforced class-action
that the federal Act pre-empts the rule of state law. waivers where they satisfy general unconscionability
standards. See, e.g., *359 Walnut Producers of Cal.
v. Diamond Foods, Inc., 187 Cal.App.4th 634, 647–650,
114 Cal.Rptr.3d 449, 459–462 (2010); Arguelles–Romero
I
v. Superior Ct., 184 Cal.App.4th 825, 843–845, 109
The California law in question consists of an authoritative Cal.Rptr.3d 289, 305–307 (2010); Smith v. Americredit
state-court interpretation of two provisions of the Financial Servs., Inc., No. 09cv1076, 2009 WL 4895280

(S.D.Cal., Dec.11, 2009); cf. Provencher, supra, at 1201 Alberto–Culver Co., 417 U.S. 506, 511, 94 S.Ct. 2449,
(considering Discover Bank in choice-of-law inquiry). And 41 L.Ed.2d 270 (1974) (quoting H.R.Rep. No. 96, at 2;
even when they fail, the parties remain free to devise other emphasis added).
dispute mechanisms, including informal mechanisms,
that, in context, will not prove unconscionable. See Volt Congress was fully aware that arbitration could provide
Information Sciences, Inc. v. Board of Trustees of Leland procedural and cost advantages. The House Report
Stanford Junior Univ., 489 U.S. 468, 479, 109 S.Ct. 1248, emphasized the “appropriate[ness]” of making arbitration
103 L.Ed.2d 488 (1989). **1758 agreements enforceable “at this time when there
is so much agitation against the costliness and delays of
litigation.” Id., at 2. And this Court has acknowledged
that parties may enter into arbitration agreements in
II
order to expedite the resolution of disputes. See Preston
v. Ferrer, 552 U.S. 346, 357, 128 S.Ct. 978, 169 L.Ed.2d
A 917 (2008) (discussing “prime objective of an agreement
to arbitrate”). See also Mitsubishi Motors Corp. v. Soler
The Discover Bank rule is consistent with the federal Act's Chrysler–Plymouth, Inc., 473 U.S. 614, 628, 105 S.Ct.
language. It “applies equally to class action litigation 3346, 87 L.Ed.2d 444 (1985).
waivers in contracts without arbitration agreements as it
does to class arbitration waivers in contracts with such
But we have also cautioned against thinking that
agreements.” 36 Cal.4th, at 165–166, 30 Cal.Rptr.3d 76, Congress' primary objective was to guarantee these
113 P.3d, at 1112. Linguistically speaking, it falls directly particular procedural advantages. Rather, that primary
within the scope of the Act's exception permitting courts to objective was to secure the “enforcement” of agreements
refuse to enforce arbitration agreements on grounds that to arbitrate. Dean Witter, 470 U.S., at 221, 105 S.Ct.
exist “for the revocation of any contract.” 9 U.S.C. § 2 1238. See also id., at 219, 105 S.Ct. 1238 (we “reject the
(emphasis added). The majority agrees. Ante, at 9. suggestion that the overriding goal of the Arbitration Act
was to promote the expeditious resolution of claims”);
id., at 219, 217–218, 105 S.Ct. 1238 (“[T]he intent of
B Congress” requires us to apply the terms of the Act
without regard to whether the result would be “possibly
The Discover Bank rule is also consistent with the inefficient”); cf. id., at 220, 105 S.Ct. 1238 (acknowledging
basic “purpose behind” the Act. Dean Witter Reynolds that “expedited resolution of disputes” might lead parties
Inc. v. Byrd, 470 U.S. 213, 219, 105 S.Ct. 1238, 84 to prefer arbitration). The relevant Senate Report points
L.Ed.2d 158 (1985). We have described that purpose as to the Act's basic purpose when it says that “[t]he purpose
one of “ensur[ing] judicial enforcement” of arbitration of the [Act] is clearly set forth in section 2,” S.Rep. No.
agreements. Ibid.; see also Marine Transit Corp. v. 536, at 2 (emphasis added), namely, the section that says
Dreyfus, 284 U.S. 263, 274, n. 2, 52 S.Ct. 166, 76 L.Ed. that an arbitration agreement “shall be valid, irrevocable,
282 (1932) (“ ‘The purpose of this bill is to make valid *362 and enforceable, save upon such grounds as exist
and enforceable agreements for arbitration’ ” (quoting at law or in equity for the revocation of any contract,” 9
H.R.Rep. No. 96, 68th Cong., 1st Sess., 1 (1924); emphasis U.S.C. § 2.
added)); 65 Cong. Rec.1931 (1924) ( “It creates no new
legislation, grants no new rights, except a remedy to Thus, insofar as we seek to implement Congress' intent,
enforce an agreement in commercial contracts and in we should think more than twice before invalidating a
*360 admiralty contracts”). As is well known, prior state law that does just what § 2 requires, namely, puts
to the federal Act, many courts expressed hostility to agreements to arbitrate and agreements to litigate “upon
arbitration, for example by refusing to order specific the same footing.”
performance of agreements to arbitrate. See S.Rep. No.
536, 68th Cong., 1st Sess., 2 (1924). The Act sought to
eliminate that hostility by placing agreements to arbitrate
III
“ ‘upon the same footing as other contracts.’ ” Scherk v.

The majority's contrary view (that Discover Bank stands as H.R. 646 before the Subcommittees of the Committees on
an “obstacle” to the accomplishment of the federal law's the Judiciary, 68th Cong., 1st Sess., 15 (1924); Hearing
objective, ante, at 9–18) rests primarily upon its claims on S. 4213 and S. 4214 before a Subcommittee of
that the Discover Bank rule increases the complexity the Senate Committee on the Judiciary, 67th Cong.,
of arbitration procedures, thereby discouraging parties 4th Sess., 9–10 (1923); Dept. of Commerce, Secretary
from entering into arbitration agreements, and to that Hoover Favors Arbitration—Press Release (Dec. 28,
extent discriminating in practice against arbitration. 1925), Herbert Hoover Papers—Articles, Addresses, and
These claims are not well founded. Public Statements File—No. 536, p. 2 (Herbert Hoover
Presidential Library); Cohen & Dayton, The New Federal
For one thing, a state rule of law that would sometimes Arbitration Law, 12 Va. L.Rev. 265, 281 (1926); AAA,
set aside as unconscionable a contract term that forbids Year Book on Commercial Arbitration in the United
class arbitration is not (as the majority claims) like a rule States (1927). This last mentioned feature of the history
that would require “ultimate disposition by a jury” or —roughly equivalent bargaining power—suggests, if
“judicially monitored discovery” or use of “the Federal anything, that California's statute is consistent with, and
Rules of Evidence.” Ante, at 8, 9. Unlike the majority's indeed may help to further, the objectives that Congress
examples, class arbitration is consistent with the use of had in mind.
arbitration. It is a form of arbitration that is well known
in California and followed elsewhere. See, e.g., Keating Regardless, if neither the history nor present practice
v. Superior Ct., 109 Cal.App.3d 784, 167 Cal.Rptr. 481, suggests that class arbitration is fundamentally
492 (1980) (officially depublished); American Arbitration incompatible with arbitration itself, then on what basis
Association (AAA), Supplementary Rules for Class can the majority hold California's law pre-empted?
Arbitrations (2003), http://www.adr.org/sp.asp?id=21936
(as visited Apr. 25, 2011, and available in Clerk of Court's *363 For another thing, the majority's argument that
case file); JAMS, The Resolution Experts, Class Action the Discover Bank rule will discourage arbitration rests
Procedures (2009). Indeed, the AAA has told us that it critically upon the wrong comparison. The majority
has found class arbitration to be “a fair, balanced, and compares the complexity of class arbitration with that
efficient means of resolving class disputes.” Brief for AAA of bilateral arbitration. See ante, at 14. And it finds the
as Amicus Curiae in Stolt–Nielsen S.A. v. AnimalFeeds former more complex. See ibid. But, if incentives are at
Int'l Corp., O.T.2009, No. 08–1198, p. 25 (hereinafter issue, the relevant comparison is not “arbitration with
AAA Amicus Brief). And unlike the majority's examples, arbitration” but a comparison between class arbitration
the Discover Bank rule imposes equivalent limitations on and judicial class actions. After all, in respect to the
litigation; hence it cannot **1759 fairly be characterized relevant set of contracts, the Discover Bank rule similarly
as a targeted attack on arbitration. and equally sets aside clauses that forbid class procedures
—whether arbitration procedures or ordinary judicial
Where does the majority get its contrary idea—that procedures are at issue.
individual, rather than class, arbitration is a “fundamental
attribut[e]” of arbitration? Ante, at 9. The majority does Why would a typical defendant (say, a business) prefer a
not explain. And it is unlikely to be able to trace its present judicial class action to class arbitration? AAA statistics
view to the history of the arbitration statute itself. “suggest that class arbitration proceedings take more time
than the average commercial arbitration, but may take less
When Congress enacted the Act, arbitration procedures time than the average class action in court.” AAA Amicus
had not yet been fully developed. Insofar as Congress Brief 24 (emphasis added). Data from California courts
considered detailed forms of arbitration at all, it may well confirm that class arbitrations can take considerably less
have thought that arbitration would be used primarily time than in-court proceedings in which class certification
where merchants sought to resolve disputes of fact, not is sought. Compare ante, at 14 (providing statistics for
law, under the customs of their industries, where the class arbitration), with Judicial Council of California,
parties possessed roughly equivalent bargaining power. Administrative Office of the Courts, Class Certification
See Mitsubishi Motors, supra, at 646, 105 S.Ct. 3346 in California: Second Interim Report from the Study of
(Stevens, J., dissenting); Joint Hearings on S. 1005 and California Class Action Litigation 18 (2010) (providing

statistics for class-action litigation in California courts). 687. See also ante, at 4, n. (THOMAS, J., concurring)
And a single class proceeding is surely more efficient (suggesting that, under certain circumstances, California
than thousands of separate proceedings for identical might remain free to apply its unconscionability doctrine).
claims. Thus, if speedy resolution of disputes were all that
mattered, then the Discover Bank rule would reinforce, *365 Because California applies the same legal principles
**1760 not obstruct, that objective of the Act. to address the unconscionability of class arbitration
waivers as it does to address the unconscionability of
The majority's related claim that the Discover Bank any other contractual provision, the merits of class
rule will discourage the use of arbitration because proceedings should not factor into our decision. If
“[a]rbitration is poorly suited to ... higher stakes” lacks California had applied its law of duress to void an
empirical support. Ante, at 16. Indeed, the majority arbitration agreement, would it matter if the procedures
provides no convincing reason to believe that parties are in the coerced agreement were efficient?
unwilling to submit High-Stake disputes to Arbitration.
and There are numerous counterexamples. Loftus, Rivals Regardless, the majority highlights the disadvantages of
Resolve Dispute Over Drug, Wall Street Journal, Apr. 16, class arbitrations, as it sees them. See ante, at 15–16
2011, p. B2 (discussing $500 million settlement in dispute (referring to the “greatly increase[d] risks to defendants”;
submitted to arbitration); Ziobro, Kraft Seeks Arbitration the “chance of a devastating loss” pressuring defendants
In Fight With Starbucks Over Distribution, Wall Street “into settling questionable claims”). But class proceedings
Journal, Nov. 30, 2010, p. B10 (describing initiation of an have countervailing advantages. In general agreements
arbitration in which the payout “could be higher” than that forbid the consolidation of claims can lead small-
$1.5 billion); Markoff, Software Arbitration Ruling Gives dollar claimants to abandon their claims rather than to
I.B.M. $833 Million From Fujitsu, N.Y. Times, Nov. 30, litigate. I suspect that it is true even here, for as the
1988, p. A1 (describing both companies as “pleased with Court of Appeals recognized, AT & T can avoid the
the ruling” resolving a licensing dispute). $7,500 payout (the payout that supposedly makes the
Concepcions' arbitration worthwhile) simply by paying
Further, even though contract defenses, e.g., duress the claim's face value, such that “the maximum gain to a
and unconscionability, slow down the dispute resolution customer for the hassle of arbitrating a $30.22 dispute is
process, federal arbitration law normally leaves such still just $30.22.” Laster v. AT & T Mobility **1761 LLC,
matters to the States. Rent–A–Center, West, Inc. v. 584 F.3d 849, 855, 856 (C.A.9 2009).
Jackson, 561 U.S. ––––, ––––, 130 S.Ct. 2772, 2775
(2010) (arbitration agreements “may be invalidated What rational lawyer would have signed on to represent
by ‘generally applicable contract defenses' ” (quoting the Concepcions in litigation for the possibility of fees
Doctor's Associates, Inc. v. Casarotto, 517 U.S. 681, 687, stemming from a $30.22 claim? See, e.g., Carnegie v.
116 S.Ct. 1652, 134 L.Ed.2d 902 (1996))). A provision in a Household Int'l, Inc., 376 F.3d 656, 661 (C.A.7 2004)
contract of adhesion (for example, requiring a consumer (“The realistic alternative to a class action is not 17
to decide very quickly whether to pursue a claim) might million individual suits, but zero individual suits, as only
increase the speed and efficiency of arbitrating a dispute, a lunatic or a fanatic sues for $30”). In California's
but the State can forbid it. See, e.g., Hayes v. Oakridge perfectly rational view, nonclass arbitration over such
Home, 122 Ohio St.3d 63, 67, 2009–Ohio–2054, ¶ 19, sums will also sometimes have the effect of depriving
908 N.E.2d 408, 412 (“Unconscionability is a ground claimants of their claims (say, for example, where claiming
for revocation of an arbitration agreement”); In re the $30.22 were to involve filling out many forms that
Poly–America, L. P., 262 S.W.3d 337, 348 (Tex.2008) require technical legal knowledge or waiting at great
(“Unconscionable contracts, however—whether relating length while a call is placed on hold). Discover Bank sets
to arbitration or not—are unenforceable under Texas forth circumstances in which the California courts believe
law”). The Discover Bank rule amounts to a variation on that the terms of consumer contracts can be manipulated
this theme. California is free to define unconscionability to *366 insulate an agreement's author from liability for
as it sees fit, and its common law is of no federal concern its own frauds by “deliberately cheat[ing] large numbers of
so long as the State does not adopt a special rule that consumers out of individually small sums of money.” 36
disfavors arbitration. Cf. Doctor's Associates, supra, at Cal.4th, at 162–163, 30 Cal.Rptr.3d 76, 113 P.3d, at 1110.

Why is this kind of decision—weighing the pros and cons it if their belief happens to be the contrary”); Cohen &
Dayton, 12 Va. L.Rev., at 276 (the Act “is no infringement
of all class proceedings alike—not California's to make?
upon the right of each State to decide for itself what
**1762 contracts shall or shall not exist under its laws”).
Finally, the majority can find no meaningful support
for its views in this Court's precedent. The federal Act
These cases do not concern the merits and demerits of
has been in force for nearly a century. We have decided
class actions; they concern equal treatment of arbitration
dozens of cases about its requirements. We have reached
contracts and other contracts. Since it is the latter question
results that authorize complex arbitration procedures.
that is at issue here, I am not surprised that the majority
E.g., Mitsubishi Motors, 473 U.S., at 629, 105 S.Ct.
can find no meaningful precedent supporting its decision.
3346 (antitrust claims arising in international transaction
are arbitrable). We have upheld nondiscriminatory state
laws that slow down arbitration proceedings. E.g., Volt
Information Sciences, 489 U.S., at 477–479, 109 S.Ct. IV
1248 (California law staying arbitration proceedings until
completion of related litigation is not pre-empted). But we By using the words “save upon such grounds as exist
have not, to my knowledge, applied the Act to strike down at law or in equity for the revocation of any contract,”
a state statute that treats arbitrations on par with judicial Congress retained for the States an important role incident
and administrative proceedings. Cf. Preston, 552 U.S., at to agreements to arbitrate. 9 U.S.C. § 2. Through those
355–356, 128 S.Ct. 978 (Act pre-empts state law that vests words Congress reiterated a basic federal idea that has
primary jurisdiction in state administrative board). long informed the nature of this Nation's laws. We
have often expressed this idea in opinions that set forth
At the same time, we have repeatedly referred to the Act's presumptions. See, e.g., Medtronic, Inc. v. Lohr, 518
basic objective as assuring that courts treat arbitration U.S. 470, 485, 116 S.Ct. 2240, 135 L.Ed.2d 700 (1996)
agreements “like all other contracts.” Buckeye Check (“[B]ecause the States are independent sovereigns in our
Cashing, Inc. v. Cardegna, 546 U.S. 440, 447, 126 S.Ct. federal system, we have long presumed that Congress does
1204, 163 L.Ed.2d 1038 (2006). See also, e.g., Vaden v. not cavalierly pre-empt state-law causes of action”). But
Discover Bank, 556 U.S. 49, ––––, 129 S.Ct. 1262, 1273– federalism is as much a question of deeds as words. It often
1274, 173 L.Ed.2d 206 (2009);; Doctor's Associates, supra, takes the form of a concrete decision by this Court that
at 687, 116 S.Ct. 1652; Allied–Bruce Terminix Cos. v. respects the legitimacy of a State's action in an individual
Dobson, 513 U.S. 265, 281, 115 S.Ct. 834, 130 L.Ed.2d 753 case. Here, recognition of that federalist ideal, embodied
(1995); Rodriguez de Quijas v. Shearson/American Express, in specific language in this particular statute, should lead
Inc., 490 U.S. 477, 483–484, 109 S.Ct. 1917, 104 L.Ed.2d us to uphold California's law, not to strike it down. We do
526 (1989); Perry v. Thomas, 482 U.S. 483, 492–493, n. 9, not honor federalist principles in their breach.
107 S.Ct. 2520, 96 L.Ed.2d 426 (1987); Mitsubishi Motors,
supra, at 627, 105 S.Ct. 3346. And we have recognized With respect, I dissent.
that “[t]o immunize an arbitration agreement from judicial
challenge” on grounds applicable to all other contracts 19 NO. 4 Westlaw Journal Class Action 319 NO. 4
“would be to elevate it over other forms of contract.” Westlaw Journal Class Action 319 NO. 4 Westlaw Journal
*367 Prima Paint Corp. v. Flood & Conklin Mfg. Co., Class Action 319 NO. 4 Westlaw Journal Class Action 3
388 U.S. 395, 404, n. 12, 87 S.Ct. 1801, 18 L.Ed.2d 1270
All Citations
(1967); see also Marchant v. Mead–Morrison Mfg. Co.,
252 N.Y. 284, 299, 169 N.E. 386, 391 (1929) (Cardozo, 563 U.S. 333, 131 S.Ct. 1740, 179 L.Ed.2d 742, 79 USLW
C.J.) (“Courts are not at liberty to shirk the process of 4279, 161 Lab.Cas. P 10,368, 11 Cal. Daily Op. Serv. 4842,
[contractual] construction under the empire of a belief that 2011 Daily Journal D.A.R. 5846, 52 Communications
arbitration is beneficent any more than they may shirk Reg. (P&F) 1179, 22 Fla. L. Weekly Fed. S 957
Footnotes

convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U.S. 321, 337, 26 S.Ct. 282, 50
L.Ed. 499.
1 The Conceptions' original contract was with Cingular Wireless. AT & T acquired Cingular in 2005 and renamed the
company AT & T Mobility in 2007. Laster v. AT & T Mobility LLC, 584 F.3d 849, 852, n. 1 (C.A.9 2009).
2 That provision further states that “the arbitrator may not consolidate more than one person's claims, and may not otherwise
preside over any form of a representative or class proceeding.” App. to Pet. for Cert. 61a.
3 The guaranteed minimum recovery was increased in 2009 to $10,000. Brief for Petitioner 7.
4 The dissent seeks to fight off even this eminently reasonable concession. It says that to its knowledge “we have not ...
applied the Act to strike down a state statute that treats arbitrations on par with judicial and administrative proceedings,”
post, at 10 (opinion of BREYER, J.), and that “we should think more than twice before invalidating a state law that ... puts
agreements to arbitrate and agreements to litigate ‘upon the same footing’ ” post, at 4–5.
5 Relying upon nothing more indicative of congressional understanding than statements of witnesses in committee hearings
and a press release of Secretary of Commerce Herbert Hoover, the dissent suggests that Congress “thought that
arbitration would be used primarily where merchants sought to resolve disputes of fact ... [and] possessed roughly
equivalent bargaining power.” Post, at 6. Such a limitation appears nowhere in the text of the FAA and has been explicitly
rejected by our cases. “Relationships between securities dealers and investors, for example, may involve unequal
bargaining power, but we [have] nevertheless held ... that agreements to arbitrate in that context are enforceable.” Gilmer
v. Interstate/Johnson Lane Corp., 500 U.S. 20, 33, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991); see also id., at 32–33, 111 S.Ct.
1647 (allowing arbitration of claims arising under the Age Discrimination in Employment Act of 1967 despite allegations of
unequal bargaining power between employers and employees). Of course the dissent's disquisition on legislative history
fails to note that it contains nothing—not even the testimony of a stray witness in committee hearings—that contemplates
the existence of class arbitration.
6 Of course States remain free to take steps addressing the concerns that attend contracts of adhesion—for example,
requiring class-action-waiver provisions in adhesive arbitration agreements to be highlighted. Such steps cannot,
however, conflict with the FAA or frustrate its purpose to ensure that private arbitration agreements are enforced according
to their terms.
7 The dissent claims that class arbitration should be compared to class litigation, not bilateral arbitration. Post, at 6–7.
Whether arbitrating a class is more desirable than litigating one, however, is not relevant. A State cannot defend a rule
requiring arbitration-by-jury by saying that parties will still prefer it to trial-by-jury.
8 The dissent cites three large arbitration awards (none of which stems from classwide arbitration) as evidence that parties
are willing to submit large claims before an arbitrator. Post, at 7–8. Those examples might be in point if it could be
established that the size of the arbitral dispute was predictable when the arbitration agreement was entered. Otherwise, all
the cases prove is that arbitrators can give huge awards—which we have never doubted. The point is that in class-action
arbitration huge awards (with limited judicial review) will be entirely predictable, thus rendering arbitration unattractive. It
is not reasonably deniable that requiring consumer disputes to be arbitrated on a classwide basis will have a substantial
deterrent effect on incentives to arbitrate.
* The interpretation I suggest would be consistent with our precedent. Contract formation is based on the consent of the
parties, and we have emphasized that “[a]rbitration under the Act is a matter of consent.” Volt Information Sciences, Inc.
v. Board of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 479, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989).
The statement in Perry v. Thomas, 482 U.S. 483, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987), suggesting that § 2 preserves
all state-law defenses that “arose to govern issues concerning the validity, revocability, and enforceability of contracts
generally,” id., at 493, n. 9, 107 S.Ct. 2520, is dicta. This statement is found in a footnote concerning a claim that the
Court “decline[d] to address.” Id., at 493, n. 9, 107 S.Ct. 2520. Similarly, to the extent that statements in Rent–A–Center,
West, Inc. v. Jackson, 561 U.S. ––––, –––– n. 1, 130 S.Ct. 2772, 2778 n. 1 (2010), can be read to suggest anything
about the scope of state-law defenses under § 2, those statements are dicta, as well. This Court has never addressed
the question whether the state-law “grounds” referred to in § 2 are narrower than those applicable to any contract.
Moreover, every specific contract defense that the Court has acknowledged is applicable under § 2 relates to contract
formation. In Doctor's Associates, Inc. v. Casarotto, 517 U.S. 681, 687, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996),
this Court said that fraud, duress, and unconscionability “may be applied to invalidate arbitration agreements without
contravening § 2.” All three defenses historically concern the making of an agreement. See Morgan Stanley Capital
Group Inc. v. Public Util. Dist. No. 1 of Snohomish Cty., 554 U.S. 527, 547, 128 S.Ct. 2733, 171 L.Ed.2d 607 (2008)
(describing fraud and duress as “traditional grounds for the abrogation of [a] contract” that speak to “unfair dealing

at the contract formation stage”); Hume v. United States, 132 U.S. 406, 411, 414, 10 S.Ct. 134, 33 L.Ed. 393 (1889)
(describing an unconscionable contract as one “such as no man in his senses and not under delusion would make” and
suggesting that there may be “contracts so extortionate and unconscionable on their face as to raise the presumption
of fraud in their inception” (internal quotation marks omitted)).

Capital Income Properties-LXXX v. Blackmon, 843 S.W.2d 22 (1992)
KeyCite Yellow Flag - Negative Treatment Attorneys and Law Firms

Distinguished by Loy v. Harter, Tex.App.-Texarkana, February 10, 2004
843 S.W.2d 22 *22 Kelly M. Crawford and C. Kent Adams, Dallas,
Supreme Court of Texas. Scott G. Campbell, New York City, for relators.
CAPITAL INCOME PROPERTIES–LXXX; Cary N. Goldberg, Chicago, IL, Thomas L. Busby,

CRI, Inc.; William B. Dockser; Martin C. Corpus Christi, Ronald A. Schy, Chicago, IL, Kathryn
F. Green, Corpus Christi, Bruce W. Collins, Dallas, for
Schwartzberg; H. William Willoughby;
respondent.
C.R.C.C. of Corpus Christi, Ltd.; CRICO–
Texas Growth Partners Limited Partnership Opinion
and Crico Securities Corporation, Relators,
v. PER CURIAM.
The Honorable Robert M. Capital Income Properties–LXXX and seven other
BLACKMON, Judge, Respondent. defendants (collectively CIP) have filed a motion for leave
to file a petition for writ of mandamus, requesting that
No. D–2848.
we direct the trial court to compel arbitration of the
|
claims raised by thirty plaintiffs in the underlying suit.
Dec. 16, 1992.
Concluding that CIP has established that the trial court
Limited partnership petitioned for writ of mandamus abused its discretion in refusing to order arbitration and
to compel arbitration of limited partners' claims against that CIP does not have an adequate remedy by appeal, we
limited partnership. The Supreme Court held that conditionally grant the relief requested. 1
arbitration was required.
Plaintiffs, residents of fourteen different states, purchased
Petition granted. shares in CIP, a District *23 of Columbia limited
partnership formed to develop and operate a Corpus
Christi hotel. Article 12.01 of the limited partnership
agreement provided that “any dispute, controversy or
West Headnotes (1)
claim arising out of or in connection with or relating to
this Agreement ... shall, upon the request of any party
[1] Alternative Dispute Resolution involved, be submitted to and settled by arbitration....”
Disputes and Matters Arbitrable Under Plaintiffs filed suit in 1991, seeking return of their
Agreement initial investments plus damages based on fraud, breach
Limited partners' claims that limited of fiduciary duty, negligent misrepresentation, and
partnership breached fiduciary duty in violation of the Deceptive Trade Practices Act. Urging
operating and managing partnership, the application of the Texas General Arbitration Act,
repeatedly misrepresenting financial health TEX.REV.CIV.STAT.ANN. art. 224—238–6 (the Texas
of operation, and fraudulently inducing Act), and the Federal Arbitration Act, 9 U.S.C. § 1–16 (the
investments arose out of and related to Federal Act), CIP requested that the trial court compel
limited partnership agreement, and, thus, arbitration.
arbitration was required under provision
of agreement requiring arbitration of any At the conclusion of a hearing on the motion to compel
dispute, controversy, or claim arising out of or arbitration, the trial court determined that the agreement
in connection with or relating to agreement. to arbitrate was binding and enforceable but that the
claims raised were not within the scope of the arbitration
42 Cases that cite this headnote clause. CIP's request for mandamus relief from the
Thirteenth Court of Appeals was denied.

Capital Income Properties-LXXX v. Blackmon, 843 S.W.2d 22 (1992)
After reviewing the mandamus record before us, we Painter, 827 S.W.2d 103, 105 (Tex.App.—Austin 1992,
writ denied).
conclude that although the trial court correctly concluded
that the arbitration clause is valid and enforceable, it
It is also undisputed that the Plaintiffs claim that CIP
abused its discretion in failing to compel arbitration
breached its fiduciary duty to them in operating and
under the Federal Act. 2 We have recently reiterated the
managing the partnership, in repeatedly misrepresenting
strong policy preference for enforcing arbitration clauses.
the financial health of the operation, and in fraudulently
Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266 (Tex.1992)
inducing them to invest in the partnership. These claims
(orig. proceeding). The Federal Act, which applies to
arise out of and relate to the limited partnership
transactions “involving commerce,” dictates enforcement
agreement. In Anglin we held that Deceptive Trade
of an arbitration agreement upon evidence that a written
Practice Act claims may be subject to arbitration, 842
agreement to arbitrate exists and that the claims raised
S.W.2d at 271, and the United States Supreme Court
are within the scope of the agreement. The Federal Act
has held that a claim of fraud in the inducement unless
is part of the substantive law of Texas. Southland Corp.
specifically directed to the making of the arbitration clause
v. Keating, 465 U.S. 1, 14–16, 104 S.Ct. 852, 860–61, 79
does not defeat application of that clause to the agreement
L.Ed.2d 1 (1984); Anglin, 842 S.W.2d at 271; Batton v.
as a whole. Prima Paint Corp., 388 U.S. at 406, 87 S.Ct. at
Green, 801 S.W.2d 923, 927 (Tex.App.—Dallas 1990, no
1807; Mesa Operating, 797 F.2d at 244.
writ). In Anglin we also concluded that a party denied
the benefit of an agreement to arbitrate is without an
*24 Accordingly, because CIP has shown that a written
adequate remedy by appeal when pursuing application
arbitration agreement exists and that the Plaintiffs' claims
of the Federal Act in state court, and that mandamus is
fall within the scope of that agreement, without hearing
therefore appropriate. 842 S.W.2d at 271.
oral argument and pursuant to Texas Rule of Appellate
Procedure 122, a majority of the court conditionally
The undisputed facts of this case establish the applicability
grants the writ of mandamus and directs the trial court
of the Federal Act: citizens from a number of different
to order that all claims proceed to arbitration under the
states have purchased interests from a business entity in
Federal Arbitration Act. The clerk is instructed to issue
one state for the purpose of carrying out a commercial
the writ only should the trial court fail to follow our
venture in another state. See Prima Paint v. Flood &
direction.
Conklin Mfg. Co., 388 U.S. 395, 401 n. 7, 87 S.Ct. 1801,
1805 n. 7, 18 L.Ed.2d 1270 (1967); Mesa Operating Ltd.
Partnership v. Louisiana Intrastate Gas Corp., 797 F.2d All Citations
238, 243 (5th Cir.1986); Lost Creek Util. v. Travis Indep.
843 S.W.2d 22
Footnotes
1 CIP also filed an application for writ of error from the judgment of the Thirteenth Court of Appeals dismissing CIP's
interlocutory appeal for want of jurisdiction. Capital Income Properties–LXXX v. Waldman, 835 S.W.2d 152 (Tex.App.—
Corpus Christi 1992). The court of appeals held that the arbitration clause was not enforceable under Texas law and that
federal law did not permit an interlocutory appeal in state court. That application is denied by separate order.
2 Section 2 of the Federal Act provides that:
a written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle
by arbitration a controversy thereafter arising out of such contract or transaction, ... shall be valid, irrevocable, and
enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

Consorcio Rive, S.A. de C.V. v. Briggs Of Cancun, Inc., 134 F.Supp.2d 789 (2001)

134 F.Supp.2d 789 Suing or participating in suit
United States District Court,
In order to substantially invoke judicial
E.D. Louisiana.
process, for purposes of determining waiver
CONSORCIO RIVE, S.A. DE C.V. of right to arbitrate, party must have actively
v. participated in lawsuit or some other type of
act inconsistent with desire to arbitrate.
BRIGGS OF CANCUN, INC., et al
No. Civ.A. 99–2204.
|
March 14, 2001. [4] Alternative Dispute Resolution
Suing or participating in suit
Mexican lessor brought action under Convention on
Merely initiating litigation, without more,
the Recognition and Enforcement of Foreign Arbitral
does not effect waiver of right to arbitrate
Awards to enforce arbitration award entered in Mexico
because no actual prejudice results from that
against American lessee. After bench trial, the District
isolated action.
Court, Barbier, J., held that: (1) lessor did not waive its
right to arbitrate dispute by filing criminal complaint in Cases that cite this headnote
Mexico against lessee's president, and (2) lessee was not
“unable to present its case.”
Award enforced. Proceedings
Mexican lessor did not waive its right
under Convention on the Recognition and
Enforcement of Foreign Arbitral Awards to
West Headnotes (7) arbitrate dispute with American lessee by
filing criminal complaint in Mexico against
[1] Alternative Dispute Resolution lessee's president; criminal complaint did
Enforcement and recognition of awards not amount to substantial invocation of
judicial process, was not inconsistent with
Waiver of right to arbitrate is not defense
lessor's intention to arbitrate, and did not
to enforcement of foreign arbitral award
prejudice lessee with respect to ongoing
under Convention on the Recognition
arbitration. Convention on the Recognition
and Enforcement of Foreign Arbitral
and Enforcement of Foreign Arbitral Awards,
Awards. Convention on the Recognition and
Art. I et seq., 9 U.S.C.A. § 201 note.
Enforcement of Foreign Arbitral Awards,
Art. I et seq., 9 U.S.C.A. § 201 note. 1 Cases that cite this headnote
Proceedings
Suing or participating in suit American lessee was not “unable to present
its case,” for purposes of Convention on
Waiver or right to arbitrate requires both
the Recognition and Enforcement of Foreign
substantial invocation of judicial process and
Arbitral Awards, as result of Mexican lessor's
either detriment or prejudice to other party.
filing of criminal complaint against lessee's
2 Cases that cite this headnote president; lessee could have participated
by means other than president's physical
presence at arbitration, and lessee did

participate to extent that it designated In accordance with Federal Rule of Civil Procedure
arbitrator and filed over 80 pages of legal 52(a), the Court now renders its findings of fact and
argument and documentation in support of conclusions of law on the two remaining 1 and related
its position. Convention on the Recognition issues: (1) whether plaintiff, Consorcio Rive (“Rive”),
and Enforcement of Foreign Arbitral Awards, waived its right to invoke arbitration of the dispute
Art. I et seq., 9 U.S.C.A. § 201 note. between the parties by filing a criminal Statement
of Facts; and (2) whether the filing of the criminal
Statement of Facts precluded Briggs of Cancun, Inc.
(“Briggs of Cancun”) from meaningfully participating
[7] Alternative Dispute Resolution in the arbitration proceedings, thus providing it with
Failure to Arbitrate a defense to the enforcement of the arbitral award
Fear of arrest and extradition do not pursuant to article V(1)(b) of the Convention on
constitute inability to attend arbitration the Recognition and Enforcement of Foreign Arbitral
hearing. Awards (“Convention”), codified at 9 U.S.C. § 201 et seq.
Cases that cite this headnote To the extent the findings of fact are more properly
classified as conclusions of law, they should be so
considered; and to the extent the conclusions of law are
more properly classified as findings of fact, they should be
Attorneys and Law Firms so considered.
*790 Randall A. Smith, Andrew Lewis Kramer, Smith,

Jones & Fawer, New Orleans, LA, for Plaintiff.
I. FINDINGS OF FACT
Robert A. Kutcher, Nicole S. Tygier, Vicki A. Turko,
Choplin, Wagner, Cole, Richard, Reboul & Kutcher, 1. Rive is a corporation organized and existing under the
LLP, Metairie, LA, for Defendants. laws of the Country of Mexico, with its principal place of
business in Mexico City, Mexico.
Opinion
2. Briggs of Cancun is a corporation organized and
BARBIER, District Judge. existing under the laws of the State of Louisiana, with its
principal place of business in Metairie, Louisiana.
This matter came on for trial before the Court, sitting
without a jury, on February 5 and 6, 2001. At the
3. On October 1, 1991, Rive, represented by Eugenio
conclusion of the trial, and upon consideration of all of
Riquelme Valdez, and Briggs of Cancun, represented
the evidence and arguments of counsel, the Court dictated
by David A. Briggs, Jr. (“David Briggs”) entered into
oral findings of fact and conclusions of law on the issue
an “Agreement” by which Rive provided property and
of whether Briggs of Cancun, Inc., and David Briggs
permits for Briggs of Cancun *791 to open a restaurant
Enterprises, Inc. should be considered a single business
and bar called Fat Tuesdays in Cancun, Mexico.
enterprise for purposes of the instant dispute. In summary,
the Court found that these two entities do not comprise
4. As memorialized in clause 35 of the Agreement, both
a single business enterprise, and thus that any arbitration
parties specifically agreed as follows:
award confirmed in this proceeding may only be enforced
against Briggs of Cancun, Inc. THIRTY FIFTH.—Any
controversy or claim arising out
At that time, the Court also allowed the parties until of, or related to, this agreement,
February 14, 2001 to file post-trial memoranda on the or the making, performance,
remaining issues, after which it took the matter under or interpretation thereof, shall
submission. be finally settled by arbitration
pursuant to the then-prevailing

rules of the INTERAMERICAN 6. As a result of a dispute relating to payments due under

COMMERCIAL ARBITRATION the Agreement, Rive initiated an arbitration proceeding
COMMISSION and the arbitrators against Briggs of Cancun in January of 1996 in Mexico.
shall be appointed in accordance
with such rules. All arbitration 7. On or about February 14, 1996, David Briggs,
proceedings shall take place Jr. responded to the Inter–American Commercial
in Monterrey, N.L., Mexico, Arbitration Commission, designating an arbitrator.
and the laws applicable to
the arbitration procedure shall 8. On or about March 26, 1996, Rive submitted its formal
be the laws of Mexico. The arbitration demand.
award of the arbitrator shall be
the sole and exclusive remedy 9. On or about August 14, 1996, Rive attorney Jose
between the parties regarding any Manuel Gomez Mont Ureta filed a criminal Statement
claims, counterclaims, issues, or of Facts requesting that the Attorney General for the
accountings presented or pled to State of Quintana Roo, Mexico initiate an investigation of
the arbitrator; shall be made and Adalberto de Luna Zuniga, Javier Ramirez Meza, David
shall promptly be payable free of A. Briggs, Jr., and Raul Torres Rivera, alleging a criminal
any tax, deduction, or offset; and conspiracy by them to prevent Rive “from exercising its
any costs, fees, or taxes incident full rights in its capacity as lessor regarding the property
to enforcing the award shall, to in question.” Exh. 174, 4.
the maximum extent permitted
by law, be charged against the 10. David Briggs testified that following the filing of the
party resisting such enforcement. criminal Statement of Facts, he did not enter Mexico for
Judgment upon the award of the fear of being detained until after the criminal matter was
arbitrator may be entered in the cleared up in 1998.
court having jurisdiction thereof,
or application may be made to 11. On or about November 26, 1996, Briggs of Cancun
such court for a judicial acceptance answered the allegations of Rive in the arbitration matter
of the award or an order of by filing a brief and attaching relevant exhibits.
enforcement. The prevailing party in
any such arbitration shall be entitled 12. Thereafter, the arbitration continued and the parties
to recovery of all administration fees were given the opportunity to offer further evidence,
and arbitration fees paid. All other which was only presented by Rive, because Briggs of
costs expenses and fees incurred by Cancun refused to participate in the arbitration due to
either party in connection with such alleged criminal proceedings in Cancun.
arbitration (including attorneys' fees
incurred) shall be borne by the party *792 13. On or about August 22, 1997, David Briggs,
so incyurring [sic] such fees. and Danny Drago, Chief Financial Officer of David
Briggs Enterprises, Inc., 2 received a letter from the
5. On November 2, 1991, Rive and Briggs of Cancun United Mexican States Solicitor of the General Republic,
also entered into an “Management Agreement” and requesting their appearance on October 5, 1997. The letter
a “Commodatum Agreement” for the operation of stated that failure to appear would result in a “remand
the Fat Tuesdays restaurant in Cancun. Like the [of] the current investigation to the Federal Penal Court
original Agreement, the Management and Commodatum so that the corresponding arrest warrant may be issued.”
Agreements also provided for controversies or claims to Exh. 181.
be resolved by arbitration.
14. David Briggs testified that he voluntarily chose not to
comply with the request to appear on October 5, 1997.

15. There was conflicting testimony at trial as to whether

an arrest warrant was actually issued for David Briggs. 23. In April 1999, Rive made formal demand on Briggs
While a document was introduced which appears to of Cancun at the address set forth in the Agreement for
reference a pending arrest warrant against David Briggs the *793 arbitration award and costs, but received no
(Rec.Doc. 178), as well as a document denominated an response.
“amparo” which purports to suspend a warrant (Rec.Doc.
176), no actual arrest warrant for David Briggs was 24. To date, Briggs of Cancun has not paid Rive any
introduced at trial. amount in satisfaction of the arbitration award.
16. At trial, David Briggs testified that he did not seek 25. Rive has never expressly waived its right to arbitration
alternative ways to appear at the hearings, such as by under the agreements between Rive and Briggs of Cancun.
telephone, nor did he send a Briggs of Cancun company
representative to appear on behalf of the company. 26. Neither Rive nor Briggs of Cancun were parties to any
criminal proceedings in Cancun, Mexico.
17. In addition, for reasons not explained by the evidence
adduced at trial, Briggs of Cancun attorney Andres
Gonzalez also failed to appear at the hearings. David
II. CONCLUSIONS OF LAW
Briggs testified that he did not instruct Mr. Gonzales not
to attend the arbitration hearing. 1. The instant litigation has been filed pursuant to the
Convention on the Recognition and Enforcement of
18. Briggs of Cancun has never presented to this Court Foreign Arbitral Awards (the “Convention”), codified at
a single piece of evidence or information that it alleges 9 U.S.C. § 201 et seq., to which both Mexico and the
it would have presented to the arbitrators, but did not, United States are signatories.
because it was precluded from participating fully in the
arbitration. 2. Because the Convention was negotiated pursuant to
the Treaty power set forth in the U.S. Constitution,
19. On November 6, 1997, the Mexican arbitration board and Congress passed enabling legislation to make the
held a final hearing, of which all parties were given Convention the highest law of the land, the Convention
proper notice. 3 Although Briggs of Cancun did not must be enforced over all prior inconsistent rules of law.
appear, Rive's counsel presented written conclusions, and Sedco, Inc. v. Petroleos Mexicanos Mexican National Oil
subsequently answered questions from the arbitrators. Co., 767 F.2d 1140, 1145 (5th Cir.1985).
Rec. Docs. 142 & 172 at 256 (“Laudo Definitivo”). No
oral testimony was presented at that hearing. 3. An action or proceeding falling under the Convention is
deemed to arise under the laws and treaties of the United
20. On June 24, 1998, the Mexican arbitration board: (1) States. 9 U.S.C. § 203.
ruled that the Agreement was rescinded due to Briggs
of Cancun's breaches; (2) awarded Rive $150,000 from 4. Federal district courts have original jurisdiction over
Briggs of Cancun for obligations under the October 1, such an action or proceeding, and venue is proper in
1991 agreement; (3) awarded Rive $110,000 from Briggs any district in which, save for the arbitration agreement,
of Cancun for costs and expenses; (4) awarded Rive an action or proceeding with respect to the controversy
$2,500,000 from Briggs of Cancun for damages resulting between the parties could be brought, or in such district
from the breach; and (5) awarded Rive 15% interest after which embraces the place designated in the agreement as
Briggs of Cancun was notified of decision. the place of arbitration if such place is within the United
States. 9 U.S.C. § 204.
21. The arbitration award, totaling $2,760,000, excluding
interest, was not served on the parties until March 8, 1999. 5. Under 9 U.S.C. § 202, the following arbitration awards
fall under the Convention:
22. Rive paid all arbitration costs, totaling approximately
$33,000.

for recognition and enforcement shall, at the time of

An arbitration agreement or arbitral the application, supply:
award arising out of a legal
relationship, whether contractual (a) The duly authenticated original award or a duly
or not, which is considered as certified copy thereof;
commercial, including a transaction,
contract, or agreement described in (b) The original agreement referred to in article II or
section 2 of this title, falls under the a duly certified copy thereof.
Convention. An agreement or award
arising out of such a relationship 10. Article II of the Convention requires that there be an
which is entirely between citizens of “agreement in writing” under which the parties agree to
the United States shall be deemed submit to arbitration all or any differences which have
not to fall under the Convention arisen or may arise between them in respect of a defined
unless that relationship involves legal relationship, whether contractual or not, concerning
property located abroad, envisages a subject matter capable of settlement by arbitration. The
performance or enforcement term “agreement in writing” includes an arbitral clause
abroad, or has some other in a contract or an arbitration agreement, signed by the
reasonable relation with one or parties or contained in an exchange of letters of telegrams.
more foreign states. For the purpose
of this section a corporation is a 11. There is no dispute in this matter that the arbitral
citizen of the United States if it award and the relevant agreements between Rive and
is incorporated or has its principal Briggs of Cancun have been supplied to the Court.
place of business in the United
States. 12. Thus, under the terms of the Convention and the
enabling federal statute, this Court has the authority to
recognize and enforce the arbitral award at issue in this
6. Under Article III of the Convention, “[e]ach
matter.
Contracting State shall recognize arbitral awards as
binding and enforce them in accordance with the rules
13. Numerous federal courts have recognized that “[T]he
of procedure of the territory where the award is relied
1958 Convention clearly shifted the burden of proof to
upon ...” 9 U.S.C. § 201 note.
the party defending against enforcement and limited his
defenses to seven set forth in Article V.” Parsons &
6. The Fifth Circuit has stated that awards of foreign
Whittemore Overseas Co. v. Societe Generale de L'Industrie
arbitrators that fall under the Convention are to be
du Papier, 508 F.2d 969, 973 (2d Cir.1974).
enforced by U.S. courts “just as easily as domestic arbitral
awards.” Schlumberger Technology Corp. v. United States,
14. Under Article V(1), recognition and enforcement may
195 F.3d 216, 217 (5th Cir.1999).
be refused if the party resisting the award furnished
to the competent authority where the recognition and
8. The Convention requires a U.S. court to treat a foreign
enforcement is sought, proves that:
arbitral award as it would a domestic award, subject to
limited defenses, including incapacity of a party, illegality (a) the parties to the agreement were under some
of the agreement, lack of due process, an award outside incapacity, or the agreement is not valid under the law
the scope of arbitration, an improper arbitration panel, to which the parties have subjected it or, failing any
or when the arbitration award has been vacated or is not indication thereon, under the law of the country where
final. Id., citing Convention, arts. III & V. the award was made; or
9. Article IV of the Convention provides the procedure for (b) the party against whom the award is invoked was not
enforcing arbitral awards and reads, in part: given proper notice of the appointment of the arbitrator
or of the arbitration proceedings or was otherwise
*794 1. To obtain the recognition and enforcement unable to present his case; or
mentioned in the preceding article, the party applying

“[w]aiver will be found when the party seeking arbitration

(c) the award deals with a difference not contemplated substantially invokes the judicial process to the detriment
by or not falling within the terms of the submission to or prejudice of the other party.” Miller Brewing Co. v.
arbitration, or it contains decisions on matters beyond Fort Worth Dist. Co., 781 F.2d 494, 497 (5th Cir.1986).
the scope of the submission to arbitration; however, if Thus, waiver (if permissible at all in the context presented)
the decisions on matters submitted to arbitration can be requires both a substantial invocation of the judicial
separated from those not so submitted, that part of the process and either detriment or prejudice to the other
award which contains decisions on matters submitted to party.
arbitration may be recognized and enforced; or
19. Further, in evaluating whether a waiver occurred
(d) the composition of the arbitral authority or the
under applicable law, it must be borne in mind that
arbitral procedure was not in accordance with the
“[w]aiver of arbitration is not a favored finding, and there
agreement of the parties, or, failing such agreement, was
is a presumption against it.” Id. at 496.
not in accordance with the law of the country where the
arbitration took place; or
20. In the same vein, the United States Supreme Court has
(e) the award has not yet become binding on the parties, stated that “any doubts concerning the scope of arbitrable
or has been set aside or suspended by a competent issues should be resolved in favor of arbitration, whether
authority of the country in which, or under the law of the problem at hand is the construction of the contract
which, that award was made. itself or an allegation of waiver, delay, or a like defense to
arbitrability.” Moses H. Cone Memorial Hosp. v. Mercury
9 U.S.C. § 201 note. Construction Corp., 460 U.S. 1, 24–25, 103 S.Ct. 927, 941,
74 L.Ed.2d 765 (1983).
15. Additionally, Article V(2) provides that recognition
and enforcement may be refused if the competent [3] 21. In considering what amounts to a substantial
authority finds that: invocation of the judicial process, federal courts have
required active participation in a lawsuit or some other
(a) the subject matter of the difference is not capable type of act inconsistent with the desire to arbitrate. For
of settlement by arbitration under the law of that [the example, in Parcel Tankers, Inc. v. Formosa Plastics Corp.,
forum] country; or 569 F.Supp. 1459, 1467 (S.D.Tex.1983), the district court
found that “[a]ctions constituting waiver may include,
*795 (b) the recognition or enforcement of the award
inter alia, some combination of filing an answer, setting
would be contrary to the public policy of that [the
up a counterclaim, pursuing discovery, and moving
forum] country.
for a continuance prior to moving for a stay pending
9 U.S.C. § 201 note. arbitration.”
16. According to the Convention and repeated federal 22. With respect to prejudice, the Fifth Circuit has found
decisions in this and other circuits, these are the only that “[w]hen one party reveals a disinclination to resort to
available defenses to an action to enforce a foreign arbitral arbitration on any phase of suit involving all parties, those
award. parties are prejudiced by being forced to bear the expenses
of a trial ... Arbitration is designed to avoid this very
[1] 17. Waiver of the right to arbitrate is not among the expense. Substantially invoking the litigation machinery
seven defenses to enforcement of a foreign arbitral award qualifies as the kind of prejudice ... that is the essence of
set forth in the Convention. Thus, as a matter of law, waiver.” E.C. Ernst, Inc. v. Manhattan Construction Co. of
defendant's argument that the arbitration award should Texas, 559 F.2d 268, 269 (5th Cir.1977).
not be enforced by this Court because plaintiff waived it
is unavailing. 4 [4] 23. “[M]erely initiating litigation, without more, does
not effect a waiver” because no actual prejudice results
[2] 18. Alternatively, even if defendant's waiver defense from that isolated action. Lauricia v. Microstrategy Inc.,
was not precluded by the Convention, in the Fifth Circuit, 114 F.Supp.2d 489 (E.D.Va.2000).

construed. Parsons & Whittemore Overseas Co. v. Societe

[5] 24. The Court finds that Rive's filing of a Statement of Generale de L'Industrie du Papier, 508 F.2d 969, 975 (2d
Facts with the Attorney General in Quintana Roo did not Cir.1974).
amount to substantial invocation of the judicial process,
and was not inconsistent *796 with Rive's intention [6] 29. In the instant case, the Court finds that Briggs
to arbitrate, especially given the fact that the Statement of Cancun was not “unable to present its case,” because
of Facts was filed eight months after arbitration was Briggs of Cancun could have participated by means other
requested. Further, Rive's actions in filing the Statement than David Briggs's physical presence at the arbitration.
of Facts did not prejudice Briggs of Cancun with respect to For instance, Briggs of Cancun could have sent a company
the ongoing arbitration. Accordingly, Rive did not waive representative to attend; could have sent its attorney to
its right to arbitration in this matter. attend; or David Briggs could have attended by telephone.
25. Article V(1)(b) of the Convention states that a foreign 30. Moreover, the evidence indicates that Briggs of
arbitration award can be refused confirmation where a Cancun did participate to the extent that it designated an
party lacked notice or was “otherwise unable to present arbitrator and filed over 80 pages of legal argument and
his case.” 9 U.S.C. § 201 note. This defense “basically documentation in support of its position. Because Briggs
corresponds to the due process defense that a party was of Cancun has brought forward no additional information
not given ‘the opportunity to be heard at a meaningful or evidence that it would have presented at the arbitration
time and in a meaningful manner’ as defined in Mathews v. if it had the opportunity to do so, the Court finds that
Eldridge, 424 U.S. 319, 333, 96 S.Ct. 893, 902, 47 L.Ed.2d Briggs of Cancun did have an opportunity to meaningfully
18.” Generica Ltd. v. Pharmaceutical Basics, Inc., 125 F.3d participate in the arbitration.
1123, 1129 (7th Cir.1997) (other citations omitted).
31. In a case presenting analogous facts, the district
26. Because Briggs of Cancun was continuously informed court in Empresa Constructora Contex Limitada v. Iseki,
of all hearing dates and was provided sufficient 106 F.Supp.2d 1020, 1026 (S.D.Cal.2000), held that the
opportunity to present witnesses and evidence in defense defendant's due process rights under the Convention
of the action, Briggs of Cancun was given proper notice of were not violated when the corporate defendant's owner
the arbitration proceedings. and C.E.O., as well as other corporate representatives,
failed to attend the arbitration held in Chile claiming
27. The due process guarantee incorporated in article V(1) that they feared arrest. Finding that because the
(b) of the Convention requires that “an arbitrator must defendant was a corporate entity distinct from *797
provide a fundamentally fair hearing.” Generica Ltd., 125 its owners and representatives and could therefore be
F.3d at 1130. “A fundamentally fair hearing is one that adequately represented by counsel competent to handle
‘meets “the minimal requirements of fairness”—adequate the company's defense, defendant did not prevail in its
notice, a hearing on the evidence, and an impartial V(1)(b) defense.
decision by the arbitrator.’ ” Id. “[P]arties that have
chosen to remedy their disputes through arbitration rather [7] 32. Additionally, it has also been held that fear
than litigation should not expect the same procedures of arrest and extradition do not constitute an inability
they would find in the judicial arena.” Id. Essentially, in to attend an arbitration hearing. See, Nat'l Dev. Co. v.
exchange for the convenience and other benefits obtained Khashoggi, 781 F.Supp. 959 (S.D.N.Y.1992).
through arbitration, parties lose “the right to seek redress
from the court for all but the most exceptional errors at 33. For the foregoing reasons, the Court finds that
arbitration.” Dean v. Sullivan, 118 F.3d 1170, 1173 (7th Briggs of Cancun's defense under article V(1)(b) of the
Cir.1997). Convention must fail. The Court also specifically finds
that even if there was a valid arrest warrant pending
28. Consistent with the federal policy of encouraging against David Briggs for some period of time, Briggs of
arbitration and enforcing arbitration awards, the defense Cancun is not entitled to a defense under article V(1)(b)
that a party was “unable to present its case” raised of the Convention because Briggs of Cancun could have
pursuant to article V(1)(b) of the Convention is narrowly participated through its Mexican attorney or corporate

representative or by telephone. Further, Briggs of Cancun 35. Similarly, the Court does not revisit the issue of
whether the arbitration award is final, because the
has not demonstrated that it was prejudiced in any way
issue was previously determined by Judge Schwartz, and
by whatever restrictions the alleged criminal action might
further, is mooted by the fact that Briggs of Cancun did
have imposed, because it has not pointed to exonerating
not post a bond as requested by the Court.
evidence that it would have presented, but could not, but
for the filing of the criminal Statement of Facts.
36. Thus, the Court ORDERS that the Mexican
arbitration award dated June 24, 1998 be and it is hereby
34. The Court need not consider the parties' discussion
recognized and enforced against Briggs of Cancun, Inc. in
of the public policy defense under the Convention,
all respects.
because that defense is not one of the narrow issues
preserved for trial following Judge Schwartz's ruling on
37. The Court FURTHER ORDERS the parties to
the Motion to Reconsider the grant of summary judgment
submit, within ten days from entry of this order, a joint
in plaintiff's favor. However, if it were before the Court,
proposed form for final judgment in accordance with these
the Court would find that its conclusion that due process
findings and conclusions.
requirements were met undermines this argument, and
that enforcement of this award does not violate the public
policies of Mexico, the United States, or the State of All Citations
Louisiana.
134 F.Supp.2d 789
Footnotes
1 On September 20, 2000, Judge Schwartz entered an order granting reconsideration of his prior order dismissing Briggs'
counterclaims. The issue for reconsideration was limited solely to the waiver issue (Briggs' Ninth Defense). Rec. Doc. 91.
2 David Briggs Enterprises, Inc. is a related entity which the Court has previously ruled is not an “alter ego” for Briggs of
Cancun, Inc.
3 The notice defense is not one that was specifically preserved by Judge Schwartz. Nonetheless, the Court observes that
the documentary evidence presented at trial demonstrated that Briggs was informed that the arbitration would take place
on November 6, 1997 at 11:00 a.m. See, e.g., Rec. Doc. 169, at 10285. While Briggs' attorney subsequently misstated
the date in correspondence to the Chamber of Commerce of Mexico City (Rec.Doc. 141), the error was pointed out to him
in a subsequent letter from the Chairman of the Chamber of Commerce. Rec. Doc 170. At any rate, Gonzalez' mistake
and its correction do not alter the fact that notice that the hearing would occur on November 6, 1997 was provided, and
the hearing was subsequently held on November 6, 1997.
4 Moreover, it appears from the evidence that the argument that the filing of the criminal Statement of Facts resulted in
a waiver of arbitration by Rive was considered and rejected by the arbitration committee. See Rec. Doc. 169, ¶ c; Rec.
Doc. 141 ¶ c.

No Shepard’s Signal™
As of: August 28, 2015 3:43 PM EDT
Cooper Indus., LLC v. Pepsi-Cola Metro. Bottling Co.

Court of Appeals of Texas, Fourteenth District, Houston
August 25, 2015, Opinion Filed
NO. 14-14-00562-CV
Reporter
2015 Tex. App. LEXIS 8882
COOPER INDUSTRIES, LLC, COOPER INDUSTRIES, LTD., Judgment reversed and remanded.
COOPER US, INC., AND COOPER INDUSTRIES, PLC,
Appellants v. PEPSI-COLA METROPOLITAN BOTTLING LexisNexis® Headnotes
CO., INC., AND WHITMAN INSURANCE COMPANY LTD.,
Appellees Civil Procedure > ... > Alternative Dispute Resolution > Arbitration >
Arbitrability
Prior History: [*1] On Appeal from the 80th District Court,
Civil Procedure > ... > Arbitration > Federal Arbitration Act > General
Harris County, Texas. Trial Court Cause No. 2011-77606. Overview
Civil Procedure > Appeals > Standards of Review > Questions of Fact
Core Terms & Law
arbitration, appellees, parties, Guaranty, Mutual, discovery, Civil Procedure > Appeals > Standards of Review > De Novo Review
termination, compel arbitration, waive, arbitration clause, pet, Contracts Law > Contract Conditions & Provisions > Arbitration
right to arbitration, trial court, settlement, invoked, motion to Clauses
compel arbitration, tortious interference, estoppel, dealer, merits,
obligations, signatory, judicial process, non-signatory, disputes, HN1 When the Federal Arbitration Act governs an arbitration
movant, surety, arbitration agreement, fraudulent transfer, denial clause, a Texas trial court conducts a summary proceeding under
of motion Texas procedural rules to make the gateway determination of
arbitrability, and it applies Texas substantive law regarding
whether a litigant must arbitrate. When the trial court does not
Case Summary sign written findings or conclusions, an appellate court may
uphold the court's order on any theory supported by the evidence,
Overview and the appellate court implies all factual findings supported by
the record that are necessary to the order. Appellate courts defer to
HOLDINGS: [1]-An order denying appellants' motion to compel
the trial court's factual determinations that are supported by
arbitration was improper because the agreements required
sufficient evidence, but we review the trial court's legal
arbitration and appellees did not show that appellants waived their
determinations de novo.
right to arbitrate since appellants never opposed arbitration before
filing its motion to compel; [2]-Because appellee's tortious
Governments > Courts > Judicial Comity
interference claims depended on the existence of the
manufacturer's obligation in the Stock Purchase Agreement HN2 Texas courts may presume that another state's law is the
(SPA), which appellants guaranteed, appellants could compel same as Texas law absent proof or argument to the contrary. The
signatory appellee to arbitrate those claims under the SPA; [3]- party requesting application of a foreign law has the initial burden
The record did not demonstrate the extent to which appellees pre- of showing that the foreign law conflicts with Texas law.
trial costs were self-inflicted and accordingly, there was no
showing that appellants unequivocally waived their right to Contracts Law > Contract Conditions & Provisions > Arbitration
arbitration by substantially invoking the judicial process. Clauses
Civil Procedure > ... > Alternative Dispute Resolution > Arbitration >
Outcome
General Overview
EDWARD HUBBARD
Page 2 of 14
2015 Tex. App. LEXIS 8882, *1
HN3 Arbitration cannot be ordered in the absence of an Civil Procedure > ... > Alternative Dispute Resolution > Arbitration >
General Overview
agreement to arbitrate. The party moving for arbitration has the
initial burden to present evidence that a valid arbitration HN7 A guarantor or surety of a party's obligation under a contract
agreement exists. If there is an agreement to arbitrate, the party containing an arbitration clause may invoke or be bound by that
must also establish that the claims asserted fall within the scope of clause in a suit regarding the obligation.
the agreement.
Civil Procedure > ... > Alternative Dispute Resolution > Arbitration > General Overview
General Overview
Contracts Law > Contract Conditions & Provisions > Arbitration
HN4 Whether a non-signatory can compel arbitration questions Clauses
the existence of a valid arbitration agreement between the parties
HN8 In general, an arbitration agreement contained within a
and therefore is a gateway matter for the court to decide.
contract survives the termination or repudiation of the contract as
Civil Procedure > ... > Alternative Dispute Resolution > Arbitration > a whole. If the contract does not state that the duty to arbitrate
General Overview ends with the termination of the contract, the strong policies
favoring arbitration should ordinarily lead the court to conclude
that the obligation to arbitrate, especially as to claims that accrued
Clauses
during the term of the contract, survives the expiration of the
Contracts Law > ... > Estoppel > Equitable Estoppel > General contract.
Overview
Torts > Business Torts > Commercial Interference > General Overview Contracts Law > Contract Interpretation > General Overview
HN5 A person who has agreed to arbitrate disputes with one party HN9 No single contractual provision taken alone should be given
may in some cases be required to arbitrate related disputes with controlling effect; rather, all the provisions must be considered
others. In particular, a signatory plaintiff who seeks to derive a with reference to the whole instrument.
direct benefit from a contract with an arbitration clause may be
equitably estopped from refusing arbitration. Although the
Clauses
boundaries of direct-benefits estoppel are not always clear, the
signatory generally must arbitrate claims if liability arises from a Civil Procedure > ... > Alternative Dispute Resolution > Arbitration >
contract with an arbitration clause, but not if liability arises from Waiver
general obligations imposed by law. When the facts are not Contracts Law > Defenses > General Overview
disputed, the application of estoppel is a question of law, not a
matter committed to the trial court's discretion. Tortious HN10 Once an arbitration movant establishes a valid arbitration
interference claims do not fall comfortably within either category. agreement that encompasses the claims at issue, a trial court has
no discretion to deny the motion to compel arbitration unless the
Torts > ... > Commercial Interference > Contracts > General Overview opposing party proves a defense to arbitration such as waiver.
HN6 The obligation not to interfere with existing contracts is a Civil Procedure > ... > Alternative Dispute Resolution > Arbitration >
general obligation imposed by law, but it is not imposed on the Waiver
parties to that contract because a party cannot interfere tortiously
with its own contract. A person must be a stranger to a contract to
General Overview
interfere tortiously with it. Thus, a signatory generally is not
required to arbitrate a tortious interference claim against a Civil Procedure > Appeals > Standards of Review > De Novo Review
complete stranger to his contract and its arbitration clause. But if Civil Procedure > Appeals > Standards of Review > Questions of Fact
the signatory plaintiff's right to recover and its damages depend & Law
on the existence of the contract containing the arbitration clause,
or if the non-signatory defendant is an agent or affiliate of a HN11 A party can waive a contractual right to arbitrate either
signatory, then the plaintiff can be compelled to arbitrate its claim. expressly or by implication. Whether waiver has

Clauses
EDWARD HUBBARD
Page 3 of 14
2015 Tex. App. LEXIS 8882, *1
occurred is a question of law for the court that is reviewed de
novo. Because public policy favors arbitration, there is a strong HN16 Whether a party has waived an arbitration right is a
presumption against waiver of the right to arbitrate. Express question of law that is reviewed de novo. If the trial court is called
waiver arises when a party affirmatively indicates that it wishes to upon to resolve factual disputes about the conduct in which the
resolve the case in the judicial forum rather than in arbitration. party engaged, an appellate court defers to the trial court's implied
fact findings if they are supported by sufficient evidence.
Civil Procedure > ... > Subject Matter Jurisdiction > Jurisdiction Over
Actions > Exclusive Jurisdiction Contracts Law > Contract Conditions & Provisions > Arbitration
Clauses
Waiver Civil Procedure > ... > Alternative Dispute Resolution > Arbitration >
Waiver
Civil Procedure > ... > Venue > Motions to Transfer > General
Overview HN15 With regard to waiving an arbitration clause, courts
consider a wide variety of factors in deciding whether a party
HN12 Moving to dismiss in favor of exclusive jurisdiction in
substantially invoked the litigation process, such as: whether the
another court is equivalent to moving to transfer venue or filing a
party who pursued arbitration was the plaintiff or the defendant;
notice of removal to another court. The Supreme Court of Texas
how long the party who pursued arbitration delayed before
and many other courts have held that such actions do not waive a
seeking arbitration; when the party who pursued arbitration
right to arbitrate.
learned of the arbitration clause's existence; how much of the
pretrial activity related to the merits rather than to arbitrability or
Civil Procedure > ... > Venue > Motions to Transfer > General
jurisdiction; how much time and expense has been incurred in
Overview
litigation; whether the party who pursued arbitration sought or
HN13 A motion to transfer venue does not seek a final opposed arbitration earlier in the case; whether the party who
determination of the litigation. pursued arbitration filed affirmative claims or dispositive motions;
how much discovery has been conducted and who initiated the
Civil Procedure > ... > Alternative Dispute Resolution > Arbitration > discovery; whether the discovery sought would be useful in
Waiver arbitration; what discovery would be unavailable in arbitration;
whether activity in court would be duplicated in arbitration; when
Clauses the case was to be tried; and whether the party who pursued
arbitration sought judgment on the merits.
HN14 A party waives an arbitration clause by implication when it
substantially invokes the judicial process to the other party's Contracts Law > Contract Conditions & Provisions > Arbitration
detriment or prejudice. The hurdle of proving implied waiver is a Clauses
high bar. In close cases, the strong presumption against waiver Civil Procedure > ... > Alternative Dispute Resolution > Arbitration >
should govern. Waiver must be decided on a case-by-case basis, Waiver
and we look to the totality of the circumstances. The party's
conduct must be unequivocally inconsistent with claiming a HN17 The quantum of litigation conduct that constitutes
known right to arbitration. "substantial" invocation of the litigation process depends on the
context. A party who enjoys substantial direct benefits by gaining
Civil Procedure > ... > Alternative Dispute Resolution > Arbitration > an advantage in the pretrial litigation process should be barred
Waiver from turning around and seeking arbitration with the spoils. Delay
alone generally does not establish waiver. Even substantially
Clauses invoking the judicial process does not waive a party's arbitration
rights unless the opposing party proves that it suffered prejudice
Civil Procedure > Appeals > Standards of Review > Questions of Fact as a result. The arbitration opponent must provide proof of
& Law
prejudice to overcome the strong presumption against waiver. In
Civil Procedure > Appeals > Standards of Review > De Novo Review the context of waiver of an arbitration right, prejudice relates to
the inherent unfairness in terms of delay, expense, or damage to a
Evidence > Weight & Sufficiency
party's legal position that occurs when the
EDWARD HUBBARD
Page 4 of 14
2015 Tex. App. LEXIS 8882, *1
party's opponent forces it to litigate an issue and later seeks to
arbitrate that same issue. A party cannot attempt to have it both Opinion
ways by switching between litigation and arbitration to its own
advantage. This is an interlocutory appeal from an order denying a motion to
compel arbitration. Appellee Pepsi-Cola Metropolitan Bottling
Civil Procedure > Pretrial Matters > Alternative Dispute Resolution > Co. ("Metro") sued appellants Cooper Industries, LLC, Cooper
Mediation Industries, Ltd., Cooper US, Inc., and Cooper Industries, PLC
Civil Procedure > Settlements > General Overview (collectively, "Cooper"), seeking to enforce two agreements.
Appellee Whitman Insurance Company Ltd. later joined the suit
Civil Procedure > Preliminary Considerations > Venue > General
as a plaintiff. Cooper filed a motion to compel arbitration pursuant
Overview
to the agreements. The trial court denied the motion after a
Contracts Law > Contract Conditions & Provisions > Forum Selection hearing without making findings of fact or conclusions of law.
Clauses
On appeal, Cooper argues the trial court erred because the
HN18 Settlement negotiations and mediation do not substantially agreements require arbitration and appellees did not show that
invoke the judicial process, nor are they inconsistent with a desire Cooper waived its right to arbitrate. We agree that the trial court
to arbitrate. Likewise, venue and jurisdictional motions do not erred in denying Cooper's motion to compel arbitration. We
constitute substantial invocation of the judicial process because therefore reverse the trial court's order, render judgment ordering
they do not relate to the merits of the case. A dismissal of all arbitration of appellees' claims against the Cooper defendants who
claims to enforce a clause requiring litigation in another forum is are parties to this appeal,1 and remand this case to the trial court
a determination that the merits of the claims should be determined for further proceedings [*2] consistent with this opinion,
elsewhere; therefore, enforcement of such a forum-selection including the grant of an appropriate stay.
clause is a non-merits basis for dismissal.
Background
Clauses This case concerns indemnification obligations regarding asbestos
Civil Procedure > ... > Alternative Dispute Resolution > Arbitration > claims. Appellees' second amended petition and Cooper's motion
Waiver to compel arbitration provide the pertinent background of the
parties' dispute.2 We begin by discussing the various transactions
Civil Procedure > Discovery & Disclosure > Discovery
that resulted in the current alignment of the parties because they
HN19 Propounding discovery will not, in and of itself, result in are relevant to our disposition of the case.
waiver of the right to compel arbitration. Length of delay alone is
IC Industries—Metro's predecessor—acquired Abex Corporation
not a basis for inferring waiver.
and Pneumo Corporation, two companies that manufactured
products containing asbestos. IC Industries sold its stock in both
Counsel: For Appellants: J. Christopher Reynolds, Solace
companies to PA Holdings under a Stock Purchase Agreement
Kirkland Southwick, HOUSTON, TX.
("SPA"). [*3] Under the SPA, IC Industries agreed to indemnify
PA Holdings against certain claims filed between August 29,
For Appellee: Winstol D. Carter, Jr., David J. Levy, John M.
1988 and August 29, 1998, and PA Holdings agreed to indemnify
Deck, HOUSTON, TX; Allyson Newton Ho, DALLAS TX.
IC Industries and its affiliates against claims filed after August 29,
1998. As explained below, a Cooper entity later guaranteed an
Judges: Panel consists of Justices Jamison, Busby, and Brown.
indemnity of PA Holdings' successor. The SPA provides that if
any controversy or claim arising out of or relating to the
Opinion by: J. Brett Busby
1 Although Cooper Holdings, Ltd. joined appellants in the motion to compel arbitration, the trial court did not rule on the motion with respect to
Cooper Holdings, Ltd. The notice of appeal does not list Cooper Holdings, Ltd. as an appellant. Accordingly, Cooper Holdings, Ltd. is not an
appellant in this case. We therefore do not address whether it was entitled to arbitration of Metro's and Whitman's claims.
2 Appellees filed a third amended petition after Cooper had filed its motion to compel arbitration.
EDWARD HUBBARD
Page 5 of 14
2015 Tex. App. LEXIS 8882, *3
agreement has not been resolved within twenty-one days after trust received [*5] a cash payment and notes to be paid over five
notice is given, either party may initiate arbitration to resolve the years.
dispute.
In response to the 2011 settlement agreement, Metro filed this
PA Holdings subsequently became Pneumo Abex, LLC. IC lawsuit alleging various causes of action, among them tortious
Industries became appellee Metro through a merger and name interference with contractual relations, conspiracy to commit
change. Whitman's predecessor was a captive insurance carrier tortious interference, fraudulent transfers, and conspiracy to
affiliated with IC Industries, and Whitman is now a subsidiary of commit fraudulent transfers.3 The suit named several defendants,
Metro. including the Cooper appellants.4 Whitman later joined the suit as
a plaintiff, claiming that as successor to an affiliate of IC
Pneumo Abex eventually sold one of its product lines to Wagner Industries, it is entitled to indemnification from Pneumo Abex
Electronic Corporation through an Asset Purchase Agreement under the SPA. Metro and Whitman alleged that the settlement
("APA"). Under the APA, Wagner agreed to indemnify and hold agreement was the end result of collusive efforts by the
Pneumo Abex harmless for any obligations Pneumo Abex owed defendants that left Pneumo Abex and the trust with a finite
to Metro and Whitman. Like the SPA, the APA contains an amount of assets. In particular, Metro and Whitman alleged that
arbitration provision. In section 13.2(c), the APA provides that the defendants "conspired to buy their way out of uncapped
any dispute arising in connection with the agreement [*4] and not guaranty obligations" and made Pneumo Abex's performance of
settled by the parties within sixty days after notice is given "shall its indemnity obligations to Metro and Whitman more
be finally settled by arbitration . . . ." The provision states that "burdensome, difficult, and expensive, if not impossible."
"[a]ny party may request a court to provide interim relief without
waiving the agreement to arbitrate." Citing the Federal Arbitration Act, Cooper filed a motion to
compel arbitration under various agreements, including the SPA
Wagner's then-parent company, Cooper Industries, LLC, and the Mutual Guaranty. After an unreported hearing, the court
guaranteed Wagner's indemnification of Pneumo Abex under a denied the motion. This interlocutory appeal followed. See 9
Mutual Guaranty agreement signed in 1994. Section 6 of the U.S.C. § 16(a)(1)(B) (West 2009); Tex. Civ. Prac. & Rem. Code
Mutual Guaranty provides that any claim or dispute "arising in Ann. § 51.016 (West 2015).
connection with" this agreement shall be resolved in accordance
with sections 13.2(b) and (c) of the APA, thus explicitly Analysis
incorporating the arbitration provision of the APA.
On appeal, Cooper argues that the trial court erred in denying the
Pneumo Abex filed a lawsuit in New York against various motion to compel arbitration because (1) Metro's and Whitman's
Cooper defendants, contending that Cooper Industries, LLC was claims are subject to arbitration under the SPA and the Mutual
mismanaging its assets and thus endangering the Mutual Guaranty, and (2) Cooper has not waived the right to arbitrate as
Guaranty. Metro and Whitman were not parties to that suit. In to either Metro or Whitman. We address each issue in turn.
2011, the Cooper defendants and Pneumo Abex reached a
settlement agreement, which the judge in the New York lawsuit HN1 When the Federal Arbitration Act governs an arbitration
approved. Under the settlement agreement, PCT International clause, a Texas trial court conducts a summary proceeding under
Holdings, Inc.—then-owner of Pneumo Abex—transferred its Texas procedural rules to make the gateway determination of
ownership interest to a trust. Cooper Industries' indemnities were arbitrability, and it applies Texas substantive law regarding
released and, in exchange, the whether a litigant must arbitrate. [*7] 5 See In
3 Appellees pled additional causes of action later abandoned; therefore, we need not analyze them.
4 Metro originally brought this action against Cooper Industries, LLC, Cooper [*6] Industries Ltd., Cooper Holdings, Ltd., Cooper US, Inc., Cooper
Industries, PLC, M & F Worldwide Corp., MAFCO Worldwide Corp., MAFCO Consolidated Group, LLC, PCT International Holdings, Inc., and the
Pneumo Abex Asbestos Claims Settlement Trust. The third amended petition also names Mcg Intermediate Holdings Inc. as a defendant.
5 The APA states that it is governed by Delaware law, but the parties do not discuss Delaware law. The SPA contains a clause stating that the "law of
the State of New York shall govern the parties' dispute." In appellees' response to Cooper's motion to compel arbitration, they argued that New York
law governs the arbitration provision in the SPA. On appeal, however, appellees assert that we need not
EDWARD HUBBARD
Page 6 of 14
2015 Tex. App. LEXIS 8882, *7
re Weekley Homes, L.P., 180 S.W.3d 127, 130 (Tex. 2005) (orig. Whether a non-signatory can compel arbitration questions the
proceeding). Because the trial court did not sign written findings existence of a valid arbitration agreement between the parties and
or conclusions, we may uphold the court's order on any theory therefore is a gateway matter for the court to decide. See In re
supported by the evidence, and we imply all factual findings Weekley Homes, L.P., 180 S.W.3d 127, 130 (Tex. 2005).
supported by the record that are necessary to the order. In re
W.E.R., 669 S.W.2d 716, 717 (Tex. 1984) (per curiam); Rush v. The supreme court has recognized that HN5 "[a] person who has
Barrios, 56 S.W.3d 88, 96 (Tex. App.—Houston [14th Dist.] 2001, agreed to arbitrate disputes with one party may in some cases be
pet. denied). We defer to the trial court's factual determinations required to arbitrate related disputes with others." Meyer v.
that are supported by sufficient evidence, but we review the trial WMCO-GP, LLC, 211 S.W.3d 302, 304 (Tex. 2006). In particular,
court's legal determinations de novo. In re Labatt Food Serv., a signatory plaintiff who seeks to derive a "direct benefit" from a
L.P., 279 S.W.3d 640, 643 (Tex. 2009). contract with an arbitration clause may be equitably estopped
from refusing arbitration. Id. at 305; see also In re Kellogg, 166
I. Cooper established that appellees' claims fall within the S.W.3d at 739 (discussing direct-benefits estoppel of non-
scope of valid arbitration agreements that Cooper can invoke. signatories). Although the boundaries of direct-benefits estoppel
are not always clear, the signatory generally must arbitrate claims
Cooper's first issue asks whether the trial court erred in refusing to if liability arises from a contract with an arbitration clause, but not
compel arbitration because appellees' claims are founded on two if liability arises from general obligations imposed by law. In re
contracts that contain mandatory arbitration provisions. HN3 Vesta Ins. Group, Inc., 192 S.W.3d 759, 761 (Tex. 2006) (per
Arbitration cannot be ordered in the absence of an agreement to curiam). When the [*10] facts are not disputed, the application of
arbitrate. Freis v. Canales, 877 S.W.2d 283, 284 (Tex. 1994) (orig. estoppel is a question of law, not a matter committed to the trial
proceeding) (per curiam). The party moving for arbitration has the court's discretion. See Meyer, 211 S.W.3d at 308.
initial burden to present evidence that a valid arbitration
agreement exists. In re Koch Indus., Inc., 49 S.W.3d 439, 444 Tortious interference claims do not fall comfortably within either
(Tex. App.—San Antonio 2001, orig. proceeding). If there is an category. In re Vesta, 192 S.W.3d at 761. HN6 The obligation not
agreement to arbitrate, the party must also establish that the to interfere with existing contracts is a general obligation imposed
claims asserted fall within the scope of the agreement. In re by law, but it is not imposed on the parties to that contract because
Kellogg Brown & Root, Inc., 166 S.W.3d 732, 737 (Tex. 2005). a party cannot interfere tortiously with its own contract. Id. (citing
Holloway v. Skinner, 898 S.W.2d 793, 796 (Tex. 1995)). A person
A. Cooper may compel arbitration against Metro under the must be a stranger to a contract to interfere tortiously with it. Id.
SPA. (citing Morgan Stanley & Co. v. Texas Oil Co., 958 S.W.2d 178,
179 (Tex. 1997)). Thus, a signatory generally is not "required to
Cooper argues that Metro's claims are subject to arbitration under arbitrate a tortious interference claim against a complete stranger
the SPA, which contains a broad clause requiring arbitration of to his contract and its arbitration clause." Id. at 763. But if the
[*9] any controversy or claim arising out of or relating to the signatory plaintiff's right to recover and its damages depend on
agreement. The parties to the SPA are Pneumo Abex and a the existence of the contract containing the arbitration clause, or if
company that later became known as Metro. Metro is thus a the non-signatory defendant is an agent or affiliate of a signatory,
signatory to the agreement, but Cooper is not. Appellees Metro then the plaintiff can be compelled to arbitrate its claim. Meyer,
and Whitman respond that Cooper cannot compel arbitration as a 211 S.W.3d at 306-07; In re Vesta, 192 S.W.3d at 762; PER
non-signatory. HN4
address the question whether Texas or New York law applies because Cooper is not entitled to compel arbitration under either state's laws. Cooper,
for its part, contends that Texas law is entirely consistent with New York law, and that it is entitled to arbitration under the law of both states.
HN2 Texas courts may presume that another state's law is the same as Texas [*8] law absent proof or argument to the contrary. Coca-Cola Co. v.
Harmar Bottling Co., 218 S.W.3d 671, 685 (Tex. 2006). The party requesting application of a foreign law has the initial burden of showing that the
foreign law conflicts with Texas law. Greenberg Traurig of New York, P.C. v. Moody, 161 S.W.3d 56, 70 (Tex. App.—Houston [14th Dist.] 2004, no
pet.). Because all parties assert the outcome is the same under both New York and Texas law, and the parties do not address Delaware law, we apply
Texas law.
EDWARD HUBBARD
Page 7 of 14
2015 Tex. App. LEXIS 8882, *10
Group, L.P. v. Dava Oncology, L.P., 294 S.W.3d 378, 387-88 Ford, although nonsignatories to the agreement between WMCO
(Tex. App.—Dallas 2009, no pet.); see also In re Kellogg, 166 and the dealer, could compel arbitration under the agreement's
S.W.3d at 739 (listing estoppel and agency among the theories for arbitration clause. Id. at 308.6
requiring arbitration with non-signatory).
Similarly, appellees' tortious interference claims against Cooper in
Cooper contends that it may enforce the arbitration clause under their second amended petition depend on the existence of the SPA
the supreme court's opinion in Meyer. Appellees argue [*11] that and Cooper's guaranty of Pneumo Abex's performance
Meyer is distinguishable because the non-signatories in that case thereunder. See Smith v. Kenda Capital, LLC, 451 S.W.3d 453,
were not strangers to the agreement, as they contend Cooper is 460 (Tex. App.—Houston [14th Dist.] 2014, no pet.) ("[D]irect
here. benefits estoppel analysis focuses on whether a contract
containing the clause at issue also [*13] includes other terms on
In Meyer, Ford Motor Company's agreement with one of its which the signatory plaintiff must rely to prosecute its claims.").
dealers provided Ford with an assignable right of first refusal to As discussed above, the SPA required Pneumo Abex to
acquire the dealer's business if the dealer decided to sell. 211 indemnify Metro's predecessor, and Cooper and its then-
S.W.3d at 304. When the dealer later signed an agreement to sell subsidiary guaranteed that indemnity in 1994. Appellees allege
its business to WMCO, Ford exercised its right and assigned that that in 2011, Cooper tortiously caused (and conspired with others
right to Meyer and his company. Id. WMCO then sued the dealer, to cause) Pneumo Abex to breach its indemnity obligation to
Meyer, and Ford, alleging, among other things, that Meyer Metro under the SPA, which contains an arbitration clause.7 If
tortiously interfered with WMCO's agreement to buy the dealer's Pneumo Abex did not breach the SPA in restructuring the
business. Id. Meyer and Ford moved to compel arbitration under a guaranty and other commitments backing its indemnity
clause in the agreement between the dealer and WMCO. Id. at obligation, then there would be no claim for tortious interference
304-05. Meyer and Ford contended that because WMCO made or conspiracy. Moreover, the remedies appellees seek under each
the agreement with the dealer, WMCO was equitably estopped cause of action are the direct benefit of the indemnity obligation
from refusing arbitration. Id. at 305. The supreme court agreed, to Metro under the SPA: they request injunctive relief obligating
noting that WMCO's claims against Ford and Meyer "depend on Cooper to fund any shortfall in the trust set up to pay the
the existence of" WMCO's agreement with the dealer: indemnity, or alternatively damages for the loss of Cooper's
guaranty of that indemnity—damages that cannot be calculated
If [the dealer] properly terminated the [agreement with without reference to the terms of the indemnity obligation in the
WMCO], based on Ford's exercise of its right of first refusal, SPA. For these reasons, Meyer supports Cooper's ability to
then there would be no claim for tortious interference, no [*12] compel Metro to arbitrate its tortious interference claims under the
need to decide whether Ford validly exercised the right of first SPA's [*14] arbitration clause.
refusal, and no need to decide whether Meyer and Ford
conspired to violate statutes protecting dealers from certain Relying on our decision in Brewer & Pritchard, P.C. v. AMKO
actions by manufacturers. Resources International, LLC,8 appellees argue that Cooper
nevertheless cannot compel arbitration because it is a complete
Id. at 307. The court also considered it important that WMCO's stranger to the SPA. They point out that Cooper had no
damages "cannot be calculated without reference to the relationship with the SPA's signatories—Metro's predecessor and
[agreement]." Id. The court thus held that Meyer and Pneumo Abex—when the SPA was executed, and that the SPA
itself did not require Cooper to
6 In a portion of the Meyer opinion, the supreme court also noted allegations of substantially interdependent and concerted misconduct. 211 S.W.3d at
307-08. But the court compelled arbitration on a theory of direct-benefits estoppel, and it declined to adopt a theory of concerted-misconduct estoppel
in a subsequent case. In re Merrill Lynch Trust Co. FSB, 235 S.W.3d 185, 191 & n.22 (Tex. 2007) (orig. proceeding). We rely solely on the theory of
direct-benefits estoppel here.
7 Alternatively, appellees allege that Cooper's actions rendered Pneumo Abex's performance of its obligations to Metro under the SPA more difficult,
if not impossible.
8 No. 14-13-00113-CV, 2014 Tex. App. LEXIS 7627, 2014 WL 3512836, at *11 (Tex. App.—Houston [14th Dist.] July 15, 2014, no. pet.) (mem.
op.) (holding buyer of leases was stranger to seller's fee agreement with law firm that had represented seller in dispute with lease operator, and
therefore firm could not use arbitration clause in fee agreement to compel buyer to arbitrate claims regarding buyer's failure to pay firm a portion of
sales price).
EDWARD HUBBARD
Page 8 of 14
2015 Tex. App. LEXIS 8882, *14
guarantee Pneumo Abex's performance. We do not agree that agreement. The parties to the Mutual Guaranty are Pneumo Abex
these facts defeat direct-benefits estoppel. and Cooper Industries, LLC. Thus, appellees Whitman and Metro
are not parties to the Mutual Guaranty. Nevertheless, direct-
Unlike in Brewer & Pritchard, Cooper guaranteed the benefits estoppel can also require non-signatory plaintiffs to
performance of one of the agreement's signatories, Pneumo Abex, arbitrate if they seek to derive a direct benefit from a contract
in 1994—long before the allegedly tortious 2011 transactions containing an arbitration clause. See In re Kellogg, 166 S.W.3d at
made the basis of this suit. [*15] Moreover, Brewer & Pritchard 739-741 (considering whether plaintiff's claims seek to enforce
did not involve a non-signatory defendant seeking to compel contract [*18] or stand independently of contract).
arbitration with a signatory plaintiff (as our inquiry under the SPA
does), nor did it address whether the plaintiff's right to recover and In their second amended petition, appellees seek to enforce
its damages depended on the existence of the agreement Cooper's obligations under the Mutual Guaranty. They allege that
containing the arbitration clause. Metro's tortious interference Cooper's acts of tortious interference in connection with the 2011
claims do depend on the existence of the SPA, so Meyer supports settlement (and its agreement with the other defendants to
arbitration of those claims as explained above. Other courts agree interfere) were undertaken with a specific intent to cap its
that HN7 a guarantor or surety of a party's obligation under a guaranty obligation, and that Cooper engaged in fraudulent
contract containing an arbitration clause may invoke or be bound transfers (and conspired to do so) when it obtained a release of its
by that clause in a suit regarding the obligation.9 Because Metro's guaranty obligation in exchange for certain payments to the trust.
tortious interference claims depend on the existence of Pneumo The remedies appellees seek include an injunction obligating
Abex's indemnity obligation in the SPA, which Cooper Cooper to fund any shortfall in the trust set up to pay the
guaranteed, we hold Cooper may compel signatory Metro to indemnity Cooper had guaranteed, or alternatively damages in the
arbitrate those claims under the SPA.10 amount of the shortfall. In short, appellees are claiming the benefit
of the Mutual Guaranty, so they are estopped from avoiding the
B. Cooper may compel arbitration against Whitman and burden of its arbitration clause. See In re Kellogg, 166 S.W.3d at
Metro under the Mutual Guaranty despite its termination. 739.
Cooper also argues that both Whitman's and Metro's claims are Appellees respond that arbitration can no longer be compelled
independently subject to arbitration under the 1994 Mutual under the Mutual Guaranty because Cooper, Pneumo Abex, and
Guaranty agreement, which broadly requires arbitration of any others terminated that agreement following the 2011 settlement.
dispute arising in connection with the They point to the following language in the termination
agreement:
9 See, e.g.,Choctaw Generation L.P. v. Am. Home Assur. Co., 271 F.3d 403, 406-08 (2d Cir. 2001) (holding surety for one party's obligation under a
construction contract containing arbitration clause could compel other party to arbitrate its claims against surety even though surety was not a party to
construction contract and surety contract contained no arbitration clause because the controversy presented [*16] was linked to the construction
contract); T-Mobile USA, Inc. v. Montijo, No. C12-1317RSM, 2012 U.S. Dist. LEXIS 176236, 2012 WL 6194204, at *4 (W.D. Wa. Dec. 11, 2012)
(same as to guarantors); Bimota SPA v. Rousseau, 628 F. Supp. 2d 500, 505-06 (S.D.N.Y. 2009) (same); Fujian Pac. Elec. Co. v. Bechtel Power
Corp., No. C 04-3126 MHP, 2004 U.S. Dist. LEXIS 23472, 2004 WL 2645974, at *6-7 (N.D. Cal. Nov. 19, 2004) (same); see also Bell v. Campbell,
143 S.W. 953, 956-57 (Tex. Civ. App.—Amarillo 1911, writ ref'd) (holding sureties bound by arbitration agreement and award against principal);
Empire Steel Corp. v. Omni Steel Corp., 378 S.W.2d 905, 911 (Tex. Civ. App.—Fort Worth 1964, writ ref'd n.r.e.) (same as to guarantors). We note
that in a subsequent case, the Second Circuit described Choctaw as involving a situation in which the non-signatory surety (American Home) was
explicitly named in the underlying contract as having certain tasks to perform thereunder. Ross v. Am. Exp. Co., 547 F.3d 137, 145 (2d Cir. 2008).
The Choctaw opinion does not appear to support this characterization. See 271 F.3d at 403-05, 407 (noting that underlying contract required party to
post and replenish letter of credit, and that American Home contracted separately with party to issue bond securing party's performance but was not
party to underlying contract). In any event, none of the cases cited at the beginning of this footnote attach importance to whether the surety or
guarantor is identified by name in the underlying agreement containing the arbitration clause.
10 Because we conclude that Whitman is bound to arbitrate its claims under the 1994 [*17] Mutual Guaranty, as discussed below, we do not address
whether Cooper could compel Whitman to arbitrate under the SPA. We also note that the parties have not separately addressed whether Cooper could
compel Metro to arbitrate its claims of fraudulent transfer and conspiracy to commit fraudulent transfer. We likewise need not address that issue under
the SPA given our conclusion below that Metro is bound to arbitrate those claims under the Mutual Guaranty.
EDWARD HUBBARD
Page 9 of 14
2015 Tex. App. LEXIS 8882, *18
The Dallas Court of Appeals agreed, noting that the termination
Effective as of the Closing, and notwithstanding [*19] any agreement was a new agreement with new consideration that
provision of the Mutual Guaranty to the contrary, the Mutual unconditionally released the parties from all previous obligations.
Guaranty shall be fully, finally and irrevocably terminated and [*21] Id. at 321-22, 323.
of no further force or effect, and no Party nor any other Person
shall have any further obligation or liability under the Mutual This case differs from TransCore in two critical respects. First,
Guaranty from and after Closing. the backward-looking release language in the TransCore
termination agreement is absent here. This termination agreement,
...
which was entered into effective April 5, 2011, only eliminates
Each Party hereby irrevocably consents and agrees that any any "further obligation" to arbitrate under the Mutual Guaranty
dispute regarding this Agreement shall be brought only to the "from and after" termination. The provision agreeing to bring
exclusive jurisdiction of the federal or state courts located in disputes regarding the termination agreement only to New York
New York County, New York . . . . courts does not address the handling of disputes under the Mutual
Guaranty.12 Thus, the termination agreement leaves intact the
We disagree with appellees that this language cuts off the estoppel obligation under the Mutual Guaranty to arbitrate disputes
effect of the Mutual Guaranty's arbitration clause. "arising in connection with the agreement" up to the point of
termination. Appellees' claims challenge Cooper's acts leading up
HN8 In general, as our sister court has held, an "arbitration to and including the 2011 settlement, which was entered into as of
agreement contained within a contract survives the termination or February 1, 2011. Because those claims arise in connection with
repudiation of the contract as a whole." Cleveland Constr. Inc. v. the Mutual Guaranty agreement as explained above, the
Levco Constr. Inc., 359 S.W.3d 843, 854 (Tex. App.—Houston termination agreement does not affect the obligation to arbitrate
[1st Dist.] 2012, pet. dism'd)) (citing Henry v. Gonzalez, 18 them.
S.W.3d 684, 690 (Tex. App.—San Antonio 2000, pet. dism'd)).11
Our facts illustrate the sensible result of applying this rule here. Second, the termination agreement in TransCore was between the
Appellees' position is that the Mutual Guaranty was tortiously and parties to the original agreement: one party seeking to compel
fraudulently terminated by Cooper and that the court should, in arbitration under the original agreement, and another party [*22]
effect, require Cooper to honor its guaranty notwithstanding the arguing that the termination agreement ended its obligation to
termination. Having asked the court to ignore the Mutual arbitrate. Here, appellees are not parties to the termination
Guaranty's termination, appellees can hardly complain if its clause agreement. Instead, appellees are third parties trying to revive the
requiring [*20] arbitration of any dispute "arising in connection obligations of the original agreement. The logical force of the
with" the agreement is also given effect. doctrine of direct-benefits estoppel—which was not at issue in
TransCore—supports requiring appellees to arbitrate their claims.
Appellees urge us instead to follow TransCore Holdings, Inc. v.
Rayner, 104 S.W.3d 317 (Tex. App.—Dallas 2003, pet. denied). In Appellees' claims against Cooper hinge on the existence of the
TransCore, parties including TransCore and Rayner entered into a Mutual Guaranty, and the gist of their case is to undo its
stock purchase agreement containing an arbitration clause. Id. at termination. If Cooper "properly terminated the" Mutual
319. Subsequently, the parties entered into a termination Guaranty, then "there would be no claim for tortious interference"
agreement that included a backward-looking mutual release of or fraudulent transfer and no need to determine whether Cooper
obligations and claims and a forward-looking provision requiring "conspired" with the other defendants to do so. Meyer, 211
actions relating to the agreement to be brought in court. Id. at 320- S.W.3d at 307. Appellees cannot have it both ways, picking and
21, 323. Rayner argued that the termination agreement released choosing which portions of the Mutual Guaranty should be
him from his obligation to arbitrate TransCore's claim that he enforced and which portions should not. See id. at 306; cf. Coker
made misrepresentations prior to termination. Id. at 321. v. Coker, 650 S.W.2d 391, 393 (Tex.
11 See also Butchers, Food Handlers & Allied Workers Union, Local 174 v. Hebrew Nat'l Kosher Foods, Inc., 818 F.2d 283, 287 (2d Cir. 1987) ("If
the contract does not state that the duty to arbitrate ends with the termination of the contract, the strong policies favoring arbitration should ordinarily
lead the court to conclude that the obligation to arbitrate—especially as to claims that accrued during the term of the contract—survives the expiration
of the contract.").
12 See Valero Energy Corp. v. Teco Pipeline Co., 2 S.W.3d 576, 587 (Tex. App.—Houston [14th Dist.] 1999, no pet.).
EDWARD HUBBARD
Page 10 of 14
2015 Tex. App. LEXIS 8882, *22
1983) (HN9 "No single [contractual] provision taken alone waived the right to arbitrate by first moving to dismiss the case in
[should] be given controlling effect; rather, all the provisions must favor of adjudication in New York based on principles of
be considered with reference to the whole instrument"). exclusive jurisdiction, comity, and forum non conveniens. In its
motion, Cooper argued that the New York court that approved the
We hold that the termination of the Mutual Guaranty agreement 2011 settlement had exclusive jurisdiction over questions
between Cooper and Pneumo Abex did not abrogate Cooper's regarding that settlement.
ability [*23] to compel arbitration of appellees' claims under that
agreement. In addition, as explained above, Cooper may compel HN12 Moving to dismiss in favor of exclusive jurisdiction in
arbitration of Metro's claims under the SPA. Accordingly, we another court is equivalent, for present purposes, to moving to
sustain Cooper's first issue and hold that the trial court erred to the transfer venue or filing a notice of removal to another court. The
extent it denied Cooper's motion to compel arbitration on the Supreme Court of Texas and many other courts have held that
ground that appellees' claims do not fall within the scope of valid such actions do not waive a right to arbitrate. E.g., Richmont
arbitration agreements that Cooper can invoke. Holdings, Inc. v. Superior Recharge Sys., L.L.C., 455 S.W.3d 573,
576 (Tex. 2015) (per curiam); In re Citigroup Global Markets,
II. Cooper did not expressly waive its right to arbitrate Inc., 258 S.W.3d 623, 626 (Tex. 2008).13
appellees' claims.
In Richmont Holdings, Superior and Richmont signed an asset
HN10 Once the arbitration movant establishes a valid arbitration purchase agreement with an arbitration clause, and Superior's
agreement that encompasses the claims at issue, a trial court has part-owner, Blake, signed a related employment agreement with
no discretion to deny the motion to compel arbitration unless the Richmont that contained a Dallas County forum selection clause.
opposing party proves a defense to arbitration such as waiver. 455 S.W.3d at 575. Superior and Blake later sued Richmont in
J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003); Denton County on various causes of action and sought a
In re First Merit Bank, N.A., 52 S.W.3d 749, 753-54 (Tex. 2001) declaration that a covenant not to compete in the employment
(orig. proceeding). Cooper's second and third issues ask whether agreement was unenforceable. Id. In response, Richmont moved
the trial court erred to the extent it denied the motion to compel by to transfer venue to Dallas County and also filed a separate suit
finding that Cooper waived its right to arbitration against Metro against Blake in Dallas County to enforce the covenant not to
and Whitman. compete. Id. Richmont later filed a motion to compel arbitration
in the Denton County suit, but the trial court denied the motion.
HN11 A party can waive a contractual right to arbitrate either Id. at 576.
expressly or by implication. Sedillo v. Campbell, 5 S.W.3d 824,
826 (Tex. App.—Houston [14th Dist.] 1999, no pet.). Whether The supreme court held that the motion should have been granted
waiver has occurred is a question of law for the court that we because Richmont had not waived arbitration. Id. The court
review de novo. Perry Homes v. Cull, 258 S.W.3d 580, 598 (Tex. explained that "[m]erely filing suit does not waive arbitration,
2008). Because public policy favors arbitration, there is [*24] a even when the movant, as in this case, files a second, separate suit
strong presumption against waiver of the right to arbitrate. In re in another county based in [*26] part on a contract at issue in the
Bruce Terminix Co., 988 S.W.2d 702, 704 (Tex. 1998) (orig. first action. Nor, we think, does moving to transfer venue. The
proceeding). motion does not address the merits of the case." Id. (citations
omitted).
Express waiver arises when a party affirmatively indicates that it
wishes to resolve the case in the judicial forum rather than in Thus, Richmont went far beyond asserting—as Cooper did
arbitration. See Okorafor v. Uncle Sam & Assocs., Inc., 295 here—that another forum was the only correct place to decide the
S.W.3d 27, 39 (Tex. App.—Houston [1st Dist.] 2009, pet. struck). parties' disputes. Richmont actually filed a second suit in the other
Appellees contend that Cooper expressly forum, yet the supreme court held that act did not waive
Richmont's ability to compel
13 See also In re Bruce Terminix Co., 988 S.W.2d at 704 (citing case holding no waiver by defendant who removed case from state to federal court);
In re Frost Nat'l Bank, 13-07-00748-CV, 2008 Tex. App. LEXIS 8570, 2008 WL 4889836, at *3 (Tex. App.—Corpus Christi Nov. 7, 2008, no pet.)
(holding party did not waive right to compel arbitration by moving to transfer venue [*25] based on provision in agreement) (mem. op.); Global Fin.
Servs., L.L.C. v. Estate of McLean, No. 04-07-627-CV, 2008 Tex. App. LEXIS 1034, 2008 WL 372521, at *3 (Tex. App.—San Antonio Feb. 13,
2008, no pet.) (mem. op.); Granite Constr. Co. v. Beaty, 130 S.W.3d 362, 367 (Tex. App.—Beaumont 2004, no pet.) (HN13 "[A] motion to transfer
venue does not seek a final determination of the litigation.").
EDWARD HUBBARD
Page 11 of 14
2015 Tex. App. LEXIS 8882, *26
arbitration in the original suit. Richmont therefore supports the
conclusion that Cooper did not waive its right to arbitration. • whether the party who pursued arbitration was the plaintiff or
the defendant;
Similarly, in In re Citigroup Global Markets, the supreme court
• how long the party who pursued arbitration delayed before
held that Citigroup did not waive arbitration despite its previous
seeking arbitration;
attempts to transfer the case to a federal multidistrict litigation
court in New York. 258 S.W.3d at 626. The court held that despite • when the party who pursued arbitration learned of the
statements in various transfer pleadings about the case's similarity arbitration clause's existence;
to others already transferred, the potential savings in consolidated
• how much of the pretrial activity related to the merits rather
discovery, and the potential convenience of parties and witnesses
than to arbitrability or jurisdiction;
in consolidated proceedings, Citigroup did not expressly waive its
right to arbitrate. Id. As the court explained, "we disagree . . . that • how much time and expense has been incurred in litigation;
transfer to an MDL court is necessarily inconsistent [*27] with
• whether the party who pursued arbitration sought or opposed
seeking arbitration." Id.
arbitration earlier in the case;
Appellees urge that Citigroup is distinguishable because in that • whether the party who pursued arbitration filed affirmative
case, the party seeking to compel arbitration expressly reserved claims or dispositive motions;
the right to request arbitration early on. See id. But the court in
Citigroup did not hold that a party must expressly reserve its right • how much discovery has been conducted and who initiated
the discovery;
to arbitrate before seeking to transfer a case. Rather, Citigroup
simply noted that the party "never opposed arbitration." Id. The • whether the discovery sought would be useful in arbitration;
same is true here: Cooper never opposed arbitration before filing
• what discovery would be unavailable in arbitration;
its motion to compel. Accordingly, we hold the trial court erred to
the extent it denied the motion to compel arbitration on the ground • whether activity in court would be duplicated in arbitration;
that Cooper expressly waived its right to arbitrate.
• when the case was to be tried; and
III. Cooper did not waive its right to arbitrate by implication. • whether the party who pursued arbitration sought judgment on
the merits.
HN14 A party waives an arbitration clause by implication when it
substantially invokes the judicial process to the other party's Baty v. Bowen, Miclette & Britt, Inc., 423 S.W.3d 427, 433 (Tex.
detriment or prejudice. Perry Homes, 258 S.W.3d at 589-90. The App.—Houston [14th Dist.] 2013, pet. denied) (citing Perry
hurdle of proving implied waiver is a high bar. Kennedy Hodges, Homes, 258 S.W.3d at 591-92).
L.L.P. v. Gobellan, 433 S.W.3d 542, 545 (Tex. 2014) (per curiam).
In close cases, the "strong presumption against waiver" should HN17 The quantum of litigation conduct that constitutes
govern. Perry Homes, 258 S.W.3d at 593. "substantial" invocation of the litigation process depends on the
context. See Perry Homes, 258 S.W.3d at 593. A party who
Waiver must be decided on a case-by-case basis, and we look to enjoys substantial direct benefits by gaining an advantage in the
the totality of the circumstances. Id. at 592. The party's conduct pretrial litigation process should be barred from turning around
must be unequivocally inconsistent with claiming [*28] a known and seeking arbitration with the spoils. Id. Delay alone generally
right to arbitration. See Van Indep. Sch. Dist. v. McCarty, 165 does not establish waiver. See In re Serv. Corp. Int'l, 85 S.W.3d
S.W.3d 351, 353 (Tex. 2005).14 HN15 We consider a wide variety 171, 174 (Tex. 2002) (orig. proceeding).
of factors in deciding whether a party substantially invoked the
litigation process, such as: "Even substantially invoking the judicial process does not waive a
party's arbitration rights unless the opposing party proves that it
suffered prejudice as a result." In re Bruce
14 As noted above, HN16 whether a party has waived an arbitration right is a question [*29] of law that this Court reviews de novo. See Perry
Homes, 258 S.W.3d at 598. If the trial court is called upon to resolve factual disputes about the conduct in which the party engaged, this Court defers
to the trial court's implied fact findings if they are supported by sufficient evidence. See id.
EDWARD HUBBARD
Page 12 of 14
2015 Tex. App. LEXIS 8882, *29
Terminix Co., 988 S.W.2d 702, 704 (Tex. 1998). The arbitration incurred approximately $3,500,000 in fees and $94,000 in other
opponent must provide proof of prejudice to overcome the strong costs." Appellees also argue that Cooper substantially
presumption against waiver. In re Vesta, 192 S.W.3d at 763. In the invoked the judicial process by moving for a continuance and
context of waiver of an arbitration right, "prejudice" relates to the agreeing to an extension of discovery.
inherent unfairness in terms of delay, expense, or damage to a
party's legal position that occurs when the party's opponent forces We disagree with appellees' position that Cooper substantially
it to litigate an issue and later seeks to arbitrate [*30] that same invoked the judicial process. In holding that substantial invocation
issue. Perry Homes, 258 S.W.3d at 597. A party cannot attempt to had occurred in Perry Homes, the Supreme Court of Texas noted
have it both ways by switching between litigation and arbitration the extensive discovery propounded by the movants but stated
to its own advantage. See Okorafor, 295 S.W.3d at 40 (citing In re that discovery is not the only measure of waiver under the totality-
Fleetwood Homes of Texas, L.P., 257 S.W.3d 692, 694 (Tex. of-the-circumstances test. Perry Homes, 258 S.W.3d at 596.15 The
2008)). court then pointed out that the movants had objected stridently to
arbitration before changing their minds and seeking arbitration
To support their position that Cooper substantially invoked the shortly before the trial setting. Id. The court also invoked the rule
judicial process, appellees assert that Cooper "inexplicably [*32] that one cannot wait until the eve of trial to request
delayed" moving to compel arbitration until May 2014, twenty- arbitration, observing that "most of the discovery in the case had
eight months after it was sued. Appellees further contend that already been completed before [movants] requested arbitration."
Cooper participated in extensive discovery related to the merits. Id.
They point out that Cooper sought admissions that Metro is
"seeking to void and/or avoid the transfers incident to the The facts here are different from those in Perry Homes and more
creations of the [trust]" and that Pneumo Abex did "not owe a analogous to In re Vesta, in which the supreme court held that
duty to [Metro] to ensure that it obtained consideration that was at arbitration had not been waived. 192 S.W.3d at 763-64. The
least equal to the value" of Cooper's obligations. Appellees argue parties moving for arbitration in Vesta had litigated for two years
that those requests relate directly to their claims of fraudulent and engaged in discovery, but they did not initially oppose
transfer and tortious interference. arbitration. See Perry Homes, 258 S.W.3d at 600 (distinguishing
Vesta on those grounds). Furthermore, the Vesta case was not
They also point to Cooper's request for the production of "all close to trial, and the party opposing arbitration incurred most of
documents and communications that show what amount would its discovery expenses in obtaining discovery rather than
have constituted 'equivalent value' with respect to the settlement providing it. Id.
of the New York Lawsuit" and "all documents (if any) in which
Whitman Insurance Company . . . is identified, as an entity and/or Like the parties moving to compel arbitration in Vesta, Cooper
a party [*31] that is entitled to indemnification . . . pursuant to the did not oppose arbitration at any time during the case. In addition,
terms of the SPA." Appellees declare that they have produced although the parties had engaged in some merits discovery, this
more than 21,000 documents, and argue that Cooper is trying to case was not on the eve of trial when Cooper filed its motion to
have it both ways by moving to compel arbitration only after compel arbitration in May 2014—approximately four months
16
receiving extensive discovery responses. The affidavit of after Whitman joined the case as [*33] a plaintiff. The record
appellees' counsel states that, "[t]o date, [appellees'] attorneys and shows that during the first ten months of the case, from December
staff have spent over 9,000 hours working on the lawsuit and 2011 to October 2012, the parties were engaged in settlement
negotiations and Metro sought to extend trial deadlines for
15See also G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502, 514 (Tex. 2015) (collecting cases in which "we have declined to find
waiver even when the movant itself propounded written discovery").
16 Although appellees point to evidence (summarized above) that substantial merits discovery had occurred, the record also contains indications that
the situation was not like that in Perry Homes, in which most discovery had been completed. According to a filing by appellees in [*34] February
2014, no "meaningful merits discovery" had yet been received from Cooper given the litigation over jurisdictional issues. In April 2014, appellees
moved to modify the docket control order, stating that the parties had been "prevented . . . from being able to engage in meaningful document
discovery on the merits until recently," and that "no fact-witness depositions have been taken on the merits as of this date."
EDWARD HUBBARD
Page 13 of 14
2015 Tex. App. LEXIS 8882, *33
that reason.17 Much of the second year was spent on venue by itself is insufficient to waive the right to arbitrate. See In re
motions, jurisdictional motions, and mediation, which failed in Serv. Corp. Int'l, 85 S.W.3d at 174; see also [*36] Granite, 130
November 2013. HN18 Settlement negotiations and mediation do S.W.3d at 367 ("Length of delay alone is not a basis for inferring
not substantially invoke the judicial process, nor are they waiver.").
inconsistent with a desire to arbitrate. See Tex. Residential Mortg.,
L.P. v. Portman, 152 S.W.3d 861, 863-64 (Tex. App.—Dallas Cooper is in court because appellees sued it, and Cooper did not
2005, no pet.). Likewise, venue and jurisdictional motions do not seek disposition on the merits. See G.T. Leach Builders, LLC v.
constitute substantial invocation of the judicial process because Sapphire V.P., LP, 458 S.W.3d 502, 512-13 (Tex. 2015) (noting
they do not relate to the merits of the case. See Granite, 130 similar factors in holding right to arbitrate had not been waived).
S.W.3d at 367; Deep Water Slender Wells, Ltd. v. Shell Intern. Appellees have not shown that Cooper obtained discovery it
Exploration & Prod., Inc., 234 S.W.3d 679, 695 (Tex. App.— otherwise would not have obtained, and this case was not on the
Houst.[14th Dist.] 2007, pet. denied) ("A dismissal of all claims eve of trial. As for the expenses appellees incurred in prosecuting
to enforce a clause requiring litigation in another forum is a their suit, the affidavit does not delineate which costs were
determination that the merits of the claims should be determined incurred in litigating against Cooper and which costs were
elsewhere; therefore, enforcement of such a forum-selection incurred in litigating against the other named defendants. Nor
clause is a nonmerits basis for dismissal."). does it address which costs were incurred in obtaining or
responding to discovery. The costs thus likely include those
Appellees cite Tuscan Builders, LP v. 1437 SH6 L.L.C., 438 associated with litigating the claims against the other named
S.W.3d 717 (Tex. App.—Houston [1st Dist.] 2014, pet. denied), a defendants and those associated with appellees' efforts at
case in which the First Court of Appeals held that the movant obtaining discovery from Cooper. The record does not
substantially invoked the judicial process. Appellees assert that demonstrate the extent to which appellees "pre-trial costs were . . .
this case is similar because the movant in Tuscan waited for more self-inflicted." In re Vesta, 192 S.W.3d at 763. Accordingly, we
than a year after the lawsuit was filed before seeking [*35] hold appellants have not shown that Cooper unequivocally
arbitration, did not accompany its answer with a notice to pursue waived its right to arbitration by substantially invoking the
arbitration, completed written discovery on the merits, inspected judicial process. Perry Homes, 258 S.W.3d at 593.
property at issue in the lawsuit, designated experts, and joined in a
motion to extend the discovery period and postpone trial. Id. at Having concluded that under the totality of the [*37]
722-23. circumstances, Cooper did not substantially invoke the judicial
process, we need not address whether appellees suffered
This case is distinguishable from Tuscan Builders. The party prejudice. We sustain Cooper's second and third issues and hold
seeking to compel arbitration in Tuscan Builders filed a third- the trial court erred to the extent it ruled that Cooper waived its
party action and conducted a building inspection that likely would right to arbitration of appellees' claims.
not have been available in arbitration. Id. at 723. The court
concluded that the motion to compel arbitration was "more Conclusion
consistent with a late-game tactical decision than an intent to
preserve the right to arbitrate." Id. at 722. In this case, by contrast, For these reasons, the trial court erred in denying the Cooper
Cooper did not file counterclaims, and appellees do not contend appellants' motion to compel arbitration. We reverse the trial
that any merits discovery obtained would not have been available court's order denying the motion, render judgment ordering
in arbitration. Appellees also "do[] not allege that the discovery arbitration of appellees' claims against the Cooper defendants who
already conducted would not be useful in arbitration." In re Vesta, are parties to this appeal, and remand this case to the trial court for
192 S.W.3d at 763; see also Granite, 130 S.W.3d at 367 (HN19 further proceedings consistent with this opinion, including the
"Propounding discovery will not, in and of itself, result in waiver grant of an appropriate stay. See Tex. Civ. Prac. & Rem. Code
of the right to compel arbitration"). Cooper's twenty-eight-month Ann. § 171.025(a) (West 2011).
delay is but one factor, which
/s/ J. Brett Busby
17 Metro filed its original petition on December 30, 2011. On October 31, 2012, Metro filed an unopposed motion to modify the scheduling order and
request for Rule 166 Conference. Metro asserted that the "parties have been engaged in extensive settlement negotiations in an effort to resolve this
case. Because the parties' efforts have been focused on resolving the matter short of litigating the issue, the parties request an extension and
modification of this Court's docket control order."
EDWARD HUBBARD
Page 14 of 14
2015 Tex. App. LEXIS 8882, *37
Justice
EDWARD HUBBARD
DIRECTV, Inc. v. Imburgia, 136 S.Ct. 463 (2015)
193 L.Ed.2d 365, 84 USLW 4018, 166 Lab.Cas. P 61,659...

Declined to Extend by 24th Senatorial Dist. Republican Committee v.
Alcorn, 4th Cir.(Va.), April 19, 2016
136 S.Ct. 463 [1] Courts
Supreme Court of the United States Decisions of United States Courts as
Authority in State Courts
DIRECTV, INC., Petitioner States
v. Federal Supremacy; Preemption
Amy IMBURGIA et al. Lower court judges are free to note their
disagreement with a decision of the Supreme
No. 14–462.
Court, but the Supremacy Clause forbids state
|
courts to dissociate themselves from federal
Argued Oct. 6, 2015.
law because of disagreement with its content
|
or a refusal to recognize the superior authority
Decided Dec. 14, 2015.
of its source. U.S.C.A. Const. Art. 6, cl. 2.
Synopsis
Background: Consumer brought action against satellite
television service provider, seeking damages for early
termination fees that allegedly violated California law. [2] Alternative Dispute Resolution
The Superior Court, Los Angeles County, No. BC398295, Preemption
John Shepard Wiley, Jr., J., denied provider's motion States
to compel arbitration, and provider appealed. The Particular cases, preemption or
California Court of Appeal, Rothschild, Acting P.J., 225 supersession
Cal.App.4th 338, 170 Cal.Rptr.3d 190, affirmed, and Federal Arbitration Act is a law of the United
certiorari was granted. States; consequently, the judges of every State
must follow it. U.S.C.A. Const. Art. 6, cl. 2; 9
U.S.C.A. § 1 et seq.
[Holding:] The Supreme Court, Justice Breyer, held that
under arbitration clause in parties' contract, providing
that it was invalid if “law of your state” made its class
arbitration waiver unenforceable, “law of your state” did [3] Alternative Dispute Resolution
not include California law invalidating class arbitration Validity
waivers that was valid at time the contract was entered Alternative Dispute Resolution
into, but was later ruled preempted by the Federal Choice of law
Arbitration Act.
The Federal Arbitration Act allows parties to
an arbitration contract considerable latitude
Reversed and remanded. to choose what law governs some or all of
its provisions, including the law governing
Justice Thomas filed a dissenting opinion. enforceability of a class-arbitration waiver. 9
Justice Ginsburg filed a dissenting opinion in which
Justice Sotomayor joined.
[4] Federal Courts

Review of State Courts

Interpretation of a contract is ordinarily a Judicial construction; role, authority,

matter of state law to which the Supreme and duty of courts
Court defers. Judicial construction of a statute ordinarily
applies retroactively.
[5] Courts
Decisions of United States Courts as [9] Contracts
Authority in State Courts Construction against party using words
California courts are the ultimate authority on The reach of the canon construing contract
California law. language against the drafter must have limits,
no matter who the drafter was.
Preemption
States
Particular cases, preemption or West Codenotes
supersession
Recognized as Preempted
Under arbitration clause in contract between West's Ann.Cal.Civ.Code §§ 1751, 1781(a)
consumer and satellite television service
provider, providing that it was invalid if
“law of your state” made its class arbitration *464 Syllabus *
waiver unenforceable, “law of your state” did
not include California law invalidating class Petitioner DIRECTV, Inc., and its customers entered
arbitration waivers that was valid at time into a service agreement that included a binding
the contract was entered into, but was later arbitration provision with a class-arbitration waiver.
ruled preempted by the Federal Arbitration It specified that the entire arbitration provision was
Act; interpreting the provision as applying unenforceable if the “law of your state” made class-
to invalid state law did not place arbitration arbitration waivers unenforceable. The agreement also
contracts on equal footing with all other declared that the arbitration clause was governed by the
contracts or give due regard to federal policy Federal Arbitration Act. At the time that respondents,
favoring arbitration. 9 U.S.C.A. § 2. California residents, entered into that agreement with
DIRECTV, California law made class-arbitration waivers
23 Cases that cite this headnote unenforceable, see Discover Bank v. Superior Court, 36
Cal.4th 148, 30 Cal.Rptr.3d 76, 113 P.3d 1100. This Court
subsequently held in AT & T Mobility LLC v. Concepcion,
[7] Contracts
563 U.S. 333, 131 S.Ct. 1740, 179 L.Ed.2d 742, however,
Existing law as part of contract
that California's Discover Bank rule was pre-empted by the
Under general California contract principles, Federal Arbitration Act, 9 U.S.C. § 2.
references in a contract to California law
incorporate the California Legislature's power When respondents sued petitioner, the trial court denied
to change the law retroactively. DIRECTV's request to order the matter to arbitration,
and the California Court of Appeal affirmed. The court
thought that California law would render class-arbitration
waivers unenforceable, so it held the entire arbitration
[8] Statutes provision was unenforceable under the agreement. The
fact that the Federal Arbitration Act pre-empted that
California law did not change the result, the court said,

because the parties were free to refer in the contract to other federal law. Fourth, the language the court uses
California law as it would have been absent federal pre- to frame the issue focuses only on arbitration. Fifth, the
emption. The court reasoned that the phrase “law of your view that state law retains independent force after being
state” was both a specific provision that should govern authoritatively invalidated is one courts are unlikely to
more general provisions and an ambiguous provision that apply in other contexts. Sixth, none of the principles of
should be construed against the drafter. Therefore, the contract interpretation relied on by the California court
court held, the parties had in fact included California law suggests that other California courts would reach the same
as it would have been without federal pre-emption. interpretation elsewhere. The court applied the canon that
contracts are construed against the drafter, but the lack of
Held : Because the California Court of Appeal's any similar case interpreting similar language to include
interpretation is pre-empted by the Federal Arbitration invalid laws indicates that the antidrafter canon would
Act, that court must enforce the arbitration agreement. not lead California courts to reach a similar conclusion in
Pp. 467 – 471. cases not involving arbitration. Pp. 468 – 471.
(a) No one denies that lower courts must follow 225 Cal.App. 4th 338, 170 Cal.Rptr.3d 190, reversed and
Concepcion, but that elementary point of law does not remanded.
resolve the case because the parties are free to choose
the law governing an arbitration provision, including BREYER, J., delivered the opinion of the Court, in which
California law as it would have been if not pre-empted. ROBERTS, C.J., and SCALIA, KENNEDY, ALITO,
The state court interpreted the contract to mean that and KAGAN, JJ., joined. THOMAS, J., filed a dissenting
the parties did so, and the interpretation of a contract opinion. GINSBURG, J., filed a dissenting opinion, in
is ordinarily a matter of state law to which this Court which SOTOMAYOR, J., joined.
defers, Volt Information Sciences, Inc. v. Board of Trustees
of Leland Stanford Junior Univ., 489 U.S. 468, 474, 109
S.Ct. 1248, 103 L.Ed.2d 488. The issue here is not whether Attorneys and Law Firms
the court's decision is a correct statement of California
Christopher Landau, Washington, DC, for Petitioner.
law but whether it is consistent with *465 the Federal
Arbitration Act. Pp. 467 – 468. Thomas C. Goldstein, Bethesda, MD, for Respondents.
(b) The California court's interpretation does not place Melissa D. Ingalls, Robyn E. Bladow, Shaun Paisley,
arbitration contracts “on equal footing with all other Kirkland & Ellis LLP, Los Angeles, CA, Christopher
contracts,” Buckeye Check Cashing, Inc. v. Cardegna, 546 Landau, P.C. Kirkland & Ellis LLP, Washington, DC, for
U.S. 440, 443, 126 S.Ct. 1204, 163 L.Ed.2d 1038, because Petitioner.
California courts would not interpret contracts other than
F. Edie Mermelstein, Law Offices of F. Edie Mermelstein,
arbitration contracts the same way. Several considerations
Huntington Beach, CA, Paul D. Stevens, Milstein
lead to this conclusion.
Adelman, LLP, Santa Monica, CA, Ingrid Maria
Evans, Evans Law Firm, Inc., San Francisco, CA,
First, the phrase “law of your state” is not ambiguous
Thomas C. Goldstein, Counsel of Record, Goldstein &
and takes its ordinary meaning: valid state law.
Russell, P.C., Bethesda, MD, Harvey Rosenfield, Pamela
Second, California case law—that under “general contract
Pressley, Consumer Watchdog, Santa Monica, CA, for
principles,” references to California law incorporate
Respondents.
the California Legislature's power to change the law
retroactively, Doe v. Harris, 57 Cal.4th 64, 69–70, 158 Opinion
Cal.Rptr.3d 290, 302 P.3d 598, 601–602—clarifies any
doubt about how to interpret it. Third, because the court Justice BREYER delivered the opinion of the Court.
nowhere suggests that California courts would reach the
same interpretation in any other context, its conclusion The Federal Arbitration Act states that a “written
appears to reflect the subject matter, rather than a general provision” in a contract providing for “settle[ment] by
principle that would include state statutes invalidated by arbitration” of “a controversy ... arising out of” that

“contract ... shall be valid, irrevocable, and enforceable, Cal.Rptr.3d 76, 113 P.3d 1100, 1110, that a “waiver” of
save upon such grounds as exist at law or in equity for class arbitration in a “consumer contract of adhesion”
the revocation *466 of any contract.” 9 U.S.C. § 2. that “predictably involve[s] small amounts of damages”
We here consider a California court's refusal to enforce and meets certain other criteria not contested here is
an arbitration provision in a contract. In our view, that “unconscionable under California law and should not be
decision does not rest “upon such grounds as exist ... for enforced.” See Cohen v. DirecTV, Inc., 142 Cal.App.4th
the revocation of any contract,” and we consequently set 1442, 1446–1447, 48 Cal.Rptr.3d 813, 815–816 (2006)
that judgment aside. (holding a class-action waiver similar to the one at issue
here unenforceable pursuant to Discover Bank ); see also
Consumers Legal Remedies Act, Cal. Civ.Code Ann.
§§ 1751, 1781(a) (West 2009) (invalidating class-action
I
waivers for claims brought under that statute). But in
DIRECTV, Inc., the petitioner, entered into a service 2011, this Court held that California's Discover Bank
agreement with its customers, including respondents Amy rule “ ‘stands as an obstacle to the accomplishment and
Imburgia and Kathy Greiner. Section 9 of that contract execution of the full purposes and objectives of Congress' ”
provides that “any Claim either of us asserts will be embodied in the Federal Arbitration Act. AT & T Mobility
resolved only by binding arbitration.” App. 128. It LLC v. Concepcion, 563 U.S. 333, 352, 131 S.Ct. 1740, 179
then sets forth a waiver of class arbitration, stating L.Ed.2d 742 (2011) (quoting Hines v. Davidowitz, 312 U.S.
that “[n]either you nor we shall be entitled to join or 52, 67, 61 S.Ct. 399, 85 L.Ed. 581 (1941)); see Sanchez v.
consolidate claims in arbitration.” Id., at 128–129. It Valencia Holding Co., LLC, 61 Cal.4th 899, 923–924, 190
adds that if the “law of your state” makes the waiver of Cal.Rptr.3d 812, 353 P.3d 741, 757 (2015) (holding that
class arbitration unenforceable, then the entire arbitration Concepcion applies to the Consumers Legal Remedies Act
provision “is unenforceable.” Id., at 129. Section 10 of the to the extent that it would have the same effect as Discover
contract states that § 9, the arbitration provision, “shall be Bank ). The Federal Arbitration Act therefore pre-empts
governed by the Federal Arbitration Act.” Ibid. and invalidates that rule. 563 U.S., at 352, 131 S.Ct. 1740;
see U.S. Const., Art. VI, cl. 2.
In 2008, the two respondents brought this lawsuit
against DIRECTV in a California state court. They *467 The California Court of Appeal subsequently
seek damages for early termination fees that they believe held in this case that, despite this Court's holding
violate California law. After various proceedings not in Concepcion, “the law of California would find the
here relevant, DIRECTV, pointing to the arbitration class action waiver unenforceable.” 225 Cal.App.4th 338,
provision, asked the court to send the matter to 342, 170 Cal.Rptr.3d 190, 194 (2014). The court noted
arbitration. The state trial court denied that request, and that Discover Bank had held agreements to dispense
DIRECTV appealed. with class-arbitration procedures unenforceable under
circumstances such as these. 225 Cal.App.4th, at 341,
The California Court of Appeal thought that the critical 170 Cal.Rptr.3d, at 194. It conceded that this Court in
legal question concerned the meaning of the contractual Concepcion had held that the Federal Arbitration Act
phrase “law of your state,” in this case the law of invalidated California's rule. 225 Cal.App.4th, at 341, 170
California. Does the law of California make the contract's Cal.Rptr.3d, at 194. But it then concluded that this latter
class-arbitration waiver unenforceable? If so, as the circumstance did not change the result—that the “class
contract provides, the entire arbitration provision is action waiver is unenforceable under California law.” Id.,
unenforceable. Or does California law permit the parties at 347, 170 Cal.Rptr.3d, at 198.
to agree to waive the right to proceed as a class in
arbitration? If so, the arbitration provision is enforceable. In reaching that conclusion, the Court of Appeal referred
to two sections of California's Consumers Legal Remedies
At one point, the law of California would have made Act, §§ 1751, 1781(a), rather than Discover Bank itself.
the contract's class-arbitration waiver unenforceable. In See 225 Cal.App.4th, at 344, 170 Cal.Rptr.3d, at 195.
2005, the California Supreme Court held in Discover Section 1751 renders invalid any waiver of the right
Bank v. Superior Court, 36 Cal.4th 148, 162–163, 30 under § 1781(a) to bring a class action for violations of

that Act. The Court of Appeal thought that applying Circuit had reached the opposite *468 conclusion on
“state law alone” (that is, those two sections) would precisely the same interpretive question decided by the
render unenforceable the class-arbitration waiver in § 9 California Court of Appeal. Murphy v. DirecTV, Inc., 724
of the contract. Id., at 344, 170 Cal.Rptr.3d, at 195. But F.3d 1218, 1226–1228 (2013). We granted the petition.
it nonetheless recognized that if it applied federal law
“then the class action waiver is enforceable and any state
law to the contrary is preempted.” Ibid. As far as those
II
sections apply to class-arbitration waivers, they embody
the Discover Bank rule. The California Supreme Court has [1] [2] No one denies that lower courts must follow this
recognized as much, see Sanchez, supra, at 923–924, 190 Court's holding in Concepcion. The fact that Concepcion
Cal.Rptr.3d 812, 353 P.3d, at 757, and no party argues was a closely divided case, resulting in a decision from
to the contrary. See Supp. Brief for Respondents 2 (“The which four Justices dissented, has no bearing on that
ruling in Sanchez tracks respondents' position precisely”). undisputed obligation. Lower court judges are certainly
We shall consequently refer to the here-relevant rule as the free to note their disagreement with a decision of this
Discover Bank rule. Court. But the “Supremacy Clause forbids state courts
to dissociate themselves from federal law because of
The court reasoned that just as the parties were free in their disagreement with its content or a refusal to recognize the
contract to refer to the laws of different States or different superior authority of its source.” Howlett v. Rose, 496 U.S.
nations, so too were they free to refer to California law as it 356, 371, 110 S.Ct. 2430, 110 L.Ed.2d 332 (1990); cf. Khan
would have been without this Court's holding invalidating v. State Oil Co., 93 F.3d 1358, 1363–1364 (C.A.7 1996),
the Discover Bank rule. The court thought that the parties vacated, 522 U.S. 3, 118 S.Ct. 275, 139 L.Ed.2d 199 (1997).
in their contract had done just that. And it set forth two The Federal Arbitration Act is a law of the United States,
reasons for believing so. and Concepcion is an authoritative interpretation of that
Act. Consequently, the judges of every State must follow
First, § 10 of the contract, stating that the Federal it. U.S. Const., Art. VI, cl. 2 (“[T]he Judges in every State
Arbitration Act governs § 9 (the arbitration provision), is shall be bound” by “the Laws of the United States”).
a general provision. But the provision voiding arbitration
if the “law of your state” would find the class-arbitration [3] [4] While all accept this elementary point of law, that
waiver unenforceable is a specific provision. The court point does not resolve the issue in this case. As the Court of
believed that the specific provision “ ‘is paramount to’ ” Appeal noted, the Federal Arbitration Act allows parties
and must govern the general. 225 Cal.App.4th, at 344, 170 to an arbitration contract considerable latitude to choose
Cal.Rptr.3d, at 195 (quoting Prouty v. Gores Technology what law governs some or all of its provisions, including
Group, 121 Cal.App.4th 1225, 1235, 18 Cal.Rptr.3d 178, the law governing enforceability of a class-arbitration
185–186 (2004); brackets omitted). waiver. 225 Cal.App.4th, at 342–343, 170 Cal.Rptr.3d,
at 194. In principle, they might choose to have portions
Second, the court said that “ ‘a court should construe of their contract governed by the law of Tibet, the law
ambiguous language against the interest of the party that of pre-revolutionary Russia, or (as is relevant here) the
drafted it.’ ” 225 Cal.App.4th, at 345, 170 Cal.Rptr.3d, law of California including the Discover Bank rule and
at 196 (quoting Mastrobuono v. Shearson Lehman Hutton, irrespective of that rule's invalidation in Concepcion. The
Inc., 514 U.S. 52, 62, 115 S.Ct. 1212, 131 L.Ed.2d Court of Appeal decided that, as a matter of contract law,
76 (1995)). DIRECTV had drafted the language; to the parties did mean the phrase “law of your state” to
void the arbitration provision was against its interest. refer to this last possibility. Since the interpretation of a
Hence the arbitration provision was void. The Court of contract is ordinarily a matter of state law to which we
Appeal consequently affirmed the trial court's denial of defer, Volt Information Sciences, Inc. v. Board of Trustees
DIRECTV's motion to enforce the arbitration provision. of Leland Stanford Junior Univ., 489 U.S. 468, 474, 109
S.Ct. 1248, 103 L.Ed.2d 488 (1989), we must decide not
The California Supreme Court denied discretionary whether its decision is a correct statement of California
review. App. to Pet. for Cert. 1a. DIRECTV then filed law but whether (assuming it is) that state law is consistent
a petition for a writ of certiorari, noting that the Ninth with the Federal Arbitration Act.

Indeed, neither the parties nor the dissent refer us to any

contract case from California or from any other State
that interprets similar language to refer to state laws
III
authoritatively held to be invalid. While we recognize that
[5] [6] Although we may doubt that the Court of Appeal the dissent believes this phrase to be “ambiguous,” post,
has correctly interpreted California law, we recognize at 474 – 475, 475 – 476, or “anomalous,” post, at 476, we
that California courts are the ultimate authority on that cannot agree with that characterization.
law. While recognizing this, we must decide whether
the decision of the California court places arbitration [7] [8] Second, California case law itself clarifies any
contracts “on equal footing with all other contracts.” doubt about how to interpret the language. The California
Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, Supreme Court has held that under “general contract
443, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006). And in principles,” references to California law incorporate
doing so, we must examine whether the Court of Appeal's the California Legislature's power to change the law
decision in fact rests upon “grounds as exist at law or in retroactively. See Doe v. Harris, 57 Cal.4th 64, 69–70, 158
equity for the revocation of any contract.” 9 U.S.C. § 2. Cal.Rptr.3d 290, 302 P.3d 598, 601–602 (2013) (holding
That is to say, we look not to grounds that the California that plea agreements, which are governed by general
court might have offered but rather to those it did in fact contract principles, are “ ‘ “deemed to incorporate and
offer. Neither this approach nor our result “steps beyond contemplate not only the existing law but the reserve
Concepcion ” or any other aspect of federal arbitration power of the state to amend the law or enact additional
law. See post, at 475 – 476 (GINSBURG, J., dissenting) laws” ’ ” (quoting People v. Gipson, 117 Cal.App.4th
(hereinafter the dissent). 1065, 1070, 12 Cal.Rptr.3d 478, 481 (2004))). And judicial
construction of a statute ordinarily applies retroactively.
We recognize, as the dissent points out, post, at 473, that Rivers v. Roadway Express, Inc., 511 U.S. 298, 312–313,
when DIRECTV drafted the contract, the parties likely 114 S.Ct. 1510, 128 L.Ed.2d 274 (1994). As far as we
believed *469 that the words “law of your state” included are aware, the principle of California law announced in
California law that then made class-arbitration waivers Harris, not the Court of Appeal's decision here, would
unenforceable. But that does not answer the legal question ordinarily govern the scope of phrases such as “law of your
before us. That is because this Court subsequently held in state.”
Concepcion that the Discover Bank rule was invalid. Thus
the underlying question of contract law at the time the Third, nothing in the Court of Appeal's reasoning
Court of Appeal made its decision was whether the “law of suggests that a California court would reach the same
your state” included invalid California law. We must now interpretation of “law of your state” in any context other
decide whether answering that question in the affirmative than arbitration. The Court of Appeal did not explain
is consistent with the Federal Arbitration Act. After why parties might generally intend the words “law of
examining the grounds upon which the Court of Appeal your state” to encompass “invalid law of your state.”
rested its decision, we conclude that California courts To the contrary, the contract refers to “state law” that
would not interpret contracts other than arbitration makes the waiver of class arbitration “unenforceable,”
contracts the same way. Rather, several considerations while an invalid state law would not make a contractual
lead us to conclude that the court's interpretation of this provision unenforceable. Assuming—as we must—that
arbitration contract is unique, restricted to that field. the court's reasoning is a correct statement as to the
meaning of “law of your state” in this arbitration
First, we do not believe that the relevant contract language provision, we can find nothing in that opinion (nor
is ambiguous. The contract says that “[i]f ... the law in any other California case) suggesting that California
of your state would find this agreement to dispense would generally interpret words such as “law of your
with class arbitration procedures unenforceable, then this state” to include state laws held invalid because they
entire Section 9 [the arbitration section] is unenforceable.” conflict with, say, federal labor statutes, federal pension
App. 129. Absent any indication in the contract that statutes, federal antidiscrimination *470 laws, the Equal
this language is meant to refer to invalid state law, it Protection Clause, or the like. Even given our assumption
presumably takes its ordinary meaning: valid state law. that the Court of Appeal's conclusion is correct, its

conclusion appears to reflect the subject matter at issue only “when a general and a particular provision are
here (arbitration), rather than a general principle that inconsistent”).
would apply to contracts using similar language but
involving state statutes invalidated by other federal law. [9] The court added that it would interpret “ ‘ambiguous
language against the interest of the party that drafted
Fourth, the language used by the Court of Appeal focused it,’ ” namely DIRECTV. 225 Cal.App.4th, at 345, 170
only on arbitration. The court asked whether “law of your Cal.Rptr.3d, at 196 (quoting Mastrobuono, 514 U.S., at
state” “mean[s] ‘the law of your state to the extent it is not 62, 115 S.Ct. 1212). The dissent adopts a similar argument.
preempted by the [Federal Arbitration Act],’ or ‘the law See post, at 474 – 476. But, as we have pointed out,
of your state without considering the preemptive effect, if supra, at 469 – 470, were the phrase “law of your state”
any of the [Federal Arbitration Act].’ ” 225 Cal.App.4th, ambiguous, surely some court would have construed that
at 344, 170 Cal.Rptr.3d, at 195. Framing the question term to incorporate state laws invalidated by, for example,
in such terms, rather than in generally applicable terms, federal labor law, federal pension law, or federal civil
suggests that the Court of Appeal could well have meant rights law. Yet, we have found no such case. Moreover, the
that its holding was limited to the specific subject matter reach of the canon construing contract language against
of this contract—arbitration. the drafter must have limits, no matter who the drafter
was. The fact that we can find no similar case interpreting
Fifth, the Court of Appeal reasoned that invalid the words “law of your state” to include invalid state laws
state arbitration law, namely the Discover Bank rule, indicates, at the least, that the antidrafter canon would not
maintained legal force despite this Court's holding in lead California courts to *471 reach a similar conclusion
Concepcion. The court stated that “[i]f we apply state in similar cases that do not involve arbitration.
law alone ... to the class action waiver, then the
waiver is unenforceable.” 225 Cal.App.4th, at 344, 170 ***
Cal.Rptr.3d, at 195. And at the end of its opinion it
reiterated that “[t]he class action waiver is unenforceable Taking these considerations together, we reach a
under California law, so the entire arbitration agreement conclusion that, in our view, falls well within the confines
is unenforceable.” Id., at 347, 170 Cal.Rptr.3d, at 198. of (and goes no further than) present well-established
But those statements do not describe California law. See law. California's interpretation of the phrase “law of your
Concepcion, 563 U.S., at 344, 352, 131 S.Ct. 1740; Sanchez, state” does not place arbitration contracts “on equal
61 Cal.4th, at 923–924, 190 Cal.Rptr.3d 812, 353 P.3d, at footing with all other contracts,” Buckeye Check Cashing,
757. The view that state law retains independent force even Inc., 546 U.S., at 443, 126 S.Ct. 1204. For that reason, it
after it has been authoritatively invalidated by this Court does not give “due regard ... to the federal policy favoring
is one courts are unlikely to accept as a general matter and arbitration.” Volt Information Sciences, 489 U.S., at 476,
to apply in other contexts. 109 S.Ct. 1248. Thus, the Court of Appeal's interpretation
is pre-empted by the Federal Arbitration Act. See Perry
Sixth, there is no other principle invoked by the Court v. Thomas, 482 U.S. 483, 493, n. 9, 107 S.Ct. 2520, 96
of Appeal that suggests that California courts would L.Ed.2d 426 (1987) (noting that the Federal Arbitration
reach the same interpretation of the words “law of Act pre-empts decisions that take their “meaning precisely
your state” in other contexts. The court said that the from the fact that a contract to arbitrate is at issue”).
phrase “law of your state” constitutes “ ‘a specific Hence, the California Court of Appeal must “enforc[e]”
exception ’ ” to the agreement's “ ‘general adoption of the arbitration agreement. 9 U.S.C. § 2.
the [Federal Arbitration Act].’ ” 225 Cal.App.4th, at
344, 170 Cal.Rptr.3d, at 195. But that tells us nothing The judgment of the California Court of Appeal is
about how to interpret the words “law of your state” reversed, and the case is remanded for further proceedings
elsewhere. It does not answer the relevant question: not inconsistent with this opinion.
whether those words encompass laws that have been
authoritatively held invalid. Cf. Prouty, 121 Cal.App.4th, It is so ordered.
at 1235, 18 Cal.Rptr.3d, at 185–186 (specific words govern

DIRECTV's *472 service agreement applicable in this

case (the 2007 version) requires consumers to arbitrate all
Justice THOMAS, dissenting.
disputes and to forgo class arbitration. Id., at 128–129.
I remain of the view that the Federal Arbitration Act
If the relevant provision stopped there, the Court's recent
(FAA), 9 U.S.C. § 1 et seq., does not apply to proceedings
precedent, see American Express Co. v. Italian Colors
in state courts. See Allied–Bruce Terminix Cos. v. Dobson,
Restaurant, 570 U.S. ––––, 133 S.Ct. 2304, 186 L.Ed.2d
513 U.S. 265, 285–297, 115 S.Ct. 834, 130 L.Ed.2d 753
417 (2013); AT & T Mobility LLC v. Concepcion, 563
(1995) (dissenting opinion); see also Preston v. Ferrer, 552
U.S. 333, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011), would
U.S. 346, 363, 128 S.Ct. 978, 169 L.Ed.2d 917 (2008)
control, and DIRECTV could have resisted the lawsuit.
(same); Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S.
But DIRECTV's form contract continued: The entire
440, 449, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006) (same);
arbitration clause is unenforceable “[i]f ... the law of your
Green Tree Financial Corp. v. Bazzle, 539 U.S. 444, 460,
state would find” unenforceable the agreement's class-
123 S.Ct. 2402, 156 L.Ed.2d 414 (2003) (same); Doctor's
arbitration prohibition. App. 129. At the time plaintiff-
Associates, Inc. v. Casarotto, 517 U.S. 681, 689, 116 S.Ct.
respondents Imburgia and Greiner commenced their court
1652, 134 L.Ed.2d 902 (1996) (same). Thus, the FAA does
action, class-arbitration bars like the one in DIRECTV's
not require state courts to order arbitration. Accordingly,
agreement were per se unenforceable as unconscionable
I would affirm the judgment of the California Court of
under the law of California. See Discover Bank v. Superior
Appeal.
Court, 36 Cal.4th 148, 162–163, 30 Cal.Rptr.3d 76, 113
P.3d 1100, 1110 (2005).
Justice GINSBURG, with whom Justice SOTOMAYOR
joins, dissenting. Nearly three years into the litigation, this Court held
It has become routine, in a large part due to this Court's in Concepcion, 563 U.S., at 338–351, 131 S.Ct. 1740,
decisions, for powerful economic enterprises to write into that the Federal Arbitration Act (FAA), 9 U.S.C. § 1
their form contracts with consumers and employees no- et seq., preempts state rules that render class-arbitration
class-action arbitration clauses. The form contract in this bans unenforceable. DIRECTV then moved to halt the
case contains a Delphic provision stating that “if the long-pending lawsuit and compel bilateral arbitration.
law of your state” does not permit agreements barring App. to Pet. for Cert. 4a. The California Superior Court
class arbitration, then the entire agreement to arbitrate denied DIRECTV's motion, No. BC398295 (Super. Ct.
becomes unenforceable, freeing the aggrieved customer to Los Angeles Cty., Cal., Jan. 26, 2012), App. to Pet.
commence class-based litigation in court. This Court reads for Cert. 17a–20a, and the California Court of Appeal
that provision in a manner most protective of the drafting affirmed. The Court of Appeal first observed that, under
enterprise. I would read it, as the California court did, to the California law DIRECTV confronted when it drafted
give the customer, not the drafter, the benefit of the doubt. the clause in question, provisions relinquishing the right
Acknowledging the precedent so far set by the Court, I to proceed under the CLRA on behalf of a class would not
would take no further step to disarm consumers, leaving be enforced. 225 Cal.App.4th 338, 342, 170 Cal.Rptr.3d
them without effective access to justice. 190, 194 (2014). The question dispositive of DIRECTV's
motion, the California court explained, trains on the
meaning of the atypical contractual phrase “the law of
your state”: “does it mean ‘the law of your state to the
I extent it is not preempted by the FAA,’ or ‘the law of your
state without considering the preemptive effect, if any, of
This case began as a putative class action in state
the FAA’?” Id., at 344, 170 Cal.Rptr.3d, at 195.
court claiming that DIRECTV, by imposing hefty early-
termination fees, violated California consumer-protective
In resolving this question, the California court emphasized
legislation, including the Consumers Legal Remedies
that DIRECTV drafted the service agreement, giving its
Act (CLRA), Cal. Civ.Code Ann. § 1750 et seq. (West
customers no say in the matter, and reserving to itself the
2015). App. 58. DIRECTV did not initially seek to
right to modify the agreement unilaterally at any time.
stop the lawsuit and compel bilateral arbitration. See
Id., at 345, 170 Cal.Rptr.3d, at 196. See also Brief for
id., at 52–53. The reason for DIRECTV's failure to
Respondents 1–2. DIRECTV used the same take-it-or-
oppose the litigation is no mystery. The version of

leave-it contract everywhere it did business. Ibid. “[T]o reversed a state-court decision on the ground that the state
protect the party who did not choose the language from an court misapplied state contract law when it determined the
unintended or unfair result,” the California court applied meaning of a term in a particular arbitration agreement.
“the common-law rule of contract interpretation that a Today's decision is a dangerous first.
court should construe ambiguous language against the
interest of the party that drafted it.” 225 Cal.App.4th, Beyond genuine debate, DIRECTV originally meant the
at 345, 170 Cal.Rptr.3d, at 196 (quoting Mastrobuono “law of your state” clause to refer to its customer's home
v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 62–63, state law untouched by federal preemption. As DIRECTV
115 S.Ct. 1212, 131 L.Ed.2d 76 (1995)). That rule was explained in a state-court filing, the clause prevented
particularly appropriate in this case, the court reasoned, enforcement of the arbitration agreement in those States,
for, “as a practical matter, it seems unlikely that plaintiffs California among them, where the class-arbitration
anticipated in 2007 that the Supreme Court would hold in proscription was unenforceable as a matter of state
2011 that the FAA preempts” state-law protection against law, while requiring bilateral arbitration in States that
compelled class-arbitration waivers. 225 Cal.App.4th, at did not outlaw purported waivers of class proceedings.
345, 170 Cal.Rptr.3d, at 196 (internal quotation marks App. 52 (“The Customer Agreement between DIRECTV
omitted). and its customers provides that the customer's home
state laws will govern the relationship, and that any
disputes will be resolved in individual arbitration if the
customer's home state laws enforce the parties' arbitration
II
agreement.” (emphasis added)).
The Court today holds that the California Court of
Appeal interpreted the language in DIRECTV's service According to DIRECTV, because the class-arbitration
agreement so unreasonably as to suggest discrimination ban, post-Concepcion, is enforceable in all States, this case
against arbitration in violation of the *473 FAA. Ante, at must now be resolved, if at all, in bilateral arbitration. The
469 – 470. As I see it, the California court's interpretation Court agrees. After Concepcion, the Court maintains, it
of the “law of your state” provision is not only reasonable, no longer matters whether DIRECTV meant California's
it is entirely right. “home state laws” when it drafted the 2007 version of
its service agreement. But Concepcion held only that a
Arbitration is a matter of “consent, not coercion.” Stolt– State cannot compel a party to engage in class arbitration
Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662, when the controlling agreement unconditionally prohibits
681, 130 S.Ct. 1758, 176 L.Ed.2d 605 (2010) (internal class procedures. See 563 U.S., at 351, 131 S.Ct. 1740
quotation marks omitted). The FAA “requires courts to (“Arbitration is a matter of contract, and the FAA
enforce privately negotiated agreements to arbitrate, like requires courts to honor parties' expectations,” so parties
other contracts, in accordance with their terms.” Volt may consent to class procedures even though such
Information Sciences, Inc. v. Board of Trustees of Leland procedures “may not be required by state law.”). Just
Stanford Junior Univ., 489 U.S. 468, 478, 109 S.Ct. 1248, as a contract itself may provide for class arbitration, so
103 L.Ed.2d 488 (1989). “[T]he interpretation of private the parties may choose to be bound by a particular state
contracts is ordinarily a question of state law, which law, in this case, the CLRA, even if the FAA would
this Court does not sit to review.” Id., at 474, 109 S.Ct. otherwise displace that state law. Hall Street Associates,
1248. See also First Options of Chicago, Inc. v. Kaplan, L.L.C. v. Mattel, Inc., 552 U.S. 576, 586, 128 S.Ct. 1396,
514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 170 L.Ed.2d 254 (2008) (“[T]he FAA lets parties tailor
(1995) (when interpreting arbitration agreements, courts some, even many, features of arbitration by contract,
“should apply ordinary state-law principles that govern including ... procedure and choice of substantive law.”). 1
the formation of contracts”). Historically, this Court “In principle,” the Court acknowledges, *474 parties
has respected state-court interpretations of arbitration “might choose to have portions of their contract governed
agreements. See Mastrobuono, 514 U.S., at 60, n. 4, 115 by the law of Tibet, [or] the law of pre-revolutionary
S.Ct. 1212; Volt Information Sciences, 489 U.S., at 484, 109 Russia.” Ante, at 468; see Brief for Petitioner 20 (observing
S.Ct. 1248. Indeed, in the more than 25 years between Volt that the FAA would allow parties “to bind themselves by
Information Sciences and this case, not once has this Court reference to the rules of a board game”). Pre-revolutionary

Russian law, but not California's “home state laws” exclude the application of California legislation, it surely
operative and unquestionably valid in 2007? Makes little chose a bizarre way to accomplish that result.
sense to me.
As earlier noted, see supra, at 472 – 473, and
Nothing in Concepcion or the FAA nullifies provisions as the California court appreciated, courts generally
of the CLRA. They hold sway when parties elect judicial construe ambiguous contractual terms against the drafter.
resolution of their disputes, and should similarly control See Mastrobuono, 514 U.S., at 63, 115 S.Ct. 1212
when parties choose that consumer-protective law to (“Respondents drafted an ambiguous document, and
govern their arbitration agreements. See Volt Information they cannot now claim the benefit of the doubt.”). This
Sciences, 489 U.S., at 475, 109 S.Ct. 1248 (where parties “common-law rule of contract interpretation,” id., at 62,
had “incorporat[ed] ... California rules of arbitration into 115 S.Ct. 1212, reflects the principle that a party should
their agreement,” they had “no FAA-guaranteed right not be permitted to write an ambiguous term, lock another
to compel arbitration” on terms inconsistent with those party into agreeing to that term, and then reap the benefit
California rules). 2 Thus, even after Concepcion, one could of the ambiguity once a dispute emerges. The rule has
properly refer to the CLRA's class-waiver proscription particular force where, as here, a court is interpreting
as “California law.” To repeat, the dispositive question a “standardized contrac[t]” that was not the product of
in this case is whether the parties intended the “law of bilateral bargaining. Restatement (Second) of Contracts §
your state” provision to mean state law as preempted by 206, Comment a (1979).
federal law, as the Court today reads the provision, or
home state law as framed by the California Legislature, Allowing DIRECTV to reap the benefit of an ambiguity
without considering the preemptive effect of federal law, it could have avoided would ignore not just the hugely
as the California court read it. unequal bargaining power of the parties, but also their
reasonable expectations at the time the contract was
The latter reading is the better one. DIRECTV had no formed. See Mastrobuono, 514 U.S., at 63, 115 S.Ct.
occasion to refer to “the law of [its customer's] state” 1212 (it is particularly appropriate to construe terms
had it meant to incorporate state law as preempted by against the drafter where the other party had no reason
the FAA. That is, DIRECTV, like virtually every other to anticipate or intend the drafter's preferred result). See
company with a similar service agreement, could have also Trans World Airlines, Inc. v. Franklin Mint Corp.,
employed a clause directly conditioning enforceability 466 U.S. 243, 262, 104 S.Ct. 1776, 80 L.Ed.2d 273 (1984)
of the arbitration agreement on the exclusion of class (“[C]ontract[s] ... are to be read in the light of the
arbitration. Indeed, DIRECTV has done just that in conditions and circumstances existing at the time they
service agreements both before and after 2007. App. 121 were entered into, with a view to effecting the objects and
(the 2004 version provides that “[a] Court may sever any purposes of the [parties] thereby contracting.” (quoting
portion of [the arbitration agreement] that it finds to Rocca v. Thompson, 223 U.S. 317, 331–332, 32 S.Ct.
be unenforceable, except for the prohibition on class or 207, 56 L.Ed. 453 (1912); ellipsis in original)). At
representative arbitration”); Brief for Respondents 35– the time DIRECTV imposed this agreement on its
36 (stating that the June 2015 version of DIRECTV's customers, it assumed that the arbitration clause would
agreement provides that “[a] court may sever any be unenforceable in California. App. 52 (explaining in
portion of [the arbitration agreement] that it finds state-court filing that, “[b]ecause California law would
to be unenforceable, except for the prohibition on not enforce the arbitration agreement ..., DIRECTV
[class arbitration]” (internal quotation marks omitted)). has not sought and will not seek to arbitrate disputes
Had DIRECTV followed this pattern in its 2007 form with California customers”). Likewise, any California
contract, the arbitration agreement, post-Concepcion, customer who read the agreement would scarcely have
unquestionably would have been enforceable in all States. understood that she had submitted to bilateral arbitration
In the 2007 version, however, DIRECTV *475 chose of any and all disputes with DIRECTV. She certainly
a different formulation, one referring to the “law of [its would have had no reason to anticipate the Court's
customer's] state.” I would not translate that term to be decision in Concepcion, rendered four years later, or to
synonymous with “federal law.” If DIRECTV meant to consider whether “law of your state” is a chameleon

term meaning California legislation when she received her Household Int'l, Inc., 376 F.3d 656, 661 (C.A.7 2004)
service contract, but preemptive federal law later on. (“The realistic alternative to a class action is not 17
million individual suits, but zero individual suits, as
DIRECTV primarily responds that the FAA requires only a lunatic or a fanatic sues for $30.”), cert. denied,
construction of all terms in arbitration agreements in 543 U.S. 1051, 125 S.Ct. 877, 160 L.Ed.2d 772 (2005).
favor of arbitrability. True, this Court has found in Nonetheless, the Court held that the FAA mandated
the FAA a “federal policy favoring arbitration.” Ante, enforcement of the entire arbitration agreement, including
at 471 (quoting Volt Information Sciences, 489 U.S., at the class-arbitration ban. Concepcion, 563 U.S., at 343,
476, 109 S.Ct. 1248). But the Court has also cautioned 131 S.Ct. 1740. Two years later, in Italian Colors, 570
that an arbitration-favoring presumption applies “only U.S., at ––––, 133 S.Ct., at 2310, the Court reaffirmed
where it reflects, and derives its legitimacy from, a judicial that class-arbitration prohibitions are enforceable even
conclusion that arbitration of a particular dispute is what where claimants “have no economic incentive to pursue
the parties intended because their express agreement to their ... claims individually in arbitration.” Today, the
arbitrate was validly formed[, is] legally enforceable[,] and Court holds that consumers lack not only protection
[is] best construed to encompass the dispute.” Granite against unambiguous class-arbitration bans in adhesion
Rock Co. v. Teamsters, 561 U.S. 287, 303, 130 S.Ct. contracts. They lack even the benefit of the doubt when
2847, 177 L.Ed.2d 567 (2010). DIRECTV acknowledges anomalous terms in such contracts reasonably could be
that “[t]his case ... involves a threshold dispute over the construed to protect their rights. 3
enforceability of the parties' arbitration agreement” in its
entirety. Reply Brief 7. Like the California court, I would *477 These decisions have predictably resulted in
resolve that dispute by employing *476 traditional rules the deprivation of consumers' rights to seek redress
of contract interpretation sans any arbitration-favoring for losses, and, turning the coin, they have insulated
presumption, including the rule that ambiguous language powerful economic interests from liability for violations of
should be construed against the drafter. See supra, at 472 consumer-protection laws. See N.Y. Times, Nov. 1, 2015,
– 473, 474 – 475. p. A1, col. 5 (“By inserting individual arbitration clauses
into a soaring number of consumer and employment
contracts, companies [have] devised a way to circumvent
III the courts and bar people from joining together in class-
action lawsuits, realistically the only tool citizens have
Today's decision steps beyond Concepcion and Italian to fight illegal or deceitful business practices.”). Studies
Colors. There, as here, the Court misread the FAA to confirm that hardly any consumers take advantage
deprive consumers of effective relief against powerful of bilateral arbitration to pursue small-dollar claims.
economic entities that write no-class-action arbitration Resnik, Diffusing Disputes: The Public in the Private of
clauses into their form contracts. In Concepcion, 563 Arbitration, the Private in Courts, and the Erasure of
U.S., at 336, 131 S.Ct. 1740, customers brought a class Rights, 124 Yale L.J. 2804, 2900–2910 (2015) (Resnik,
action claiming that AT & T Mobility had improperly Diffusing Disputes). Because consumers lack bargaining
charged $30.22 in sales tax while advertising cellular power to change the terms of consumer adhesion
telephones as free. AT & T Mobility's form consumer contracts ex ante, “[t]he providers [have] won the power
contract contained a mandatory arbitration clause and a to impose a mandatory, no-opt-out system in their
class-arbitration proscription. Because consumers lacked own private ‘courts' designed to preclude aggregate
input into the contractual terms, and because few rational litigation.” Resnik, Fairness in Numbers: A Comment
consumers would go through the hassle of pursuing on AT & T v. Concepcion, Wal–Mart v. Dukes, and
a $30.22 claim in bilateral arbitration, the California Turner v. Rogers, 125 Harv. L. Rev. 78, 133 (2011).
courts deemed the arbitration agreement unenforceable as See also Miller, Simplified Pleading, Meaningful Days
unconscionable. See id., at 365, 131 S.Ct. 1740 (BREYER, in Court, and Trials on the Merits: Reflections on
J., dissenting) (“ ‘[T]he maximum gain to a customer the Deformation of Federal Procedure, 88 N.Y.U. L.
for the hassle of arbitrating a $30.22 dispute is still Rev. 286, 323 (2013) (“[P]owerful economic entities
just $30.22.’ ” (quoting Laster v. AT & T Mobility can impose no-class-action-arbitration clauses on people
LLC, 584 F.3d 849, 856 (C.A.9 2009))); Carnegie v. with little or no bargaining position—through adhesion

contracts involving securities accounts, credit cards, edifice of its own creation.” Allied–Bruce Terminix Cos.
mobile phones, car rentals, and many other social v. Dobson, 513 U.S. 265, 283, 115 S.Ct. 834, 130 L.Ed.2d
amenities and necessities.”). 4 The proliferation of take-it- 753 (1995) (concurring opinion). See also Miller, supra,
or-leave-it agreements mandating arbitration and banning at 324 (“[O]ver the years the Act has been transformed
class procedures, and this Court's readiness to enforce by the Supreme Court through constant expansion into
such one-sided agreements, have disabled consumers an expression of a ‘federal policy’ favoring arbitration,
from “shop[ping] to avoid arbitration mandates.” Resnik, whether it involves a bilateral business dispute or not.”).
Diffusing Disputes 2839. See also id., at 2872 (“[T]he
numbers of clauses mandating arbitration are soaring The Court's ever-larger expansion of the FAA's scope
across many sectors.”). contrasts sharply with how other countries treat
mandatory arbitration clauses in consumer contracts of
The Court has suggested that these anticonsumer adhesion. A 1993 European Union Directive forbids
outcomes flow inexorably from the text and purpose of the binding consumers to unfair contractual terms, defined
FAA. But Congress passed the FAA in 1925 as a response as those “not ... individually negotiated” that “caus[e]
to the reluctance of some judges to enforce commercial a significant imbalance in the parties' rights and
arbitration agreements between merchants with relatively obligations ... to the detriment of the consumer.”
equal bargaining power. Moses, Arbitration Law: Who's Coun. Directive 93/13, Art. 3, 1993 O.J. (L. 95) 31.
in Charge? 40 Seton Hall L. Rev. 147, 170–171 (2010). A subsequent EU Recommendation interpreted this
See also id., at 170 (contract disputes between merchants Directive to bar enforcement of one-party-dictated
have been a proper subject of arbitration since the 1600's). mandatory consumer arbitration agreements. Comm'n
The FAA's purpose was to “make the contracting party Recommendation 98/257, 1998 O.J. (L. 115) 34 (“The
live up to his agreement.” H.R.Rep. No. 68–96, at 1 consumer's recourse to the out-of-court procedure may
(1924). See also Moses, supra, at 147 (Congress sought not be the result of a commitment prior to the
to “provide federal courts with procedural law that materialisation of the dispute, where such commitment
would permit the enforcement of arbitration agreements has the effect of depriving the consumer of his
between merchants in diversity cases.”). Congress in 1925 right to bring an action before the courts for the
could not have anticipated that the Court would apply settlement of the dispute.”). As a result of this Directive
the FAA to render consumer adhesion *478 contracts and Recommendation, disputes between providers and
invulnerable to attack by parties who never meaningfully consumers in the EU are arbitrated only when the parties
agreed to arbitration in the first place. See Resnik, mutually agree to arbitration on a “post-dispute basis.”
Diffusing Disputes 2860 (“The merchants and lawyers Sternlight, Is the U.S. Out on a Limb? Comparing the U.S.
who forged the public law of arbitration in the United Approach to Mandatory Consumer and Employment
States sought federal legislation to enforce consensual Arbitration to That of the Rest of the World, 56 U.
agreements.” (emphasis added)). Miami L. Rev. 831, 847–848 (2002) (emphasis deleted); see
id., at 852 (enforcement of mandatory arbitration clauses
Nor does the text of the FAA compel this result. in consumer contracts of adhesion “is quite rare, if not
Section 2, on which the Court relied in Concepcion, nonexistent,” outside the United States).
Italian Colors, and this case, prescribes simply that
arbitration provisions are to be treated the same as other ***
contractual terms: “[a] written provision in ... a contract
evidencing a transaction involving commerce to settle by The California Court of Appeal appropriately applied
arbitration a controversy ... shall be valid, irrevocable, traditional tools of state contract law to interpret
and enforceable, save upon such grounds as exist at DIRECTV's reference to the home state laws of its
law or in equity for the revocation of any contract.” customers. Demeaning that court's judgment through
9 U.S.C. § 2. As Justice O'Connor observed when the harsh construction, this Court has again expanded
Court was just beginning to transform the FAA into what the scope of the FAA, further degrading the rights
it has become, “the Court has abandoned all pretense of consumers and further insulating already powerful
of ascertaining congressional intent with respect to the economic entities from liability for unlawful acts. I resist
Federal Arbitration Act, building instead, case by case, an

the Court's bent, and would affirm the judgment of the All Citations
California Court of Appeal.
136 S.Ct. 463, 193 L.Ed.2d 365, 84 USLW 4018, 166
Lab.Cas. P 61,659, 15 Cal. Daily Op. Serv. 13,165, 2015
Daily Journal D.A.R. 13,261, 63 Communications Reg.
(P&F) 1442, 25 Fla. L. Weekly Fed. S 567
Footnotes
L.Ed. 499.
1 FAA preemption is distinct from federal preemption in other contexts. Unlike “state laws invalidated by, for example,
federal labor law, federal pension law, or federal civil rights law,” ante, at 470, state laws are preempted by the FAA only
to the extent that they conflict with the contracting parties' intent. See Mastrobuono v. Shearson Lehman Hutton, Inc., 514
U.S. 52, 59, 115 S.Ct. 1212, 131 L.Ed.2d 76 (1995) (“[I]n the absence of contractual intent to the contrary, the FAA would
pre-empt” a particular state law. (emphasis added)); Brief for Law Professors as Amicus Curiae 10 (“FAA preemption
cannot occur without reference to a particular agreement of the parties....”).
2 The Court refers to the relevant California law as the “Discover Bank rule” and suggests that, “under ‘general contract
principles,’ references to California law incorporate the California Legislature's power to change the law retroactively.”
Ante, at 469. But despite this Court's rejection of the Discover Bank rule in Concepcion, the California Legislature has
not capitulated; it has retained without change the CLRA's class-waiver prohibition. The Discover Bank rule relied on
an interpretation of the FAA, see 36 Cal.4th 148, 162–173, 30 Cal.Rptr.3d 76, 113 P.3d 1100, 1100–1117 (2005); in
contrast, the CLRA's class-waiver proscription reflects California's legislative policy judgment.
3 It has not always been this way. In Wilko v. Swan, 346 U.S. 427, 435, 438, 74 S.Ct. 182, 98 L.Ed. 168 (1953), the
Court unanimously held that an arbitration clause in a brokerage agreement was unenforceable. The Court noted that
the Securities Act was “drafted with an eye to the disadvantages under which buyers labor” when negotiating brokerage
agreements, id., at 435, 74 S.Ct. 182, and described arbitration as less protective of the rights of stock buyers than
litigation, id., at 435–437, 74 S.Ct. 182. The Court later overruled Wilko, rejecting what it described as Wilko 's “suspicion
of arbitration as a method of weakening the protections afforded in the substantive law.” Rodriguez de Quijas v. Shearson/
American Express, Inc., 490 U.S. 477, 481, 109 S.Ct. 1917, 104 L.Ed.2d 526 (1989). See also Gilmer v. Interstate/
Johnson Lane Corp., 500 U.S. 20, 33, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991) (relying on Rodriguez de Quijas to
conclude that “[m]ere inequality in bargaining power ... is not a sufficient reason to hold that arbitration agreements
are never enforceable in the employment context”). Similarly, before Italian Colors, the Court had suggested that “the
existence of large arbitration costs could preclude a litigant ... from effectively vindicating her federal statutory rights in the
arbitral forum,” and when that is so, an arbitration agreement may be unenforceable. Green Tree Financial Corp.–Ala. v.
Randolph, 531 U.S. 79, 90, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000). Although the Court in Italian Colors did not expressly
reject this “effective vindication” principle, the Court's refusal to apply the principle in that case suggests that the principle
will no longer apply in any case. See 570 U.S., at ––––, 133 S.Ct., at 2320 (KAGAN, J., dissenting); CompuCredit Corp.
v. Greenwood, 565 U.S. ––––, –––– – ––––, 132 S.Ct. 665, 676, 181 L.Ed.2d 586 (2012) (GINSBURG, J., dissenting)
(criticizing the Court for ignoring a federal statutory “right to sue” and for holding “that credit repair organizations can
escape suit by providing in their take-it-or-leave-it contracts that arbitration will serve as the parties' sole dispute-resolution
mechanism”).
4 The Consumer Financial Protection Bureau recently published a study documenting the proliferation of mandatory
arbitration clauses containing class-arbitration waivers in consumer financial-services contracts, as well as the vanishingly
small number of claims brought by financial-services consumers in bilateral arbitration. See Consumer Financial
Protection Bureau, Arbitration Study § 1, pp. 9–13 (2015).

Garcia v. Huerta, 340 S.W.3d 864 (2011)
[1] interlocutory order amending prior order compelling

arbitration of borrowers' claims against real estate agent
KeyCite Yellow Flag - Negative Treatment were subject to review for abuse of discretion, and
Distinguished by Hogg v. Lynch, Chappell & Alsup, P.C., Tex.App.-El
Paso, November 10, 2015
[2] lender's waiver of right to enforce arbitration
340 S.W.3d 864
agreement could not be imputed to real estate agent.
Court of Appeals of Texas,
San Antonio.
Albert GARCIA, Appellant,
v.
Edward HUERTA and Margarita A.
Huerta, Individually and as Next Friends West Headnotes (12)
of Heather L. Huerta, Edward Timothy
Huerta and Danara L. Huerta, Appellees. [1] Alternative Dispute Resolution
Scope and standards of review
No. 04–10–00688–CV.
Interlocutory order that granted borrowers'
|
motion to amend order compelling arbitration
March 30, 2011.
by not requiring arbitration of claim
|
against lender's real estate agent that
Rehearing Overruled May 9, 2011.
evicted borrowers from home in process of
Synopsis foreclosure, and which permitted borrowers'
Background: Borrowers who defaulted on home equity litigation of claims against agent to proceed,
loan filed suit against secured lender, lender's real estate was subject to appellate review for abuse
agent that assisted lender in evicting borrowers from of discretion, pursuant to which appellate
property during foreclosure, and others, with claims court would defer to trial court's factual
against real estate agent for violations of Texas Debt determinations, and would review questions
Collection Act and for trespass, theft, burglary and of law de novo. V.T.C.A., Civil Practice &
conversion, and invasion of privacy. Defendants filed Remedies Code § 51.016.
motions to compel arbitration. The 229th Judicial District
Court, Duval County, Alex William Gabert, J., denied 2 Cases that cite this headnote
motions. Defendants filed petition for writ of mandamus
to compel District Court to vacate order and to compel [2] Alternative Dispute Resolution
arbitration. The Court of Appeals, 300 S.W.3d 818, Scope and standards of review
conditionally granted writ. The Judicial District Court On appeals of orders denying arbitration
ordered parties to submit to arbitration. Borrowers under the Texas Arbitration Act (TAA),
subsequently settled with lender and other defendants, the appellate court will apply a no-
and pursuant to agreement, lender waived arbitration and evidence standard to the trial court's factual
assigned its claims against real estate agent to borrowers. determinations and a de novo standard to
The District Court granted borrowers' motion to amend legal determinations. V.T.C.A., Civil Practice
arbitration order and ordered that litigation against agent & Remedies Code § 51.016.
could proceed. Real estate agent appealed.
Holdings: The Court of Appeals, Phylis J. Speedlin, J., [3] Appeal and Error
held that: Cases Triable in Appellate Court
Appeal and Error

Allowance of remedy and matters of enforcing arbitration. 9 U.S.C.A. § 1 et seq.;

procedure in general V.T.C.A., Civil Practice & Remedies Code §
When a matter involving both factual 171.001 et seq.
determinations and legal conclusions is
decided by the trial court, the appellate
court will generally employ the abuse of
discretion standard, in which it defers to [8] Alternative Dispute Resolution
the trial court's factual determinations while Waiver or Estoppel
determining questions of law de novo. Secured lender's waiver of its right to compel
arbitration pursuant to arbitration agreement
provision of home equity loan agreement
was not imputed to real estate agent
[4] Alternative Dispute Resolution that assisted lender in evicting borrowers
Scope and standards of review during foreclosure proceedings, and therefore,
Whether there is a valid and enforceable real estate agent did not waive right to
agreement to arbitrate is a legal question compel arbitration; agent never acted in any
subject to de novo review. way to indicate that he was repudiating
right to enforce arbitration agreement, or
7 Cases that cite this headnote otherwise acted inconsistently with intent
to rely on arbitration agreement, but in
fact consistently invoked right to enforce
arbitration agreement throughout course of
Evidence
borrower's litigation of tort claims against
There is a strong presumption favoring
agent.
arbitration, which arises only after the party
seeking to compel arbitration proves a valid 2 Cases that cite this headnote
arbitration agreement exists.
6 Cases that cite this headnote [9] Alternative Dispute Resolution

Whether a party has waived his right to
arbitration is a question of law that the
Validity
appellate court reviews de novo, giving no
Under both the Federal Arbitration Act and
deference to the trial court's ruling.
the Texas Arbitration Act, the court will
apply ordinary state contract law principles 1 Cases that cite this headnote
in order to decide whether a valid arbitration
agreement exists. 9 U.S.C.A. § 1 et seq.;
[10] Estoppel
V.T.C.A., Civil Practice & Remedies Code §
Nature and elements of waiver
171.001 et seq.
Estoppel
2 Cases that cite this headnote Implied waiver and conduct constituting
waiver
[7] Alternative Dispute Resolution “Waiver” is an intentional relinquishment
Evidence of a known right or intentional conduct
inconsistent with claiming that right.
Once a valid agreement to arbitrate has been
established, a presumption attaches favoring 1 Cases that cite this headnote
arbitration and the burden shifts to the party
resisting arbitration to establish a defense to
[11] Estoppel

Implied waiver and conduct constituting allegations that Wells Fargo Bank, N.A., America's
waiver Servicing Company, Premiere Asset Services, Langley &
There can be no waiver of a right if the person Banack, Inc., Robert Carl Jones (an attorney employed
sought to be charged with waiver says or does by the law firm of Langley & Banack), and Albert
nothing inconsistent with an intent to rely Garcia wrongfully foreclosed on Edward and Margarita
upon such right. Huerta's (“the Huertas”) property. The Huertas obtained
a home equity loan from Wells Fargo. In connection
1 Cases that cite this headnote with this loan, the Huertas and Wells Fargo entered
into an arbitration agreement. The arbitration agreement
provided that:
Evidence Any party to this Agreement or to any Loan Document
There is a strong presumption against waiver may require that any Dispute be resolved by binding
of an arbitration agreement under the Federal arbitration in accordance with the terms of this
Arbitration Act, and any doubts regarding Arbitration Program, administered by the American
waiver are resolved in favor of arbitration. 9 Arbitration Association (the “AAA”) ... and the
U.S.C.A. § 1 et seq. Federal Arbitration Act....
3 Cases that cite this headnote A ‘Dispute’ shall include any dispute, claim or
controversy of any kind, whether in contract or in
tort, legal or equitable, now existing or hereafter
arising, relating in any way to this Note or Loan
Attorneys and Law Firms Documents or any related agreement incorporating
this Arbitration Program (the “Documents”), or any
*866 Wade C. Crosnoe, Thompson, Coe, Cousins & past, present, or future loans, transactions, contracts,
Irons, L.L.P., Austin, TX, for Appellant. agreements, relationships, incidents, or injuries of any
kind whatsoever relating to or involving consumer
Andrew M. Greenwell, Harris & Greenwell, Corpus
lending, business banking, community banking, Private
Christi, TX, for Appellee.
Client Services, or any successor group or department
Sitting: PHYLIS J. SPEEDLIN, Justice, REBECCA of Lender.... Arbitration may be demanded at any time,
SIMMONS, Justice, and MARIALYN BARNARD, and may be compelled by summary proceedings in
Justice. Court.
Subsequently, the Huertas defaulted on the home equity

loan; they eventually filed for bankruptcy and the loan was
OPINION discharged.
Opinion by: PHYLIS J. SPEEDLIN, Justice.
Thereafter, Wells Fargo, through its counsel Langley &
Albert Garcia challenges the trial court's rendition of an Banack, sought a non-judicial foreclosure of the home
amended order denying him arbitration. We reverse the equity loan. The property was purchased by Wells Fargo
judgment of the trial court, and remand the cause to the at the foreclosure sale. Wells Fargo and its wholly-
trial court for further proceedings. owned subsidiary, *867 Premier Asset Services, then
hired Garcia, a real estate agent, to evict the Huertas and
to remove their belongings from their home. Premiere
asked Garcia to use his best efforts to sell the property,
BACKGROUND
and specifically directed him to clean up and repair
The facts underlying this case are summarized in this the property. Following the eviction, the Huertas filed
court's earlier opinion in In re Wells Fargo Bank, N.A., 300 suit against Wells Fargo, America's Servicing Company,
S.W.3d 818, 821–23 (Tex.App.-San Antonio 2009, orig. Langley & Banack, Jones, Premiere, and Garcia. As to
proceeding), as follows. The underlying dispute involves Garcia, the Huertas asserted claims under the Texas Debt

Collection Act and alleged that he committed trespass, accomplish the intent and purpose of this Agreement,
theft, burglary and conversion, and invasion of privacy. including papers: (1) to assign any and all claims that
Wells Fargo and/or its Affiliates might have against
Thereafter, all defendants, including Garcia, moved to Albert Garcia, First Texas Realty, Blue Star Services
compel arbitration. In response to the motions to compel and/or their Affiliates related to or arising from the
arbitration, the Huertas asserted there was not a valid events made the basis of this Lawsuit; (2) to waive
and binding arbitration agreement because, among other any rights to enforce any arbitration agreement as it
reasons, the agreement was only between “Wells Fargo may relate to any claims asserted against Garcia, First
Bank Texas, N.A.” and the Huertas, not any of the actual Texas Realty, and Blue Star Services, as agents for
parties to the lawsuit. The trial court denied all of the Wells Fargo, whether brought as a result of assignment
motions to compel arbitration. *868 from Wells Fargo or brought independently from
such assignment; ... (4) to vacate the order compelling
Wells Fargo, America's Servicing Company, Premiere, arbitration; ...
Langley & Banack, Jones, and Garcia then filed a petition
for writ of mandamus in this court, seeking to compel A month after the Settlement Agreement was executed,
the trial court to vacate the order denying their motions the Huertas filed their “Motion to Amend the Amended
to compel arbitration. We held that Wells Fargo had Order on Motions to Compel Arbitration, Motion for
the right to enforce the arbitration agreement. 1 Id. Leave to File Fifth Amended Petition and Motion to
at 824. We further held that although the remaining Set Case on Trial Docket and Enter Docket Control
defendants, including Garcia, were nonsignatories to the Order” (“Motion to Amend”). The Motion to Amend
arbitration agreement, they acted as agents of Wells asked the trial court to amend its prior amended order
Fargo and their allegedly wrongful acts related to their compelling arbitration, and to deny arbitration as to
behavior as agents of Wells Fargo; therefore, they were the Huertas' claims against Garcia. In support of the
also entitled to enforce the arbitration agreement. Id. motion, the Huertas introduced portions of the Settlement
at 825. Finally, we held that none of the defendants Agreement and argued that Wells Fargo's express waiver
had waived their right to compel arbitration based on of its right to arbitrate under the arbitration agreement
invocation of the judicial process. Id. at 830–31. We operated as a waiver of Garcia's right to arbitrate
conditionally granted mandamus and directed the trial under the same agreement. After a hearing, the trial
court to withdraw its order denying the defendants' court granted the Motion to Amend, and amended the
motions to compel arbitration. Id. at 832. The trial court order compelling arbitration “so as to deny arbitration
complied, and signed an “Amended Order on Motion as to Albert Garcia and his assumed names and
to Compel Arbitration” which granted the defendants' related companies based on the additional evidence of
motions to compel arbitration and stayed the district express waiver of the arbitration agreement by the Wells
court litigation pending the outcome of the arbitration Fargo Parties.” Garcia now appeals. See TEX. CIV.
proceedings. PRAC. & REM.CODE ANN. § 51.016 (West Supp.2010)
(permitting interlocutory appeal of order denying motion
Thereafter, the Huertas negotiated a settlement with Wells to compel arbitration under the Federal Arbitration Act).
Fargo and the remaining defendants, except for Garcia.
The Settlement Agreement provides for the assignment of On appeal, Garcia contends the trial court erred in
Wells Fargo's claims against Garcia to the Huertas and granting the Motion to Amend because (1) it conflicts with
contains a provision requiring the settling defendants to our prior mandamus opinion ordering the trial court to
execute (1) an assignment of their claims against Garcia compel arbitration and (2) Wells Fargo was not entitled to
to the Huertas and (2) a waiver of the defendants' rights waive arbitration on Garcia's behalf. Garcia alternatively
to enforce the arbitration agreement with respect to any argues he is entitled to enforce the arbitration agreement
claim against Garcia: under the doctrine of equitable estoppel.
17. Cooperation. The Parties agree to cooperate with

one another to execute and file or deliver such other
STANDARD OF REVIEW AND APPLICABLE LAW
documentation as may be necessary or appropriate to

[1] Until recently, orders denying motions to compel proves a valid arbitration agreement exists. Webster, 128
arbitration in matters subject to the Federal Arbitration S.W.3d at 227. Under both the FAA and the TAA, we
Act (FAA) were not subject to interlocutory appeal; apply ordinary state contract law principles in order to
instead, they were reviewed in mandamus proceedings decide whether a valid arbitration agreement exists. See In
using an abuse of discretion standard. See Jack B. Anglin re D. Wilson Const. Co., 196 S.W.3d 774, 781 (Tex.2006)
Co. v. Tipps, 842 S.W.2d 266, 272–73 (Tex.1992). Under (citing First Options of Chicago, Inc. v. Kaplan, 514 U.S.
that standard, “we defer to the trial court's factual 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995)). Once
determinations if they are supported by evidence, but a valid agreement to arbitrate has been established, a
we review the trial court's legal determinations de novo.” presumption attaches favoring arbitration and the burden
In re Labatt Food Service, L.P., 279 S.W.3d 640, 643 shifts to the party resisting arbitration to establish a
(Tex.2009). defense to enforcing arbitration. See In re AdvancePCS
Health L.P., 172 S.W.3d 603, 607 (Tex.2005) (per curiam);
[2] [3] Section 51.016 now permits courts to review such In re Hartigan, 107 S.W.3d 684, 687–88 (Tex.App.-San
orders by appeal. See TEX. CIV. PRAC. & REM.CODE Antonio 2003, orig. proceeding [mand. denied] ).
ANN. § 51.016; In re 24R, Inc., 324 S.W.3d 564, 566 n. 1
(Tex.2010). This court has not addressed the standard of
review applicable to such appeals. However, on appeals
DISCUSSION
of orders denying arbitration under the Texas Arbitration
Act (TAA), we apply a no-evidence standard to the trial We first address Garcia's contention that Wells Fargo's
court's factual determinations and a de novo standard waiver of arbitration contained in the Settlement
to legal determinations. See MacIvor v. Zuehl Airport Agreement did not extend to waive Garcia's right to
Flying Cmty. Owners Assoc., No. 04–10–00053–CV, 2010 arbitration. In our prior opinion, we noted that Garcia
WL 2298906, at *2 (Tex.App.-San Antonio June 9, was an agent of Wells Fargo, and that the Huertas'
2010, no pet.) (mem. op) (applying de novo review to claims against Garcia related to his behavior as Wells
interlocutory appeal of order denying motion to compel Fargo's agent. Wells Fargo, 300 S.W.3d at 825; see also
arbitration under TAA when order turns on a legal In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 739
determination); Pony Exp. Courier Corp. v. Morris, 921 (Tex.2005) (nonsignatory may be bound to arbitration
S.W.2d 817, 820 (Tex.App.-San Antonio 1996, no writ) agreement by agency law). We thus held that Garcia was
(noting that “no evidence” is the appropriate standard entitled to enforce the arbitration agreement as an agent of
when reviewing factual questions concerning an order Wells Fargo. Wells Fargo, 300 S.W.3d at 825; see also In re
denying arbitration). When a matter involving both Merrill Lynch Trust Co., 123 S.W.3d 549, 556 (Tex.App.-
factual determinations and legal conclusions is decided San Antonio 2003, orig. proceeding), mand. granted, 235
by the trial court, we generally employ the abuse of S.W.3d 217 (Tex.2007) (orig. proceeding) (per curiam)
discretion standard, in which we defer to the trial court's (“The scope of an arbitration agreement may be extended
factual determinations while determining questions of law to claims against agents of the principal when all the
de *869 novo. Morris, 921 S.W.2d at 820. Accordingly, agents' allegedly wrongful acts relate to their behavior
we will apply the abuse of discretion standard of review as agents of the principal signatory company, and those
to interlocutory appeals under section 51.016. See Sidley acts were within the scope of the claims covered by the
Austin Brown & Wood, LLP v. J.A. Green Dev. Corp., arbitration provisions for which the principal would be
327 S.W.3d 859, 862–63 (Tex.App.-Dallas 2010, no liable.”).
pet.) (applying abuse of discretion standard in reviewing
interlocutory appeal under section 51.016). [8] [9] Having already established that Garcia is
entitled to enforce the arbitration agreement, we must
[4] [5] [6] [7] Whether there is a valid and enforceablenow determine whether Wells Fargo's express waiver of
agreement to arbitrate is a legal question subject to de novo its own right to arbitrate contained in the Settlement
review. In re Labatt Food Service, 279 S.W.3d at 643; J.M. Agreement operated to deny Garcia his right to enforce
Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex.2003). the arbitration agreement. Whether a party has waived
There is a strong presumption favoring arbitration, which his right to arbitration is a question of law that we
arises only after the party seeking to compel arbitration review de novo, giving no deference to the trial court's

ruling. Wells Fargo, 300 S.W.3d at 830 (citing Perry agreement during the entire course of this proceeding,
both before and after this Court issued its opinion in In re
Homes v. Cull, 258 S.W.3d 580, 598 (Tex.2008)). In the
Wells Fargo. The mere fact that Wells Fargo subsequently
arbitration context, the majority of cases alleging waiver
waived “any rights to enforce the arbitration agreement
involve the invocation of the legal process to one party's
as it ... relate[s] to any claims asserted against Garcia”
detriment. See, e.g., In re Citigroup Global Mkts., Inc.,
does not mean that Garcia—who relied upon this Court's
258 S.W.3d 623, 625 (Tex.2008) (orig. proceeding); Perry,
holding that he had the right to enforce the agreement—
258 S.W.3d at 589–90. The Huertas did not allege waiver
also waived his right to enforce the arbitration agreement.
based on invocation of the judicial process; rather, they
asserted that Wells Fargo's express waiver contained in the
[12] Further, there is a strong presumption against
Settlement Agreement must be imputed to *870 Garcia
waiver under the FAA, In re D. Wilson, 196 S.W.3d
because he acted as an agent of Wells Fargo, and his right
at 783, and any doubts regarding waiver are resolved
to arbitration was therefore derivative of Wells Fargo's.
in favor of arbitration. In re Bruce Terminix Co., 988
The Huertas cite no authority for this proposition, and
S.W.2d 702, 705 (Tex.1998). In light of this presumption,
we cannot agree that one party's waiver of the right to
and acknowledging the lack of evidence of waiver by
arbitration can be imputed to another.
Garcia, we cannot conclude that Wells Fargo's waiver of
[10] [11] Waiver is “an intentional relinquishment of arbitration was imputed to Garcia. Accordingly, we hold
the trial court erred in denying arbitration to Garcia on
a known right or intentional conduct inconsistent with
the basis of express waiver by Wells Fargo. We reverse
claiming that right.” Jernigan v. Langley, 111 S.W.3d 153,
the judgment of the trial court, and remand the cause
156 (Tex.2003). “There can be no waiver of a right if the
to the trial court with instructions to enter an order
person sought to be charged with waiver says or does
compelling arbitration as to Garcia and staying all other
nothing inconsistent with an intent to rely upon such
proceedings pending the outcome of arbitration. Based
right.” Id. Here, the Huertas did not allege that Garcia
on our resolution, we need not reach Garcia's arguments
himself acted in such a way so as to repudiate his right
relative to the law of the case or equitable estoppel.
to enforce the arbitration agreement, and there is no
evidence in the record of a knowing or intentional waiver
by Garcia. Additionally, the Huertas have not alleged that All Citations
Garcia did anything inconsistent with an intent to rely
on the arbitration process. To the contrary, Garcia has 340 S.W.3d 864
consistently invoked his right to enforce the arbitration
Footnotes
1 We specifically held that Wells Fargo Bank, N.A. established that Wells Fargo Bank Texas, N.A. was consolidated and
resulted in Wells Fargo Bank, N.A., which had the right to enforce the arbitration agreement. Id. at 824.

Gatlin v. Criscione, Not Reported in F.Supp.2d (2008)
2008 WL 2745956
Before the court is the motion of Ogden Chrysler

Plymouth, Inc., the corporate name of Bill Kay, to stay
2008 WL 2745956
and compel arbitration of the claims against it pursuant
Only the Westlaw citation is currently available.
to an arbitration agreement between Gatlin and Bill Kay.
For the reasons set forth below, the motion [# 12] will
N.D. Illinois,
be granted; however, the arbitration will be stayed until
Eastern Division.
Gatlin's nonarbitrable claims have been resovled by the
George GATLIN, Plaintiff, court. 1
v.
P.O. A. CRISCIONE, Star # 16195, P.O. S.
I. Background
Mulkerrin, Star # 17071, and Anthony Caputo,
On May 2, 2007, Gatlin signed an agreement to purchase a
Individually, and the City of Chicago, Illinois
used vehicle from Bill Kay (“the purchase agreement”). 2
Solution Group, and Bill Kay Chrysler, Defendants.
The purchase agreement provided that, while Gatlin was
No. 1:07-cv-7212. permitted to take the vehicle home that day, completion of
| the sale was contingent on Bill Kay's securing third party
July 11, 2008. financing for the sale. Gatlin was required to cooperate
in Bill Kay's efforts to secure financing, including filling
Attorneys and Law Firms out an accurate credit application as well as providing any
necessary documentation. The purchase agreement also
Edward M. Fox, Leslie C. Mccoy, Ed Fox & Associates,
stated that if Bill Kay was unable to secure financing,
Chicago, IL, for Plaintiff.
Gatlin would be required to return the vehicle within 24
Tiffany Yvette Harris, City of Chicago Law Department, hours. Should Gatlin fail to do so, he authorized Bill Kay
Stuart David Gordon, James Hjalmar Whalen, John to repossess the vehicle, “with or without legal process.”
C. Eggert, Gordon & Karr LLP, Chicago, IL, for
Defendants. Greater Suburban Acceptance Corporation (“GSAC”)
subsequently agreed to provide financing for Gatlin if it
was able to confirm the information provided in his credit
application. When GSAC was unable to confirm Gatlin's
MEMORANDUM OPINION AND ORDER
stated residence, employer, or income, it determined that it
JOAN HUMPHREY LEFKOW, District Judge. would not fund Gatlin's purchase. Bill Kay then requested
that Gatlin return the vehicle, and when he failed to do so,
*1 Plaintiff George Gatlin filed a seven count complaint Bill Kay hired ISG, a repossession company, to secure its
in this case. He alleges the following: (1) false arrest return. Anthony Caputo was ISG's employee.
under 42 U.S.C. § 1983 against Chicago Police Officer
defendants Criscione and Mulkerrin; (2) false arrest under At some time before 3:00 on the afternoon of June
42 U.S.C. § 1983 against defendant Anthony Caputo; 4, 2007, Caputo falsely informed officers Criscione and
(3) excessive force under 42 U.S.C. § 1983 against Mulkerrin that Gatlin was in possession of a weapon
defendants Criscione and Mulkerrin; (4) failure to provide while driving on Chicago Avenue near Pine Avenue in
medical care under 42 U.S.C. § 1983 against defendants Chicago. Caputo arranged with the officers that they be
Criscione and Mulkerrin; (5) false arrest under Illinois present “when Caputo caused Plaintiff's vehicle to be
law against defendants Criscione, Mulkerrin, Caputo, stopped.” When stopped, the officers searched Gatlin and
Illinois Solution Group (“ISG”), and Bill Kay Chrysler his vehicle without lawful cause, arrested him without
(“Bill Kay”); (6) an Illinois law claim of willful and probable cause, and used excessive force against him.
wanton conduct for failure to provide medical care against Also on June 4, Caputo on behalf of Bill Kay filed a
defendants Criscione, Mulkerrin, and the City of Chicago; police report alleging that Gatlin had submitted false
and (7) malicious prosecution under Illinois law against information in his credit application in violation of Illinois
defendants Caputo, ISG, and Bill Kay. law. Gatlin was criminally charged with defrauding a

2008 WL 2745956
financial institution. On July 11, 2007, that charge was “[W]hen a contract contains an arbitration clause, a strong
terminated in Gatlin's favor. presumption in favor of arbitration exists and courts have
no choice but to order arbitration unless it may be said
*2 As relevant to the pending motion, Gatlin alleges with positive assurance that the arbitration clause is not
arrest without probable cause in violation of the Fourth susceptible of an interpretation that covers the asserted
Amendment against Caputo individually on the basis that dispute.” CK Witco Corp. v. Paper Allied Indus., Chem.
he willfully acted in concert with the officers in causing the & Energy Workers Int'l Union, 272 F.3d 419, 421-22
unlawful arrest (Count II), as well as Illinois common law (7th Cir.2001) (internal citations and quotations omitted).
false arrest and malicious prosecution. He alleges that ISG “To compel arbitration, a party need only show: (1) an
and Bill Kay are liable for Caputo's state law torts based agreement to arbitrate, (2) a dispute within the scope of the
on the doctrine of respondeat superior (Count VII). Gatlin arbitration agreement, and (3) a refusal by the opposing
seeks compensatory and punitive damages against all the party to proceed to arbitration.” Zurich American Ins. Co.
defendants. v. Watts Indus., Inc., 466 F.3d 577, 580 (7th Cir.2006)
(citations omitted). “[A]ny doubts concerning the scope of
Bill Kay maintains that Gatlin's claims of false arrest arbitrable issues should be resolved in favor of arbitration,
and malicious prosecution fall within the scope of an whether the problem at hand is the construction of the
arbitration agreement signed by the parties in conjunction contract language itself or an allegation of waiver, delay,
with the vehicle purchase agreement. That arbitration or a like defense to arbitrability.” Mastrobouno, 514 U.S.
agreement provides, in relevant part, that it at 62 n. 8 (quoting Moses H. Cone Memorial Hospital v.
Mercury Construction Corp., 460 U.S. 1, 24-25, 103 S.Ct.
[s]hall apply to any dispute, issue, 927, 74 L.Ed.2d 765 (1983)). To further this policy in favor
controversy or claim arising from of arbitration, Section 3 of the FAA provides, in relevant
any events which occurred prior to, part:
on or subsequent to the execution
of this Arbitration Agreement. A
‘dispute’ includes any controversy *3 If any suit or proceeding be brought in any of the
or claim arising from or relating courts of the United States upon any issue referable
to the vehicle you have purchased to arbitration under an agreement in writing for such
or leased on the date shown arbitration, the court in which such suit or proceeding is
above. The term “dispute” also pending, upon being satisfied that the issue involved in
includes, but is not limited to, claims such suit or proceeding is referable to arbitration ... shall
relating to the negotiation of the on application of one of the parties stay the trial of the
purchase or lease of the vehicle, action until such arbitration has been had in accordance
and any dispute relating to any with the terms of the agreement, providing the applicant
vehicle service contract purchased or for the stay is not in default in proceeding with such
provided at the time the vehicle was arbitration.
purchased or leased, or thereafter. In 9 U.S.C. § 3. 4
addition, the term ‘dispute’ includes “[The opponent of arbitration] bears the burden of
any question regarding whether a establishing that the arbitration clause is unenforceable.”
matter is subject to arbitration under Stewart v. Molded Plastic's Research of Ill., Inc., 2001 WL
this Arbitration Agreement. 1607464, at * 1 (N.D.Ill.Dec.17, 2001) (citing Shearson/
Am. Express, Inc. v. McMahon, 482 U.S. 220, 226-27,
107 S.Ct. 2332, 96 L.Ed.2d 185 (1987) (“The burden
II. Legal Standard is on the party opposing arbitration, however, to show
The central purpose of the Federal Arbitration Act that Congress intended to preclude a waiver of judicial
(“FAA”) is to “ensure that private agreements to arbitrate remedies for the statutory rights at issue.”)).
are enforced according to their terms.” Mastrobouno v.
Shearson Lehman Hutton, Inc., 514 U.S. 52, 53-54, 115
S.Ct. 1212, 131 L.Ed.2d 76 (1995) (citations omitted). 3 III. DISCUSSION

2008 WL 2745956
has not responded to this argument in his response

A. Bill Kay Did Not Waive its Right to Arbitration brief. The arbitration agreement at issue clearly stipulates
Gatlin first contends that because Caputo, acting on that questions of arbitrability will be submitted to
behalf of Bill Kay, initiated criminal proceedings against arbitration. The court must therefore submit the question
Gatlin, Bill Kay waived its right to arbitration. Choosing of arbitrability to the arbitrator.
to submit issues which are arbitrable under a contract to
a court for decision is a presumptive waiver of the right
to arbitrate. Cabinetree of Wisconsin, Inc. v. Kraftmaid C. Arbitration will be Stayed
Cabinetry, Inc., 50 F.3d 388, 390 (7th Cir.1995); Kennedy Until the Conclusion of this Case
v. Commercial Carriers, Inc., 630 N.E.2d 1059, 1062, 258 Gatlin's final contention is that his claims against those
Ill.App.3d 939, 943, 196 Ill.Dec. 894, 897 (Ill.App.Ct. defendants who were not signatories of the arbitration
1st Dist.1994). This is an unusual fact pattern. At least, agreement are intertwined with the claims against Bill Kay
neither party has cited any case authority specifically and it would therefore be prejudicial to pursue these claims
addressing the issue whether initiation of a criminal case separately. His argument overlooks the fact that “the
in court to resolve a contractual dispute amounts to Federal Arbitration Act ‘requires piecemeal resolution
submitting arbitrable issues to a court for decision. Here, when necessary to give effect to an arbitration agreement’
as the facts are presented, Bill Kay through its agent and mandates enforcement of an arbitration agreement
was not seeking resolution of a dispute contemplated ‘notwithstanding the presence of other persons who are
by the arbitration clause; it was attempting to effect parties to the underlying dispute but not to the arbitration
its contractual right to take possession of the vehicle. agreement.’ ” Board of Managers of the Courtyards at
Certainly, Bill Kay would not have had a justiciable claim the Woodlands Condominium Ass'n v. IKO Chicago, Inc.,
at that point. It follows that Bill Kay has not waived its 697 N.E.2d 727, 732, 183 Ill.2d 66, 75, 231 Ill.Dec. 942,
right to arbitration. 947 (1998) (citing Moses H. Cone Memorial Hospital, 460
U.S. at 20)). Immediate submission of Gatlin's claims
against Bill Kay, however, would undermine the court's
B. The Arbitrability of Gatlin's Claims against Bill jurisdiction over Gatlin's nonarbitrable claims against the
Kay is an Issue to be Determined by the Arbitrator other defendants in this case. Because Bill Kay's liability
Gatlin next contends that these claims do not fall within is premised on respondeat superior, it will depend on the
the scope of the arbitration agreement because false arrest liability of Caputo and Illinois Solutions Group and on
and malicious prosecution claims are too attenuated to findings of fact regarding their actions. The arbitrator
have been reasonably considered by the plaintiff at the could not determine Bill Kay's liability without deciding
time he signed the arbitration agreement. One of Bill whether Caputo and ISG are liable, and if it decides
Kay's points in support of its motion, however, is that those issues before the court could do so, its decision
the parties agreed to submit the question of arbitrability could potentially have a res judicata effect on the claims
itself to an arbitrator. As quoted above, the arbitration against those parties in this case. When a similar situation
agreement provides that “ ‘dispute’ includes any question arose in Dickinson v. Heinold Securities, Inc., 661 F.2d
regarding whether a matter is subject to arbitration under 638, 644 (7th Cir.1981), the Seventh Circuit said that the
this Arbitration Agreement.” district court did not have discretion to force the parties
to litigate otherwise arbitrable claims in order to preserve
*4 Under both federal and Illinois law, “courts have its jurisdiction over nonarbitrable claims, but noted that
recognized that parties are free to agree to submit the it did have discretion to stay the arbitration of those
question of arbitrability itself to arbitration.” Bahuriak claims until the nonarbitrable claims had been decided by
v. Bill Kay Chrysler Plymouth, Inc., 786 N.E.2d 1045, the court. Because that course of action would preserve
1050, 337 Ill.App.3d 714, 719, 272 Ill.Dec. 211 (2003) the court's jurisdiction over Gatlin's nonarbitrable claims
(citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. and would also promote efficiency, arbitration of Gatlin's
938, 943-45, 115 S.Ct. 1920, 1923-25, 131 L.Ed.2d 985, claims against Bill Kay will be stayed until the conclusion
992-94 (1995)); Int'l Bhd. of Elec. Workers, Local 21 of this case. If the arbitrator determines that those claims
v. Ill. Bell Tel. Co., 491 F.3d 685, 687 (7th Cir.2007) are not arbitrable, they will return to the court, and their
(Issues of arbitrability are to be decided by the court resolution will be likely to have been simplified by the
unless the parties have clearly provide otherwise). Gatlin proceedings in the interim.

2008 WL 2745956
arbitration is stayed until Gatlin's nonarbitrable claims

have been resolved by the court.
IV. Conclusion and Order
*5 For the foregoing reasons, Bill Kay's motion to stay
and to compel arbitration [# 12] is granted; however, the All Citations
Not Reported in F.Supp.2d, 2008 WL 2745956
Footnotes
1 The court has jurisdiction over this case pursuant to 28 U.S.C. §§ 1331, 1343, and 1367.
2 The court has taken the facts concerning the purchase agreement and related events, which are not materially disputed,
from the Complaint and from Bill Kay's Reply in Support of its Motion. The facts concerning Caputo and the defendant
officers are derived from the complaint and are disputed by the defendants but will be presumed true for the purpose of
this motion. Safranek v. Copart, Inc., 379 F.Supp.2d 927, 928 (N.D.Ill.2005)
3 Professor Margaret Moses argues forcefully, however, that judges have misinterpreted the FAA, granting it far greater
breadth than Congress contemplated when it passed the law:
“... [The Federal Arbitration Act]-which has been construed to preempt state law, eliminate the
requirement of consent to arbitration, permit arbitration of statutory rights, and remove the jury
trial right from citizens without their knowledge or consent-is a statute that would not likely have
commanded a single vote in the 1925 Congress.”
Margaret L. Moses, Statutory Misconstruction: How the Supreme Court Created a Federal Arbitration Law Never
Enacted by Congress, 34 FLA. ST. U.L.REV. 99 (2006).
4 Bill Kay argues that Illinois law also supports his motion, but the plaintiff responds only within the context of the FAA.

Griffin v. Burlington Volkswagen, Inc., 411 N.J.Super. 515 (2010)
988 A.2d 101
malicious prosecution against automobile

dealership and dealership employee arose
KeyCite Yellow Flag - Negative Treatment out of and related to his purchase of
Distinguished by Barr v. Bishop Rosen & Co., Inc., N.J.Super.A.D.,
automobile, and thus were subject to the
October 26, 2015
arbitration clause in the retail order form
411 N.J.Super. 515
signed by purchaser; purchaser's claims
Superior Court of New Jersey,
related to the actions dealership took after
Appellate Division.
purchaser retained possession of the car, even
Joseph GRIFFIN, Plaintiff-Appellant, though financing for the transaction was not
v. obtained, including its actions in attempting
to repossess the car by reporting to the police
BURLINGTON VOLKSWAGEN, INC., and
department that the car had been stolen.
Augustine Staino, Defendants-Respondents.
Submitted Oct. 27, 2009.
|
Decided Feb. 8, 2010. [2] Alternative Dispute Resolution
Liberal or strict construction
Synopsis
Background: Purchaser of automobile filed a complaint
Construction in favor of arbitration
alleging claims for false arrest, false imprisonment,
An agreement to arbitrate should be read
malicious prosecution, abuse of process, invasion of
liberally in favor of arbitration.
privacy, and intentional infliction of emotional distress
and a statutory claim under the New Jersey Civil Rights 20 Cases that cite this headnote
Act against car dealership and dealership employee
after defendants reported the vehicle dealership had sold
to purchaser as stolen, resulting in purchaser's arrest. [3] Alternative Dispute Resolution
Dealership filed a motion to compel arbitration. The Evidence
Superior Court, Law Division, Burlington County, No. Courts operate under a presumption of
L-2756-08, granted the motion, Purchaser appealed. arbitrability in the sense that an order to
arbitrate the particular grievance should not
be denied unless it may be said with positive
assurance that the arbitration clause is not
[Holding:] The Superior Court, Appellate Division,
susceptible of an interpretation that covers the
Skillman, P.J.A.D., held that purchaser's claims against
asserted dispute.
automobile dealership and dealership employee arose out
of and related to his purchase of automobile, and thus 6 Cases that cite this headnote
were subject to the arbitration clause in the retail order
form signed by purchaser.
Affirmed. Attorneys and Law Firms
**101 J. Craig Currie (J. Craig Currie & Associates),

attorney for appellant.
West Headnotes (3)
Wardell, Craig, Annin & Baxter, attorneys for
respondents (Jeffrey S. Craig and Domenic B. Sanginiti,
[1] Alternative Dispute Resolution Jr., Haddonfield, on the brief).
Sales contracts disputes
Before Judges SKILLMAN, GILROY and
Automobile purchaser's claims for false arrest,
SIMONELLI.
false imprisonment, abuse of process, and

988 A.2d 101
Griffin subsequently brought this damages action

Opinion against Burlington Volkswagen and Staino in the Law
The opinion of the court was delivered by Division, asserting common law claims for false arrest,
false imprisonment, malicious prosecution, abuse of
process, invasion of privacy, and intentional infliction of
SKILLMAN, P.J.A.D.
emotional distress and a statutory claim under the New
*516 In August 2006, plaintiff Joseph Griffin purchased Jersey Civil Rights Act of 2004, N.J.S.A. 10:6-1 to -2.
a car from defendant Burlington Volkswagen. This
purchase required Griffin to obtain financing. According Before filing an answer, Burlington Volkswagen moved
to Griffin, he was assured at the time of the sale by to dismiss Griffin's complaint on the ground that he
defendant Augustine Staino, an employee of Burlington was required to arbitrate his claims under an arbitration
Volkswagen, that he had already been approved **102 provision contained in the *518 retail order form. The
for such financing. After paying a $1,000 deposit and trial court granted this motion. Griffin appeals.
signing a retail order form, Griffin obtained possession
of the car and thereafter received what he described as a [1] The arbitration provision that the trial court
“certificate of ownership.” Griffin subsequently drove the concluded requires Griffin to arbitrate his claims against
car to Texas where he was enrolled in college. Burlington Volkswagen states in pertinent part:
The parties to this agreement agree

*517 Approximately a month after entering into
to arbitrate any claim, dispute, or
this transaction, Griffin was informed by Burlington
controversy, including all statutory
Volkswagen that the third-party lender it had expected
claims and any state or federal
to provide financing for Griffin's purchase of the car had
claims, that may arise out of or
changed its mind and was unwilling to provide financing.
relating to the purchase or lease
Moreover, Burlington Volkswagen declined to finance the
identified in this Motor Vehicle
purchase itself and instead undertook efforts to repossess
Retail Order and the financing
the car from Griffin. According to Griffin, these efforts
thereof. By agreeing to arbitration,
consisted of harassing telephone calls to Griffin and his
the parties understand and agree
employer at Griffin's place of employment and to Griffin
that they are waiving their rights to
and his girlfriend at their residence.
maintain other available resolution
processes, such as a court action
According to Griffin, Burlington Volkswagen also
or administrative proceeding, to
reported to the Burlington Police Department that Griffin
settle their disputes. New Jersey
had stolen the car by forcibly removing it from their
Consumer Fraud Act, Used Car
premises. As a result of this report, a warrant was
Lemon Law, and Truth-in-Lending
issued for Griffin's arrest. Based on this warrant, Griffin
claims are just three examples of the
was arrested while driving the car in Mississippi and
various types of claims subject to
incarcerated overnight. Griffin had to retain local counsel,
arbitration under this agreement....
post a bond, and remain in Mississippi until he provided
There are no limitations on the type
an explanation for his possession of the car sufficient
of claims that must be arbitrated,
for Mississippi law enforcement authorities to allow his
except for New Car Lemon Law
release. Griffin also alleges that the Mississippi police
and Magnuson-Moss Warranty Act
seized the car and that he has not seen the car since.
claims which are excluded from
arbitration under this agreement.
Thereafter, Griffin had to return to New Jersey to respond
to the criminal charges brought against him as a result of
Burlington Volkswagen's report of his theft of the car. On [2] [3] It is firmly established in this State that “[b]ecause
May 7, 2007, those charges were dismissed. of the favored status **103 afforded to arbitration, ‘[a]n
agreement to arbitrate should be read liberally in favor
of arbitration.’ ” Garfinkel v. Morristown Obstetrics &

988 A.2d 101
Gynecology Assocs., 168 N.J. 124, 132, 773 A.2d 665 after Griffin retained possession of the car even though
(2001) (quoting Marchak v. Claridge Commons, Inc., 134 financing for this transaction was not obtained and
N.J. 275, 282, 633 A.2d 531 (1993)). Therefore, “courts Griffin made no payments beyond his initial $1,000
operate under a ‘presumption of arbitrability in the deposit. Specifically, Griffin alleges that Burlington
sense that an order to arbitrate the particular grievance Volkswagen attempted to repossess the car by wrongfully
should not be denied unless it may be said with positive reporting to the Burlington Police Department that he
assurance that the arbitration clause is not susceptible had stolen it, as a result of which he was arrested and
of an interpretation that covers the asserted dispute.’ incarcerated in Mississippi and had to defend himself
” EPIX Holdings Corp. v. Marsh & McLennan Cos., against criminal charges. Griffin's claims of false arrest,
410 N.J.Super. 453, 471, 982 A.2d 1194 (App.Div.2009) false imprisonment, abuse of process, and malicious
(quoting Caldwell v. KFC Corp., 958 F.Supp. 962, 973 prosecution based on Burlington Volkswagen's actions
(D.N.J.1997)). will depend, at least in part, on a determination of
the parties' respective interests in the car under the
Courts have generally read the terms “arising out of” or Motor Vehicle Retail Order in light of the failure to
“relating to” a contract as indicative of an “extremely obtain financing for Griffin's *520 purchase. Therefore,
broad” agreement to arbitrate any dispute relating in Griffin's claims “arise out of” and “relate to” this
any way to the contract. Angrisani v. Financial Tech. consumer transaction and are thus subject to the
Ventures, L.P., 402 N.J.Super. 138, 149, 952 A.2d arbitration clause contained in the retail order form. See
1140 (App.Div.2008); accord EPIX Holdings, supra, 410 Dan Wachtel Ford, Lincoln, Mercury, Inc. v. Modas, 891
N.J.Super. at 472, 982 A.2d 1194 (quoting with approval So.2d 287 (Ala.2004) (holding that plaintiff's claims of
the court's “expansive interpretation” in *519 Sweet “malicious prosecution ... and abuse of process [arose] out
Dreams Unlimited, Inc. v. Dial-A-Mattress Int'l, Inc., 1 of **104 actions taken by [defendant upon plaintiff's]
F.3d 639, 642 (7th Cir.1993), of “an arbitration clause refusal to return” a car after defendant was unable to
applying to disputes ‘arising out of the agreement’ as find financing). But see Mannix v. Hosier, 249 A.D.2d
including ‘any dispute between the contracting parties that 966, 672 N.Y.S.2d 574, 575 (App.Div.1998) (holding that
is in any way connected with their contract.’ ”). plaintiff's claim of malicious prosecution that resulted
from harassment charges brought by plaintiff's broker
Arbitration provisions using such expansive language “only collaterally related to the financial relationship
are construed to require arbitration of statutory claims between the parties”).
such as alleged civil rights violations and common law
torts. See, e.g., EPIX Holdings, supra, 410 N.J.Super. Griffin analogizes Burlington Volkswagen's action in
at 461, 468-75, 982 A.2d 1194 (tort claims including reporting that the car had been stolen to the police to
breach of fiduciary duty, negligent misrepresentation, and a Burlington Volkswagen employee assaulting him in
fraud); Alfano v. BDO Seidman, LLP., 393 N.J.Super. order to regain possession of the car. However, a tort
560, 575-77, 925 A.2d 22 (App.Div.2007) (tort claims claim based on such an assault would not require a
including fraud and civil conspiracy); Gras v. Assocs. First determination of the parties' respective rights in the car
Capital Corp., 346 N.J.Super. 42, 54-57, 786 A.2d 886 under the Motor Vehicle Retail Order. A Missouri court
(App.Div.2001) (Consumer Fraud Act claim); Young v. has concluded that
Prudential Ins. Co., 297 N.J.Super. 605, 608, 614-21, 688
A.2d 1069 (App.Div.1997) (Law Against Discrimination for a tort claim to be subject to arbitration under a
and Conscientious Employee Protection Act claims). broad arbitration clause, it must raise some issue the
resolution of which requires reference to or construction
The retail order form signed by Griffin included an of some portion of the parties' contract. Where,
expansive form of arbitration clause under which he however, a tort claim is independent of the contract
agreed “to arbitrate any claim, dispute, or controversy ... terms and does not require reference to the underlying
that may arise out of or relating to the purchase ... contract, arbitration is not compelled.
identified in the Motor Vehicle Retail Order and the
[Estate of Athon v. Conseco Finance Servicing Corp., 88
financing thereof.” Griffin's claims “arise out of” and
S.W.3d 26, 30 (Mo.Ct.App.2002) (citations omitted).]
“relate to” the actions that Burlington Volkswagen took

988 A.2d 101
See also EPIX Holdings, supra, 410 N.J.Super. at 475, As alternative grounds for reversal of the judgment
dismissing his complaint, Griffin also argues that
982 A.2d 1194 (requiring arbitration under expansive
Burlington Volkswagen should be foreclosed from relying
arbitration clause because plaintiff could not “maintain
upon the arbitration clause because its invocation of
its claim for damages without reference to, and reliance
the criminal process to regain possession of the car
upon, the underlying contract”). Under this approach
constituted a waiver or equitably estopped Burlington
to determining arbitrability under the broad form of
Volkswagen from seeking arbitration of Griffin's claims.
arbitration clause involved in this case, a tort claim based
These arguments are clearly without merit. R. 2:11-3(e)(1)
on an assault upon Griffin to regain possession of the car
(E).
would not be subject to arbitration because it would not
require “reference to the underlying contract.” However,
Affirmed.
Griffin's tort claims against Burlington Volkswagen are
subject to arbitration because they *521 depend in part
on an interpretation of the parties' rights under the Motor All Citations
Vehicle Retail Order.
411 N.J.Super. 515, 988 A.2d 101

G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502 (2015)
58 Tex. Sup. Ct. J. 532
[3] question of whether a contractual deadline for

initiating arbitration operated to bar general contractor's
KeyCite Yellow Flag - Negative Treatment demand for arbitration was one for arbitrators to decide;
Declined to Extend by In Interest of C.C., Tex.App.-Amarillo,
September 1, 2015
[4] brokers, subcontractors, and engineers did not have
458 S.W.3d 502
a legal right to enforce the arbitration provisions in the
Supreme Court of Texas.
general contract;
G.T. Leach Builders, LLC, et al., Petitioners,
v. [5] direct benefit estoppel did not apply to allow brokers,
subcontractors, and engineers to compel developer to
Sapphire V.P., LP, Respondent
arbitrate its claims against them pursuant to the general
NO. 13–0497 contract; and
|
Argued November 5, 2014 [6] contracts between general contractor and
| subcontractor did not require developer to arbitrate its
Opinion delivered: March 20, 2015. claims against subcontractors.
Synopsis
Background: Property developer sued insurance brokers Affirmed in part, reversed in part, and remanded.
for negligence and breach of contract after a hurricane
caused extensive damages to a development project,
alleging that brokers allowed a builder's risk insurance
West Headnotes (39)
policy to expire and be replaced by a permanent insurance
policy even though construction of the project was
not complete. Brokers designated general contractor, [1] Courts
subcontractors, and engineers as responsible third parties. Review by or certificate to Supreme
Developer amended its petition to name those parties Court by Court of Civil Appeals of questions
as defendants. Subsequently, general contractor and the where its decision conflicts with or overrules
other defendants filed motions to compel arbitration. that of another Court of Civil Appeals or
The 404th District Court, Cameron County, Elia Cornejo that of the Supreme Court
Lopez, J., denied the motions. The defendants pursued Supreme Court had jurisdiction to review
an interlocutory appeal. The Corpus Christi - Edinburg a judgment of the court of appeals in an
Court of Appeals, 2013 WL 2298447, affirmed. The interlocutory appeal from trial court's denial
defendants filed petitions for review, which the Supreme of motions to compel arbitration in a dispute
Court granted. between property developer and various
defendants, including general contractor, over
responsibility for an expiration of a builder's
Holdings: The Supreme Court, Boyd, J., held that: risk insurance policy; the holding of the
court of appeals created an inconsistency
[1] general contractor's acts of requesting a continuance with prior precedent regarding the issue of
and then agreeing to a new trial did not constitute an whether courts or arbitrators should decide
express waiver of its arbitration rights as set forth in a whether a contractual deadline barred a
contract between general contractor and developer; demand for arbitration, and clarification of
the inconsistency would remove unnecessary
[2] general contractor did not impliedly waive its certainty in the law and unfairness to litigants.
arbitration rights; Tex. Gov't Code Ann. § 22.225(c, e).

58 Tex. Sup. Ct. J. 532

[2] Estoppel
A party asserting implied waiver as a defense
to arbitration has the burden to prove
Estoppel that (1) the other party has “substantially
Implied waiver and conduct constituting invoked the judicial process,” which is
waiver conduct inconsistent with a claimed right to
“Waiver,” which is the intentional compel arbitration, and (2) the inconsistent
relinquishment of a known right, can occur conduct has caused it to suffer detriment
either expressly, through a clear repudiation or prejudice; because the law favors and
of the right, or impliedly, through conduct encourages arbitration, this hurdle is a high
inconsistent with a claim to the right. one.
5 Cases that cite this headnote 3 Cases that cite this headnote
[3] Alternative Dispute Resolution [7] Alternative Dispute Resolution

Trial or hearing Suing or participating in suit
When the relevant facts are undisputed, When a party asserts implied waiver as a
whether a party waived its right to arbitrate is defense to arbitration, which requires the
a question of law. party to prove, inter alia, that the other
party has substantially invoked the judicial
4 Cases that cite this headnote process, courts consider a wide variety of
factors in determining the invocation issue,
[4] Alternative Dispute Resolution including how long the party moving to
Suing or participating in suit compel arbitration waited to do so, the
General contractor's acts of requesting a reasons for the movant's delay, whether and
continuance and then agreeing to a new when the movant knew of the arbitration
trial date in an insurance-related dispute agreement during the period of delay, how
with property developer did not constitute much discovery the movant conducted before
an express waiver of general contractor's moving to compel arbitration and whether
arbitration rights as set forth in a contract that discovery related to the merits, whether
between the parties. the movant requested the court to dispose
of claims on the merits, whether the movant
Cases that cite this headnote asserted affirmative claims for relief in court,
the extent of the movant's engagement in
pretrial matters related to the merits as
opposed to matters related to arbitrability or
jurisdiction, the amount of time and expense
General contractor, in an insurance-related the parties have committed to the litigation,
dispute with property developer, did not whether the discovery conducted would be
impliedly waive its arbitration rights as set unavailable or useful in arbitration, whether
forth in a contract between the parties, absent activity in court would be duplicated in
proof by developer that general contractor arbitration, and when the case was to be tried.
substantially invoked the judicial process or
that developer was prejudiced by general 7 Cases that cite this headnote
contractor's litigation conduct.
Cases that cite this headnote [8] Alternative Dispute Resolution


58 Tex. Sup. Ct. J. 532
General contractor did not substantially

invoke the litigation process in contravention [11] Alternative Dispute Resolution
of its arbitration rights as set forth in its Suing or participating in suit
contract with property developer, so as to Responding to discovery and simply being
support a conclusion that general contractor named in a lawsuit while discovery is ongoing
did not impliedly waive its arbitration rights do not amount to waiver of an arbitration
in an insurance-related dispute, even though right.
general contractor filed certain motions and
participated in pretrial discovery, and general Cases that cite this headnote
contractor could have been more prompt in
seeking arbitration; general contractor was in [12] Alternative Dispute Resolution
the lawsuit because it was sued by developer, Suing or participating in suit
general contractor's motions were defensive Property developer did not prove that it
in nature, general contractor's participation suffered unfair prejudice as a result of
in discovery was because developer engaged general contractor's litigation conduct in an
it in discovery, and a delay of two or insurance-related dispute, so as to support
three months between trial court's denial of a conclusion that general contractor did not
general contractor's motion to transfer venue impliedly waive its arbitration rights as set
and general contractor's motion to compel forth in a contract between the parties, even
arbitration was not a substantial delay relative though general contractor might have had
to the timeline of the case as a whole. access to more information as a result of the
litigation than if the dispute had originated in
arbitration; developer, not general contractor,
chose to initiate proceedings in the courts
[9] Alternative Dispute Resolution rather than in arbitration, and general
Suing or participating in suit contractor did not serve any request for
Merely taking part in litigation is not production, interrogatory, or deposition
enough to show that a party substantially notice in the case.
invoked the judicial process, for the purpose
of determining whether the party impliedly Cases that cite this headnote
waived an arbitration right; rather, the
litigation conduct must demonstrate that the [13] Alternative Dispute Resolution
party has substantially invoked the judicial Suing or participating in suit
process to its opponent's detriment. Detriment or prejudice from a party's
litigation conduct, for the purpose of
determining whether the party impliedly
waived an arbitration right, refers to an
[10] Alternative Dispute Resolution inherent unfairness caused by a party's
Suing or participating in suit attempt to have it both ways by switching
A party's litigation conduct aimed at between litigation and arbitration to its own
defending itself and minimizing its litigation advantage.
expenses, rather than at taking advantage
of the judicial forum, does not amount to 1 Cases that cite this headnote
substantial invocation of the judicial process,
for the purpose of determining whether the [14] Alternative Dispute Resolution
party impliedly waived an arbitration right. Suing or participating in suit
Prejudice may result when a party seeking
arbitration first sought to use the judicial

58 Tex. Sup. Ct. J. 532
process to gain access to information that arbitration regardless of whether general

would not have been available in arbitration, contractor waived any right to arbitration.
but propounding discovery will not, in and
of itself, result in waiver of a right to compel 1 Cases that cite this headnote
arbitration.
[18] Appeal and Error
Necessity of presentation in general
Appeal and Error
[15] Alternative Dispute Resolution Incorporation of assignment of errors
An issue presented in a petition for review to
Although a delay may be a factor both in the Supreme Court must have been preserved
terms of whether a party moving to compel for appellate review in the trial court and
arbitration has substantially invoked the assigned as error in the court of appeals, but
judicial process and whether the nonmovant only if the matter complained of originated in
has suffered prejudice, mere delay is not the trial court. Tex. R. App. P. 53.2(f).
ordinarily enough to result in a waiver of
a right to compel arbitration, even if it is 1 Cases that cite this headnote
substantial.
2 Cases that cite this headnote [19] Appeal and Error

Nature of remedy by dismissal
Disposing of appeals for harmless procedural
defects is disfavored.
Waiver or Estoppel
Waiver of an arbitration right can be implied Cases that cite this headnote
from a party's unequivocal conduct, but not
by inaction.
5 Cases that cite this headnote Defects, objections, and amendments
Appellate briefs are to be construed
reasonably, yet liberally, so that the right to
appellate review is not lost by waiver.
Presentation and reservation of grounds
for review Cases that cite this headnote
General contractor did not waive its argument
in the Supreme Court that arbitrators,
not the courts, had to decide whether a
Scope of Inquiry in General
contractual deadline for initiating arbitration
When an error asserted in a petition for
of disputes with property developer barred
review in the Supreme Court first arose from
general contractor's demand for arbitration,
the judgment of the court of appeals, the
even though general contractor raised the
Supreme Court is not required to address and
argument for the first time in its petition
resolve the petitioner's related argument; in
for review in the Supreme Court; the alleged
the exercise of its discretionary jurisdiction,
error of which general contractor complained
the Supreme Court may elect to address the
did not originate in trial court but instead
issue, or not. Tex. R. App. P. 53.2(f).
first arose from the judgment of the court of
appeals, which, in response to an argument Cases that cite this headnote
raised for the first time by property developer
on appeal, held that the deadline precluded

58 Tex. Sup. Ct. J. 532
Scope of Inquiry in General agreement requires that they refer those

Supreme Court's decision on whether to disputes to arbitration. Tex. Civ. Prac. &
address and resolve an argument by a Rem. Code Ann. § 171.021(a).
petitioner for review related to an asserted
error that first arose from the judgment
of the court of appeals involves important
prudential considerations, such as the need to [25] Alternative Dispute Resolution
conserve judicial resources, whether allowing Disputes and Matters Arbitrable Under
lower courts to first consider and rule on Agreement
the issue will further the goal of accuracy Whether disputing parties made a valid and
in judicial decision-making, and the Supreme presently enforceable agreement to arbitrate
Court's duty to promote fairness among and, if so, whether the present disputes
litigants. Tex. R. App. P. 53.2(f). fall within the scope of that agreement
are sometimes referred to as “questions of
arbitrability.” Tex. Civ. Prac. & Rem. Code
Ann. § 171.021(b).
Arbitrability of dispute 6 Cases that cite this headnote

Conditions precedent to arbitration; [26] Alternative Dispute Resolution
procedural arbitrability Construction
Question of whether a deadline in a contract In deciding questions of arbitrability, i.e.,
between property developer and general for whether disputing parties made a valid and
initiating arbitration operated to bar general presently enforceable agreement to arbitrate
contractor's demand for arbitration of an and, if so, whether the present disputes fall
insurance-related dispute with developer was within the scope of that agreement, courts
a question of procedural arbitrability for apply the common principles of general
arbitrators to decide, as opposed to a question contract law to determine the parties' intent.
of substantive arbitrability for the courts to Tex. Civ. Prac. & Rem. Code Ann. §
decide; the deadline did not determine the 171.021(b).
present existence, enforceability, or scope of
the agreement to arbitrate the parties' disputes 6 Cases that cite this headnote
but instead imposed a procedural limit on
the parties' rights under that agreement, [27] Alternative Dispute Resolution
given that developer conceded the existence Suing or participating in suit
of an enforceable arbitration agreement
Question of whether a party has waived its
that applied to its claims against general
right to arbitration by its conduct in litigation
contractor. Tex. Civ. Prac. & Rem. Code Ann. is another way of asking the first question of
§ 171.021(b). arbitrability, i.e., whether there is a presently
enforceable arbitration agreement; if a party's
conduct in litigation equates to a waiver of
its rights under the arbitration agreement,
[24] Alternative Dispute Resolution there is no presently enforceable agreement to
Right to Enforcement and Defenses in arbitrate. Tex. Civ. Prac. & Rem. Code Ann.
General § 171.021(b).
When parties have contractually agreed to
arbitrate their future disputes, the courts' 9 Cases that cite this headnote
obligation to honor and enforce that

58 Tex. Sup. Ct. J. 532
to allow nonparties, which were insurance

[28] Alternative Dispute Resolution brokers, subcontractors, and engineers, to
Persons affected or bound compel developer to arbitrate its claims
Nonparties may be bound to an arbitration against them pursuant to the general contract;
clause when the rules of law or equity would developer did not sue nonparties for breach
bind them to the contract generally. of obligations under the general contract but,
instead, alleged that they each breached duties
Cases that cite this headnote that each contractually agreed to perform
and failed to perform them as a reasonable
[29] Alternative Dispute Resolution professional would have performed them, the
Persons entitled to enforce allegations referred to other contracts, not the
Nonparties to a contract between property general contract, and even if developer's tort
developer and general contractor did not claims sounded in contract, they did not arise
have a legal right to enforce the contract's solely out of or otherwise seek direct benefits
arbitration provisions in an insurance- under the general contract.
related dispute with developer, even though
nonparties, which were insurance brokers,
subcontractor, and engineers, pointed to the
contract's joinder provision and definition of [32] Alternative Dispute Resolution
“contractor”; the joinder provision permitted Waiver or Estoppel
the parties to the contract to consent to the Under principles of equitable estoppel, a
joinder of additional parties in the arbitration litigant who sues based on a contract with an
but did not require them to do so, and the arbitration provision cannot, on the one hand,
contract expressly provided that the contract seek to hold a nonsignatory liable pursuant
documents were not to be construed to create to duties imposed by the contract but, on the
a contractual relationship between any person other hand, deny arbitration's applicability
or entities other than developer and general because the defendant is a nonsignatory.
contractor. Tex. Civ. Prac. & Rem. Code Ann.
§ 171.021(a). 1 Cases that cite this headnote

Waiver or Estoppel
[30] Alternative Dispute Resolution Equitable principle that a claimant cannot
Persons entitled to enforce both seek to hold a nonsignatory liable
As a general rule, an arbitration clause cannot pursuant to duties imposed by a contract
be invoked by a nonparty to the arbitration containing an arbitration provision and
contract. deny arbitration's applicability because the
defendant is a nonsignatory applies when
4 Cases that cite this headnote a claimant seeks direct benefits under the
contract.
Waiver or Estoppel
Property developer's claims against
nonparties to a contract between developer [34] Alternative Dispute Resolution
and general contractor for negligence and Waiver or Estoppel
breach of contract did not seek a direct Whether a claim seeks a direct benefit from
benefit under the general contract, and a contract containing an arbitration clause
thus direct benefit estoppel did not apply turns on the substance of the claim, not

58 Tex. Sup. Ct. J. 532
artful pleading, for the purpose of determining to hold a nonsignatory liable pursuant
the applicability of “direct benefits estoppel,” to duties imposed by the contract and
which bars a claimant from both seeking to denying arbitration's applicability because
hold a nonsignatory liable pursuant to duties the defendant is a nonsignatory, the alleged
imposed by contract and denying arbitration's liability must arise solely from the contract or
applicability because the defendant is a must be determined by reference to it.
nonsignatory.

[35] Alternative Dispute Resolution Waiver or Estoppel
Waiver or Estoppel When the substance of a claim arises from
For direct benefits estoppel to apply to general obligations imposed by state law,
bar a claimant from both seeking to including statutes, torts, and other common
hold a nonsignatory liable pursuant to law duties, or federal law, rather than from a
duties imposed by a contract containing contract containing an arbitration provision,
an arbitration provision and denying direct benefits estoppel does not apply, even if
arbitration's applicability because the the claim refers to or relates to the contract.
defendant is a nonsignatory, it is not enough
that a party's claim relates to the contract; 4 Cases that cite this headnote
instead, the party must seek to derive a “direct
benefit,” that is, a benefit that stems directly, [39] Alternative Dispute Resolution
from that contract. Operation and Effect
1 Cases that cite this headnote Contracts between general contractor and
subcontractors did not require property
developer to arbitrate its claims against
[36] Alternative Dispute Resolution subcontractors for negligence and breach
Waiver or Estoppel of contractual duties, even assuming that
For a claim to seek a direct benefit from a the subcontracts were binding on developer,
contract containing an arbitration provision, and even though the subcontracts contained
as required for direct benefit estoppel to arbitration provisions; another provision in
apply to bar a claimant from both seeking each subcontract stated that subcontractor
to hold a nonsignatory liable pursuant expressly agreed, notwithstanding any
to duties imposed by the contract and provision to the contrary in the
denying arbitration's applicability because the contract documents, that the subcontract
defendant is a nonsignatory, the claim must did not contain a provision for the
depend on the existence of the contract and mandatory arbitration of disputes, and
be unable to stand independently without the even though the arbitration provisions and
contract. the notwithstanding provision conflicted,
the notwithstanding provision specifically
4 Cases that cite this headnote provided that in the event of any conflict, the
notwithstanding provision would prevail.
Waiver or Estoppel
For a claim to seek a direct benefit from a
contract containing an arbitration provision,
as required for direct benefit estoppel to
apply to bar a claimant from both seeking

58 Tex. Sup. Ct. J. 532
or if they are equitably estopped *509 from denying

*508 ON PETITION FOR REVIEW FROM THE their assent to such an agreement, courts must honor
COURT OF APPEALS FOR THE THIRTEENTH the agreement by referring the disputes to arbitration
DISTRICT OF TEXAS unless the party demanding arbitration has waived that
right by substantially participating in the litigation. We
Attorneys and Law Firms
apply these principles in this case to determine whether
Calvin Burgess, John B. Wallace, Timothy Leo Nebel, a property developer must arbitrate its claims against
Hartline Dacus Barger Dreyer LLP, Houston, for several defendants involved in a construction project.
Petitioner ZCA Residential, LLC. The trial court denied all of the defendants' motions to
compel arbitration, and the court of appeals affirmed. We
Charles Clayton Conrad, Edward S. Hubbard, Coats, hold that (1) the developer agreed to arbitrate its claims
Rose, Yale, Ryman & Lee, PC, Gilberto Hinojosa, against the general contractor and the general contractor
Law Offices of Gilberto Hinojosa & Associates, P.C., did not waive its right to demand arbitration; (2) the
Brownsville, Lawrence J. West, Stephen Douglas Pritchett developer's argument that a contractual deadline bars
Jr., Johnson, Trent, West & Taylor, L.L.P., Houston, for the general contractor's demand for arbitration is itself a
Petitioner G.T. Leach Builders, L.L.C. claim that must be arbitrated; (3) the developer did not
agree in the general contract to arbitrate its claims against
Aaron Tilley, Cozen O'Connor, Dallas, Joseph the other defendants; (4) the developer is not equitably
A. Ziemianski, Stephen Bender Edmundson, Cozen
estopped from denying any such agreement; and (5) the
O'Connor, Houston, for Petitioner CHP and Associates, subcontracts do not contain an enforceable arbitration
Consulting Engineers, Inc. agreement. In short, we hold that the developer must
arbitrate its claims against the general contractor but not
Brian Christopher Lopez, Engvall & Lopez, L.L.P.,
its claims against the other defendants.
Jennifer Bruch Hogan, Richard P. Hogan Jr., Hogan &
Hogan, Houston, for Petitioner Comfort Systems USA–
South Central.
I.
Andrew T. McKinney IV, Daniel W. Burrows, Litchfield
Cavo, LLP, Houston, for Petitioner Power Design, Inc.
Background
Ethan Dennis Carlyle, James M. Cleary Jr., Martin
Disiere Jefferson & Wisdom LLP, Houston, for Petitioner In July 2008, Hurricane Dolly caused extensive damage
Adams Insurance Service, Inc. to a luxury condominium project that Sapphire V.P., L.P.
was in the process of developing on South Padre Island.
Jeremy J. Gaston, Walter J. Cicack, Hawash, Meade, Sapphire filed suit against Adams Insurance Services,
Gaston, Neese & Cicack LLP, Houston, for Petitioner Inc., Arthur J. Gallagher Risk Management, and Tracy
Arthur J. Gallagher Risk Management Services, Inc. Williams (collectively, the Insurance Brokers), asserting
claims for negligence and breach of contract. Sapphire
Frank Costilla, Law Offices of Frank Costilla, L.P., alleged that, eight days before the hurricane hit, the
Brownsville, Jonathan Daniel Simon, Simon Law Firm, Insurance Brokers allowed a builder's risk insurance
Richard D. Daly, Daly & Black, P.C., Houston, Melissa policy to expire and be replaced by a permanent insurance
Waden Wray, Daly & Black, P.C., Waco, for Respondent policy even though construction of the project was not yet
Sapphire VP, LP. complete. Sapphire sought to recover millions of dollars
for water damage, increased construction costs, delay
Opinion
costs, lost revenue, and other losses that the builder's risk
Justice Boyd delivered the opinion of the Court. policy allegedly covered or should have covered but the
permanent policy did not.
Texas law encourages parties to resolve disputes through
arbitration, 1 but it will not force them to arbitrate unless More than two-and-a-half years after the hurricane
they have agreed to that alternative. 2
If they have, struck, the Insurance Brokers designated several others
as responsible third parties: (1) the project's general

58 Tex. Sup. Ct. J. 532
contractor, G.T. Leach Builders, L.L.C.; (2) two of arbitration agreement and that it applies to Sapphire's
G.T. Leach's subcontractors, Power Design, Inc. and claims against G.T. Leach, but contends that G.T. Leach
Atlas Comfort Systems USA, LLC 3 (collectively, the expressly and impliedly waived its right to demand
Subcontractors); and (3) an engineering contractor, CHP arbitration. Alternatively, Sapphire argues that G.T.
& Associates Consulting Engineers, Inc., and its employee Leach failed to demand arbitration prior to a deadline
that the contract expressly imposes. The court of appeals
Mark Janneck (collectively, the Engineers). 4 Sapphire,
agreed with Sapphire's second argument and did not
in turn, promptly amended its petition to name these
reach its first. We conclude that (1) G.T. Leach did not
parties as defendants, alleging that their negligence and
waive its arbitration rights, and (2) the issue of whether
contractual breaches resulted in construction defects that
the contractual deadline bars G.T. Leach's demand for
caused the condominium project to sustain the water
arbitration is one that the arbitrators—not the courts—
damage that resulted in the uncovered losses. Although
must decide. Because the waiver argument challenges G.T.
Sapphire asserted these claims within the four-year statute
Leach's ability to rely on the arbitration agreement at all,
of limitations applicable to claims *510 for breach of
we address it first.
contract, the two-year statute of limitations on negligence
claims had already expired. At that time, however, Texas
law allowed a claimant to assert claims against a party A. Waiver of Right to Arbitration
designated as a responsible third party even though the [2] [3] Sapphire asserts that G.T. Leach has waived
statute of limitations barred the claim. 5 its right to enforce their arbitration agreement. Waiver
—the “intentional relinquishment of a known right”—
[1] After pursuing pretrial motions and participating can occur either expressly, through a clear repudiation
in discovery, G.T. Leach—the general contractor— of the right, or impliedly, through conduct inconsistent
moved to compel arbitration and stay the litigation, with a claim to the right. Perry Homes, 258 S.W.3d at
relying on an arbitration agreement contained in its 590–91, 594; Moayedi v. Interstate 35/Chisam Rd., L.P.,
general contract with Sapphire. The Insurance Brokers, 438 S.W.3d 1, 6 (Tex.2014). Sapphire argues that G.T.
Subcontractors, and Engineers (collectively, the Other Leach both expressly and impliedly waived its right to
Defendants) subsequently filed similar motions, also compel arbitration in this case. The trial court agreed
relying on the arbitration agreement in the general and denied G.T. Leach's motion to compel arbitration,
contract, even though they never signed that contract. but the court of appeals did not reach the issue. Both
The Subcontractors relied, in addition, on language in parties have fully briefed the issue and urge us to decide
their subcontracts with G.T. Leach, even though Sapphire it here. When, as here, the relevant facts are undisputed,
never signed the subcontracts. The trial court denied whether a party waived its right to arbitrate is a question of
all of the motions without explaining its reasons. The law. Kennedy Hodges, L.L.P. v. Gobellan, 433 S.W.3d 542,
defendants pursued an interlocutory appeal, the court 545 (Tex.2014) (per curiam); Perry Homes, 258 S.W.3d at
of appeals affirmed, 6 and we granted the defendants' 598 & n.102. At the parties' mutual request, we reach the
issue here to avoid unnecessary delay. See, e.g., Placencio
petitions for review. 7
v. Allied Indus. Int'l, Inc., 724 S.W.2d 20, 22 (Tex.1987)
(reaching, rather than remanding, issue of law not reached
by court of appeals “[t]o avoid unnecessary delay”). Based
II. on the undisputed facts, we conclude that G.T. Leach has
not waived its right to arbitration.
G.T. Leach
1. Express Waiver
We first consider whether G.T. Leach can compel
[4] Sapphire first argues that G.T. Leach expressly waived
arbitration. In the general contract, G.T. Leach and
its arbitration rights by seeking a continuance and
Sapphire agreed that “[a]ny Claim arising out of or
agreeing to a new trial date. Specifically, Sapphire notes
related to the Contract ... shall ... be subject to agreed
that G.T. Leach filed (jointly with the other defendants) a
private arbitration” and “shall be decided by binding
motion for continuance stating that “there is insufficient
arbitration.” 8 Sapphire *511 concedes that this is a valid time for the parties to prepare this case with the current

58 Tex. Sup. Ct. J. 532
trial setting” and discovery “cannot be completed prior

to the current trial setting.” When the parties agreed • how much discovery the movant conducted before
to postpone the trial setting, G.T. Leach then signed moving to compel arbitration, and whether that
a Rule 11 agreement in which all parties agreed to a discovery related to the merits;
scheduling order and a new trial date. We do not agree that
• whether the movant requested the court to dispose of
the statements contained in these documents expressly
claims on the merits;
relinquish and repudiate a right to arbitration. As we
explained when addressing nearly identical statements in • whether the movant asserted affirmative claims for
In re Fleetwood Homes of Texas, L.P., “[n]othing in [these relief in court;
statements] expressly waives arbitration or revokes [an]
arbitration demand.” 257 S.W.3d 692, 694 (Tex.2008); see • the extent of the movant's engagement in pretrial
also In re Bank One, N.A., 216 S.W.3d 825, 827 (Tex.2007) matters related to the merits (as opposed to matters
(per curiam) (holding that filing of motion to set aside related to arbitrability or jurisdiction);
default judgment and set new trial date does not expressly
• the amount of time and expense the parties have
waive arbitration rights). Although the acts of requesting
committed to the litigation;
and then agreeing to a new trial date could be inconsistent
with an intent to exercise the right to arbitrate, they do not • whether the discovery conducted would be unavailable
constitute an express waiver of that right. or useful in arbitration;
• whether activity in court would be duplicated in

2. Implied Waiver arbitration;
[5] [6] A party asserting implied waiver as a defense
to arbitration has the burden *512 to prove that • when the case was to be tried.
(1) the other party has “substantially invoked the
judicial process,” which is conduct inconsistent with Perry Homes, 258 S.W.3d at 590–91.
a claimed right to compel arbitration, and (2) the
inconsistent conduct has caused it to suffer detriment [8] [9] Sapphire first initiated this lawsuit against the
or prejudice. Perry Homes, 258 S.W.3d at 593–94; see Insurance Brokers in 2009. In the summer of 2010, it
also Gobellan, 433 S.W.3d at 545. Because the law favors filed a separate lawsuit in Harris County, Texas, against
and encourages arbitration, “this hurdle is a high one.” the architects who designed the condominium project,
Richmont Holdings, Inc. v. Superior Recharge Sys., L.L.C., seeking to recover essentially the same damages arising
455 S.W.3d 573, 575 (Tex.2014) (per curiam) (quoting from Hurricane Dolly. Six months later, Sapphire added
Perry Homes, 258 S.W.3d at 589–90). We conclude that G.T. Leach to the Harris County lawsuit, and four
Sapphire has not cleared the hurdle in this case. months after that, Sapphire named G.T. Leach as a
defendant in this lawsuit. G.T. Leach moved to compel
arbitration the following November. Sapphire asserts that
G.T. Leach's actions in this case between May 2011
a. Litigation Conduct and November 2012 amount to waiver of any right it
has to arbitrate Sapphire's claims. Sapphire contends
[7] Whether a party has substantially invoked the judicial
that G.T. Leach waived its arbitration rights through its
process depends on the totality of the circumstances. Perry
actions between May 2011 and November 2012, primarily
Homes, 258 S.W.3d at 589–90. Courts consider a “wide
by filing counterclaims, filing motions for relief, and
variety” of factors, including:
participating in pretrial discovery. “Merely taking part
• how long the party moving to compel arbitration in litigation,” however, “is not enough.” In re D. Wilson
waited to do so; Constr. Co., 196 S.W.3d 774, 783 (Tex. 2006) (citations
omitted). Rather, that conduct must demonstrate that the
• the reasons for the movant's delay; party “has substantially invoked the judicial process to
[its] opponent's detriment.” Id. (citing In re Vesta Ins. Grp.,
• whether and when the movant knew of the arbitration
Inc., 192 S.W.3d 759, 762 (Tex. 2006) (per curiam)).
agreement during the period of delay;

58 Tex. Sup. Ct. J. 532
In considering the relevant factors, we note first that G.T.

Leach did not elect to resolve its disputes with Sapphire [10] In addition to its venue challenge, G.T. Leach
in court; rather, it is in this lawsuit because Sapphire filed motions to designate responsible third parties, for
sued it. See Perry Homes, 258 S.W.3d at 591 (noting that continuance, and to quash depositions. These motions,
one factor is whether party seeking arbitration was *513 however, were defensive, rather than offensive, in nature.
plaintiff who chose to file suit or defendant responding A party's litigation conduct aimed at defending itself
to suit filed against it). Although G.T. Leach asserted a and minimizing its litigation expenses, rather than at
counterclaim against Sapphire in the Harris County suit, taking advantage of the judicial forum, does not amount
it did not assert counterclaims seeking affirmative relief in to substantial invocation of the judicial process. See
this lawsuit. The counterclaim G.T. Leach filed in Harris Richmont Holdings, ––– S.W.3d at ––––; see also Keytrade
County was defensive in nature, and our rules required USA, Inc. v. Ain Temouchent M/V, 404 F.3d 891, 897
G.T. Leach to file it or risk losing it altogether. See TEX. (5th Cir.2005) (declining to find waiver where movant
R. CIV. P. 97(a) (defining compulsory counterclaims). sought summary judgment “from a defensive posture”);
We have held that “[m]erely filing suit does not waive Rodriguez v. Transnave Inc., 8 F.3d 284, 288 (5th Cir.1993)
arbitration,” Richmont Holdings, 455 S.W.3d at 576, (declining to find waiver where movant voluntarily
and we have declined to find waiver of the right to appeared in suit and sought removal because it was
arbitrate when a movant filed cross-actions in litigation, “purely defensive action to preserve its right of removal
see D. Wilson Constr., 196 S.W.3d at 783. Moreover, and to avoid any possibility of a default judgment”).
G.T. Leach never sought disposition of its Harris County
counterclaim on the merits; instead it merely took the [11] Finally, G.T. Leach participated in pretrial
action necessary to preserve that claim once Sapphire discovery, but it did so because Sapphire engaged it in
initiated a lawsuit arising out of the same subject matter. discovery. Sapphire complains that because the parties
Nor did G.T. Leach ever seek summary judgment or agreed to conduct discovery jointly for both cases, all
dismissal of Sapphire's claims on the merits. See Richmont discovery propounded by any party was available to
Holdings, 455 S.W.3d at 575 (observing that whether all parties, such that G.T. Leach has received copies of
movant sought “disposition on the merits” is key factor in documents produced by other parties and transcripts of
deciding waiver); see also Perry Homes, 258 S.W.3d at 592 depositions taken by other *514 parties. Sapphire asserts
(observing that “whether the movant sought judgment on that G.T. Leach acted inconsistently with its right to
the merits” is a factor). arbitrate both when it responded to discovery requests
and when it resisted discovery by seeking to quash a
Instead, G.T. Leach first and primarily sought to transfer deposition notice. Responding to discovery and simply
venue of this case to Harris County, or alternatively to being named in the lawsuit while discovery is ongoing do
abate this case while the Harris County case was resolved. not amount to waiver. To the contrary, we have declined
Rather than driving up litigation costs—another factor to find waiver even when the movant itself propounded
courts consider for waiver—G.T. Leach endeavored to written discovery. See, e.g., Fleetwood Homes, 257 S.W.3d
create efficiency by defending Sapphire's claims in a at 694; In re Bruce Terminix, Co., 988 S.W.2d 702, 703–
single venue. Perry Homes, 258 S.W.3d at 591. We 04 (Tex.1998); EZ Pawn Corp. v. Mancias, 934 S.W.2d
have rejected arguments relying on venue challenges to 87, 88–89 (Tex.1996). Nor does G.T. Leach's motion to
establish waiver because such challenges do not relate quash, in which it objected to the time and place of a
to the merits of the case. See Richmont Holdings, 455 deposition notice served on it by Sapphire, amount to an
S.W.3d at 576 (also noting that under rules of procedure, affirmative invocation of the judicial forum.
“objections to improper venue must be made at the outset
of the case”); In re Serv. Corp. Int'l, 85 S.W.3d 171, The only discovery that G.T. Leach actually propounded
175 (Tex.2002) (holding that parties did not waive right was a form request for disclosure that G.T. Leach included
to arbitrate by seeking to move litigation from state to in its answer in the case. See TEX. R. CIV. P. 194.1
federal court); In re ADM Investor Servs., Inc., 304 S.W.3d (providing required form for requests for disclosure). Such
371, 374 (Tex.2010) (applying Perry Homes test in context requests seek basic information about a lawsuit: who are
of forum-selection clauses and holding that motion to the parties and witnesses, what are the theories, and how
transfer venue did not waive contractual right). much is at stake? A defendant needs this information to

58 Tex. Sup. Ct. J. 532
make intelligent decisions about how to defend the suit, rights by initiating lawsuit, invoking forum-selection
and as we have stated, a party may protect its existing clause, moving to transfer venue, propounding request for
litigation rights from forfeiture without waiving its right to disclosure, and waiting nineteen months after being sued
arbitration. We have declined to find waiver of the right to to move for arbitration); Fleetwood Homes, 257 S.W.3d
arbitrate in other cases where the movant made a request at 694 (holding that movant did not waive arbitration
for disclosure. See Richmont Holdings, 455 S.W.3d at 575; rights by noticing deposition, serving written discovery,
Vesta Ins., 192 S.W.3d at 763. and waiting eight months to move for arbitration); Bruce
Terminix, 988 S.W.2d at 703–04 (holding that movant did
G.T. Leach also designated experts and responsible third not waive arbitration rights by propounding requests for
parties, but these actions were also defensive in nature production and interrogatories and waiting six months
and necessary to preserve G.T. Leach's rights. If G.T. to seek arbitration); Mancias, 934 S.W.2d at 88–89
Leach had failed to timely designate experts, it would have (holding that movant did not waive arbitration rights
forfeited the right to present expert witnesses if the suits by propounding written discovery, noticing deposition,
went to trial. See TEX. R. CIV. P. 193.6(a). Likewise, agreeing to reset trial date, and waiting nearly a year to
G.T. Leach had to designate responsible third parties by move for arbitration).
the deadline imposed in the scheduling order. G.T. Leach
did not create the need to timely designate experts and
responsible third parties by agreeing to a scheduling order:
b. Prejudice
the rules of civil procedure impose a default deadline for
expert designations when the court has not set one, and [12] [13] [14] [15] [16] Nor has Sapphire proven
the Civil Practice and Remedies Code imposes a deadline that it suffered unfair prejudice as a result of G.T.
for designating responsible third parties. TEX. R. CIV. P. Leach's litigation conduct. Detriment or prejudice, in
195.2; TEX. CIV. PRAC. & REM. CODE § 33.004(a). this context, refers to an “inherent unfairness caused by
a ‘party's attempt to have it both ways by switching
While we agree that G.T. Leach could have been more between litigation and arbitration to its own advantage.’
prompt in seeking arbitration, most of the delay of ” In re Citigroup Global Mkts., Inc., 258 S.W.3d 623,
which Sapphire complains occurred either during the 625 (Tex.2008) (per curiam) (quoting Perry Homes, 258
eighteen months before Sapphire added G.T. Leach to this S.W.3d at 597). Prejudice may result when a party seeking
case or during the four-plus months during which G.T. arbitration first sought to use the judicial process to gain
Leach sought to transfer venue. See TEX. R. CIV. P. access to information that would not have been available
86 (governing order of pleadings for motion to transfer in arbitration, but propounding discovery will not, in and
venue). The delay between the trial court's denial of the of itself, result in waiver of a right to compel arbitration.
motion to transfer venue and G.T. Leach's motion to Bruce Terminix, 988 S.W.2d at 704. Similarly, while delay
compel arbitration was between two and three months. may be a factor both in terms of whether the movant
We conclude that three months is not a substantial delay has substantially invoked the judicial process and whether
relative to the timeline of this case as a whole. Cf. the nonmovant has suffered prejudice, mere delay is not
Fleetwood Homes, 257 S.W.3d at 694 (no waiver despite ordinarily enough, even if it is substantial. Richmont
eight-month delay); Vesta Ins., 192 S.W.3d at 763 (no Holdings, 455 S.W.3d at 576; see also Fleetwood Homes,
waiver despite two-year delay). 257 S.W.3d at 694 (eight-month delay); Vesta Ins., 192
S.W.3d at 763 (two-year delay). “Waiver can be implied
Considering the totality of the circumstances, we hold that from a party's unequivocal conduct, but not by inaction.”
G.T. Leach has not substantially invoked the litigation ADM Investor, 304 S.W.3d at 374 (citing Perry Homes,
process in contravention of its contractual right to 258 S.W.3d at 593).
arbitration. See Perry Homes, 258 S.W.3d at 589–90
(adopting totality-of-the-circumstances test). As in several G.T. Leach may have had access to more information as a
cases involving similar or greater participation in litigation result of this litigation than if Sapphire's dispute with G.T.
than occurred here, we decline to find waiver under these Leach had originated in arbitration. But Sapphire, not
circumstances. See Richmont Holdings, 455 S.W.3d at 576 G.T. Leach, chose to initiate this suit in the courts rather
*515 (holding that movant did not waive arbitration than arbitration, and G.T. Leach did not serve a single

58 Tex. Sup. Ct. J. 532
request for production, interrogatory, or deposition notice must defer to the arbitrators to determine the meaning and
in the case. Sapphire's contention (discussed below) that it effect of the contractual deadline.
has been prejudiced by the delay because the contractual
deadline for initiating arbitration expired before G.T.
Leach moved to compel arbitration is unavailing because 1. Waiver
that deadline expired before Sapphire even named G.T. [17] [18] Sapphire contends that G.T. Leach waived its
Leach a party to this suit. argument that only the arbitrators can decide Sapphire's
contractual-deadline defense because G.T. Leach failed
In summary, although we agree that G.T. Leach could to raise the argument in the trial court or in the court
have demanded waiver more promptly than it did, we hold of appeals. In support, Sapphire relies on our well-
that the totality of the circumstances do not establish that established error-preservation rules, which preclude a
G.T. Leach substantially invoked the judicial process to party from seeking appellate review of an issue that the
the extent required to demonstrate a waiver of its right party did not properly raise in the trial court. See TEX.
to arbitration, and its participation in the litigation has R. APP. P. 33.1(a)(1) (“As a prerequisite to presenting
not caused Sapphire the kind of prejudice necessary to a complaint for appellate review, the record must show
clear the “high hurdle” of waiver. We thus conclude that that ... the complaint was made to the trial court ....”); see
G.T. Leach has not impliedly waived its right to demand also In re B.L.D., 113 S.W.3d 340, 350 (Tex.2003) (listing
arbitration in this case. cases for proposition that “error [must be] preserved in the
trial court”). 10 These rules do not apply here, however,
because Sapphire first raised its contractual-deadline
B. Contractual Deadline defense in the court of appeals, not in the trial court.
We now turn to Sapphire's contention that a contractual Under our rules, an issue *517 presented in a petition
deadline bars G.T. Leach's arbitration demand. The for review to this Court must have “been preserved for
deadline at issue provides that any appellate review in the trial court and assigned as error in
the court of appeals,” but only “[i]f the matter complained
*516 demand for arbitration shall
of originated in the trial court.” TEX. R. APP. P. 53.2(f).
be made within ... a reasonable time
after the Claim has arisen, and in no
In the trial court, Sapphire argued only that G.T.
event shall it be made after the date
Leach waived its right to arbitration by participating in
when institution of legal or equitable
the litigation. The only time Sapphire referred to the
proceedings based on such Claim
contractual deadline in the trial court was to support
would be barred by the applicable
its waiver-by-litigation defense and, in particular, its
statute of limitations as determined
contention that G.T. Leach's participation in the litigation
pursuant to Section 13.7.
was prejudicial to Sapphire. 11 Sapphire never asserted in
The court of appeals agreed with Sapphire that this the trial court that the contractual deadline independently
deadline bars G.T. Leach's demand for arbitration bars G.T. Leach's arbitration demand. G.T. Leach thus
because the statute of limitations had run on Sapphire's had no reason to argue in the trial court that the
claims by the time G.T. Leach made its demand. 9 G.T. arbitrators, rather than the court, must resolve that
Leach argues that the court should not have addressed the assertion. On this point, there was no error for G.T. Leach
contractual deadline at all, because Sapphire's contention to preserve in the trial court.
that the deadline bars G.T. Leach's arbitration demand
is itself an issue that Sapphire agreed to resolve through [19] [20] Sapphire first relied on the contractual deadline
arbitration. In other words, G.T. Leach argues that only as an independent bar to G.T. Leach's arbitration demand
the arbitrators—and not the courts—can decide whether in its appellee's brief in the court of appeals, and the
the contractual deadline bars G.T. Leach's demand for error that G.T. Leach now complains of (i.e., that the
arbitration. In response, Sapphire asserts that G.T. Leach court of appeals should not have decided that issue) first
waived this argument by failing to raise it in the trial court arose from the court of appeals' judgment. Although G.T.
or the court of appeals. We conclude that G.T. Leach Leach could have made this argument in its reply brief
did not waive the argument, and we agree that the courts or in a motion for rehearing in the court of appeals, 12

58 Tex. Sup. Ct. J. 532
our rules do not require petitioners to have made in the

court of appeals all arguments that are responsive to Here, when Sapphire argued for the first time in the court
arguments that a respondent raised for the first time in of appeals that the contractual deadline is an independent
that court. See Key Operating & Equip., Inc. v. Hegar, bar to G.T. Leach's arbitration demand, G.T. Leach
435 S.W.3d 794, 797 (Tex.2014) (“An issue raised in this neither conceded nor disputed that the court of appeals
Court must have been assigned as error in the court could decide that issue, and instead argued only that the
of appeals if it originated in the trial court.”) (emphasis bar did not apply. After the court of appeals held, for the
added). Instead, we have held that when the petitioner's first time in this case, that the bar applied and precluded
argument or complaint first arises “from the court of arbitration regardless of whether G.T. Leach waived any
appeals' judgment,” it “may be raised either in a motion right to arbitration, G.T. Leach asserted in its petition for
for rehearing in the court of appeals or in a petition for review in this Court both that the court could not decide
review in this Court.” Bunton v. Bentley, 153 S.W.3d 50, that issue and, if it could, the bar does not apply. Because
53 (Tex.2004) (holding that petitioner's *518 “complaint the error of which G.T. Leach complains did not originate
that the exemplary damages were unconstitutionally in the *519 trial court and first arose from the court of
excessive arose from the court of appeals' judgment and appeals' judgment, G.T. Leach did not waive its complaint
may therefore be raised in this Court for the first time”) by raising it for the first time in its petition for review in
(citing Larsen v. FDIC/Manager Fund, 835 S.W.2d 66, 74 this Court.
n.12 (Tex.1992)).
[21] [22] That is not to say that we must address and
Our decision in Gilbert Texas Construction, L.P. v. resolve an argument that the petitioner failed to raise
Underwriters at Lloyd's London illustrates this point. 327 in the court of appeals whenever the asserted error
S.W.3d 118, 125 (Tex.2010). In that case, Gilbert sued arose from that court's judgment. In the exercise of its
Underwriters for breach of contract after Underwriters discretionary jurisdiction, a court may elect to address
denied coverage of Gilbert's insurance claim. On cross- the issue, or not. See, e.g., United States v. Williams,
motions for summary judgment, the trial court agreed 504 U.S. 36, 41, 44–45, 112 S.Ct. 1735, 118 L.Ed.2d 352
with Gilbert, and having won on the issue of coverage, (1992) (finding it “a permissible exercise of our discretion”
Gilbert had no obligation to preserve any error in the trial to address an issue that was not “pressed or passed
court's judgment. Id. Underwriters appealed, however, upon” in the appellate court in the case presently before
and argued in the court of appeals that an exclusion the Court). The decision involves “[i]mportant prudential
to the policy's coverage applied. In that court, Gilbert considerations,” such as the need to conserve judicial
did not dispute that the exclusion applied, but instead resources, whether allowing lower courts to first consider
argued that an exception to the exclusion also applied, and rule on the issue will “further the goal of accuracy
thus resulting in coverage. The court of appeals reversed in judicial decision-making,” and our duty to “promote
and rendered judgment for Underwriters, finding that the fairness among litigants.” In re B.L.D., 113 S.W.3d at 350.
exclusion applied and the exception did not. Id. In its We conclude that G.T. Leach did not waive its right to
petition for review in this Court, Gilbert argued both that argue that the arbitrators, rather than the courts, must
the exclusion did not apply and, if it did, the exception to decide the effect of the contractual-deadline issues, and we
the exclusion applied as well. Pet. for Review at ix, Gilbert elect to exercise our discretionary jurisdiction to resolve
Tex. Constr., 327 S.W.3d 118, 2008 WL 2195918, at *6, that argument now.
*12. Underwriters then asserted that Gilbert had waived
its argument that the exclusion did not apply by failing to
raise it in the court of appeals, but we disagreed. Gilbert 2. Arbitrability of the Deadline
Tex. Constr., 327 S.W.3d at 125. “While ordinarily a party [23] [24] We now turn to the question of who should
waives a complaint not raised in the court of appeals,” we decide whether the contractual deadline bars G.T. Leach's
explained, “a complaint arising from the court of appeals' demand for arbitration in this case. Ultimately, this is a
judgment may be raised either in a motion for rehearing question of the parties' intent as expressed in their written
in that court or in a petition for review in this Court.” Id. agreement. When parties have contractually agreed to
(citing TEX. R. APP. P. 53.2(f); Bunton, 153 S.W.3d at arbitrate their future disputes, the courts' obligation to
honor and enforce that agreement requires that they
53). 13
refer those disputes to arbitration. The Texas Arbitration

58 Tex. Sup. Ct. J. 532
Act (TAA) 14 thus provides that courts “shall order the party's conduct in litigation equates to a waiver of its rights
parties to arbitrate on application of a party showing: (1) under the arbitration agreement, there is no presently
an agreement to arbitrate; and (2) the opposing party's enforceable agreement to arbitrate.
refusal to arbitrate.” TEX. CIV. PRAC. & REM. CODE §
171.021(a) (emphasis added); In re FirstMerit Bank, N.A., In this regard, the United States Supreme Court has
52 S.W.3d 749, 753–54 (Tex.2001) (“Once the trial court recognized a distinction between questions of “substantive
concludes that the arbitration agreement encompasses the arbitrability”—which courts decide—and “procedural
claims, and that the party opposing arbitration has failed arbitrability”—which courts must refer to the arbitrators
to prove its defenses, the trial court has no discretion but to decide. See BG Group, PLC v. Republic of Arg., –––U.S.
to compel arbitration and stay its own proceedings.”) ––––, 134 S.Ct. 1198, 1206–07, 188 L.Ed.2d 220 (2014);
Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 81,
[25] [26] The courts' role, then, is first to decide 123 S.Ct. 588, 154 L.Ed.2d 491 (2002). In Howsam, a
whether the parties made a valid and presently enforceable brokerage firm argued that its client could not initiate
agreement to arbitrate. TEX. CIV. PRAC. & REM. an arbitration because the client failed to do so within
CODE § 171.021(b) (“If a party opposing an application a six-year deadline that the parties had contractually
[for arbitration] denies the existence of the agreement, the adopted as part of their arbitration agreement. 537 U.S.
court shall summarily determine that issue.”). If they did, at 81, 123 S.Ct. 588. The Court held that this was not a
then the court must decide whether the present disputes question of arbitrability for the courts to decide. Id. at
fall within the scope of that agreement. See id.; In re 83, 123 S.Ct. 588. Although the Court acknowledged that,
Hous. Pipe Line Co., 311 S.W.3d 449, 451 (Tex.2009); “[l]inguistically speaking, one might call any potentially
J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 dispositive gateway question a ‘question of arbitrability,’
(Tex.2003). These questions that courts must resolve are ” it explained that “the phrase ‘question of arbitrability’
sometimes referred to as questions of “arbitrability.” has a far more limited scope” and does not encompass “
*520 See, e.g., Hous. Pipe Line, 311 S.W.3d at 451–52; ‘procedural’ questions which grow out of the dispute and
bear on its final disposition” or “allegation[s] of waiver,
Perry Homes, 258 S.W.3d at 587–92. 15 If, by answering
delay, or a like defense.” Id. at 84, 123 S.Ct. 588 (citation
these questions, the court determines that the present
omitted). Quoting the Revised Uniform Arbitration Act
disputes are in fact arbitrable under the parties' agreement,
of 2000, the Court explained that, “in the absence
the court must complete its role by ordering the parties
of an agreement to the contrary, issues of substantive
to arbitration and leaving it to the arbitrators to resolve
arbitrability ... are for a court to decide and issues of
those disputes. See TEX. CIV. PRAC. & REM. CODE
procedural arbitrability, i.e., whether prerequisites such as
§ 171.021; Venture Cotton Co-op. v. Freeman, 435 S.W.3d
time limits, notice, laches, estoppel, and other conditions
222, 232 (Tex.2014).
precedent to an obligation to arbitrate have been met,
are for the arbitrators to decide.” Id. at 81, 123 S.Ct. 588
[27] We have also recognized that the question of whether
(emphasis and citation omitted, ellipsis in Howsam ).
a party has waived its right to arbitration through its
litigation conduct is a question of arbitrability for the
The Supreme Court reiterated this distinction in
courts to decide. Perry Homes, 258 S.W.3d at 588.
BG Group, further clarifying the difference between
We concluded that this is a question of arbitrability,
substantive arbitrability questions addressing the
rather than a question to be arbitrated, because (1)
existence, enforceability, and scope of an agreement
“[c]ontracting parties would expect the court to decide
*521 to arbitrate (which courts decide), and procedural
whether one party's conduct before the court waived the
arbitrability questions addressing the construction and
right to arbitrate,” (2) it is a “gateway” matter regarding
application of limits on that agreement (which only
“whether the parties have submitted a particular dispute
arbitrators can decide):
to arbitration,” and (3) “courts decide defenses relating
solely to the arbitration clause.” Id. at 588–89. In essence, On the one hand, courts presume that the parties intend
the question of whether a party has waived its right to courts, not arbitrators, to decide what we have called
arbitration by its conduct in litigation is just another disputes about “arbitrability.” These include questions
way of asking the first question of arbitrability: whether such as “whether the parties are bound by a given
there is a presently enforceable arbitration agreement. If a arbitration clause,” or “whether an arbitration clause

58 Tex. Sup. Ct. J. 532
in a concededly binding contract applies to a particular can award Sapphire a remedy on its negligence claims
type of controversy.” in light of Sapphire's more than two-year delay in
asserting them. More pointedly, it involves an alleged
On the other hand, courts presume that the parties “delay beyond a limitations deadline.” Perry Homes, 258
intend arbitrators, not courts, to decide disputes S.W.3d at 589; see also id. at 588 (noting that “federal
about the meaning and application of particular courts ... consistently [defer to arbitrators] when waiver
procedural preconditions for the use of arbitration. concerns limitations periods” *522 ). We explained in
These procedural matters include claims of “waiver, Perry Homes that, absent express contractual agreement
delay, or a like defense to arbitrability.” And they to the contrary, issues of this nature must be resolved by
include the satisfaction of “prerequisites such as time arbitrators rather than courts. See id. at 588–89; see also
limits, notice, laches, estoppel, and other conditions BG Grp., 134 S.Ct. at 1207 (observing that “satisfaction
precedent to an obligation to arbitrate.” of ‘prerequisites such as time limits' ” are questions of
procedural arbitrability for the arbitrator to decide).
134 S.Ct. at 1206–07 (citations omitted).
Stated another way, the parties' dispute over the meaning

We applied these distinctions when we decided in Perry
and effect of the contractual deadline does not touch
Homes that waiver by litigation conduct presents a
upon the issue of whether an enforceable agreement to
question of substantive arbitrability that courts must
arbitrate Sapphire's claims exists. Neither party disputes
decide. 258 S.W.3d at 588–89. We held that, although
that such an agreement does exist. Instead, they dispute
Howsam referenced “waiver” and “delay” as “procedural
whether, in light of the contractual deadline, the existing,
matters” for arbitrators to decide, it did not mean that
enforceable agreement limits G.T. Leach's rights under the
the issue of waiver by litigation conduct was one for
agreement itself. Sapphire's contention that it does and
arbitrators, rather than courts. Id. Instead, we held that
G.T. Leach's contention that it does not are themselves
courts should defer to arbitrators to resolve the issue
“Claim[s] arising out of or related to the Contract,”
of waiver when “waiver concerns limitations periods or
waiver of particular claims or defenses,” but courts should which the parties expressly agreed to arbitrate. 17 See In
decide issues of waiver by litigation conduct. Id. at 588. re Wood, 140 S.W.3d 367, 369 (Tex.2004) (holding that
We stated that “parties generally intend arbitrators to dispute over whether contract prohibited class arbitration
decide matters that ‘grow out of the dispute and bear on its was a contract construction issue, which was a “dispute
final disposition,’ ” such as “waiver of a substantive claim arising out of” the contract that the parties had committed
or delay beyond a limitations deadline.” Id. at 589. Our to the arbitrator) (citing Green Tree Fin. Co. v. Bazzle,
explanation in Perry Homes is consistent with our prior 539 U.S. 444, 123 S.Ct. 2402, 156 L.Ed.2d 414 (2003),
recognition that, once the party seeking arbitration proves for the proposition that whether contract prohibited class
the existence of an enforceable agreement to arbitrate, arbitration was a “dispute about what the arbitration
Texas and federal law recognize a strong presumption contract [meant,]” which was “a dispute ‘relating to this
“in favor of arbitration such that myriad doubts— contract’ ” that the parties had agreed “an arbitrator, not
as to waiver, scope, and other issues not relating to a judge, would answer”).
enforceability—must be resolved in favor of arbitration.”
We do not hold that disputes over a contractual deadline
Poly–Am., 262 S.W.3d at 348. 16
in an arbitration agreement will always present questions
of procedural arbitrability that arbitrators must decide. If
In this case, the contractual deadline in the general
a party contends, for example, that a contractual deadline
contract falls squarely within the category of “matters that
renders the agreement to arbitrate unconscionable or that
‘grow out of the dispute and bear on [the arbitrators']
the deadline operates to limit the scope of the claims
final disposition’ ” of the claims. See Perry Homes,
the parties agreed to arbitrate, those contentions might
258 S.W.3d at 588. The deadline does not determine
raise issues of substantive arbitrability for the courts to
the present existence, enforceability, or scope of the
decide. Cf. Quilloin v. Tenet HealthSystem Phila., Inc.,
agreement to arbitrate the parties' disputes, but instead
673 F.3d 221, 234 (3d Cir.2012) (considering argument
imposes a procedural limit on the parties' rights under that
that time limit in arbitration agreement was substantively
agreement. It bears on the arbitrators' final disposition
unconscionable); but see Kristian v. Comcast Corp., 446
of Sapphire's claims—specifically, whether the arbitrators

58 Tex. Sup. Ct. J. 532
F.3d 25, 43–44 (1st Cir.2006) (holding that arbitrator or equity would bind them to the contract generally.” In
should decide whether contract's one-year limitations re Weekley Homes, L.P., 180 S.W.3d 127, 129 (Tex.2005).
provision conflicted with Clayton Act's four-year statute We conclude here, however, that neither law nor equity
of limitations for antitrust claims). But Sapphire asserts requires Sapphire to arbitrate these claims.
no such contentions in this case. Instead, it concedes the
existence of an enforceable arbitration agreement that
applies to its claims against G.T. Leach, and argues only A. Arbitration Under the General Contract
that the terms of that agreement limit G.T. Leach's rights We begin with the Other Defendants' reliance on the
under the agreement itself. Consistent with the decisions general contract as support for their arbitration demands.
We conclude that Sapphire did not agree in the *524
of numerous federal courts, 18 we *523 conclude that
general contract to arbitrate its claims against the Other
Sapphire's argument presents questions of procedural
Defendants and is not equitably estopped from refusing
arbitrability that only the arbitrators can decide, and the
to do so.
court of appeals thus erred by deciding the issue.
In summary, with respect to Sapphire's claims against 1. No Agreement to Arbitrate

G.T. Leach, we hold that G.T. Leach did not expressly As we have explained, a party seeking to compel
or impliedly waive its right to arbitration, and the courts arbitration must establish that a valid arbitration
must defer to the arbitrators to decide whether and how agreement exists and that the claims at issue fall within
the contractual deadline affects that right. We therefore the scope of that agreement. TEX. CIV. PRAC. & REM.
reverse the court of appeals' judgment with respect to CODE § 171.021(a); FirstMerit Bank, 52 S.W.3d at 753.
the trial court's denial of G.T. Leach's motion to compel Sapphire concedes that the general contract contains a
arbitration. valid arbitration agreement, but contends that the Other
Defendants cannot enforce that agreement because they
are not signatories or parties to the general contract. See
III. In re Rubiola, 334 S.W.3d 220, 224 (Tex.2011) (holding
that, generally, “parties must sign arbitration agreements
before being bound by them”). We have recognized,
The Other Defendants however, that in some circumstances a non-signatory can
be bound to, or permitted to enforce, an arbitration
[28] We now turn to the arbitrability of Sapphire's claims
agreement. See, e.g., In re Kellogg Brown & Root, Inc.,
against the Other Defendants, which include (1) the
166 S.W.3d 732, 739 (Tex.2005) (listing “(1) incorporation
Insurance Brokers and Engineers, who each allegedly
by reference; (2) assumption; (3) agency; (4) alter ego; (5)
contracted directly with Sapphire in agreements that
equitable estoppel, and (6) third-party beneficiary”).
undisputedly did not include an enforceable arbitration
agreement, and (2) the Subcontractors, who contracted
[29] [30] With regard to the Other Defendants and the
directly with G.T. Leach in agreements that allegedly
general contract, the question in this case, as in Rubiola,
did include enforceable arbitration agreements. The
“is not whether a non-signatory may be compelled to
Other Defendants contend that Sapphire agreed to
arbitrate but rather whether a non-signatory may compel
arbitrate its claims against them in the general contract
arbitration.” 334 S.W.3d at 224. As a general rule, “an
and the subcontracts, and alternatively, that Sapphire
arbitration clause cannot be invoked by a non-party
is equitably estopped from denying its assent to the
to the arbitration contract.” Grigson v. Creative Artists
arbitration agreements in those contracts. Although the
Agency, L.L.C., 210 F.3d 524, 532 (5th Cir.2000). “[The]
Other Defendants did not sign the general contract
policy favoring arbitration is strong, but it alone cannot
and Sapphire did not sign the subcontracts, we have
authorize a non-party to invoke arbitration.” Id. Thus, the
recognized that “sometimes a person who is not a party
Other Defendants must establish that they have a valid
to the agreement can compel arbitration with one who is,
legal right to enforce the general contract's arbitration
and vice versa.” Meyer v. WMCO–GP, LLC, 211 S.W.3d
agreement even though they are not parties to that
302, 305 (Tex.2006). More specifically, “nonparties may
contract. The Other Defendants contend that Sapphire
be bound to an arbitration clause when the rules of law
agreed in the general contract that the Other Defendants

58 Tex. Sup. Ct. J. 532
could enforce its arbitration provisions. See Rubiola, 334 to be accorded in the arbitration. We conclude that
S.W.3d at 222 (holding that “parties to an arbitration the Other Defendants' reliance on the scope of the
agreement may grant non-signatories the right to compel agreement between Sapphire and G.T. Leach to establish
arbitration”). 19 the existence and enforceability of an agreement between
Sapphire and the Other Defendants is misplaced. As we
This contention raises questions about “the existence of have explained, a party seeking to compel arbitration
a valid arbitration clause between specific parties and is must establish both (1) the existence of a valid enforceable
therefore a gateway matter for the court to decide.” Id. agreement to arbitrate and (2) that the claims at issue fall
at 224. Ultimately, the question requires us to determine within the scope of that agreement. TEX. CIV. PRAC. &
“the intent of the parties, as expressed in the terms REM. CODE § 171.021(a); FirstMerit Bank, 52 S.W.3d
of the agreement,” so we apply “ordinary principles of at 753. The Other Defendants' argument that Sapphire
state contract law [to] determine whether there is a valid agreed that they, as non-signatories, could enforce the
agreement to arbitrate.” Id. (quoting Bridas S.A.P.I.C. v. arbitration agreement addresses the first issue, not the
Gov't of Turkm., 345 F.3d 347, 355, 358 (5th Cir.2003)); second. Although Sapphire's claims may fall within the
see also Kellogg Brown & Root, 166 S.W.3d at 738 (holding scope of the agreement, the scope of the arbitration clause
that, “[u]nder the FAA, ordinary principles of state “does not answer whether [Sapphire] must arbitrate” with
contract law determine whether there is a valid agreement the Other Defendants. Kellogg Brown & Root, 166 S.W.3d
to arbitrate”). The Other Defendants argue that several at 739–40.
provisions of the contract demonstrate Sapphire's intent
to allow them to require arbitration, but we find none of
them persuasive. b. The Joinder Provisions
The Other Defendants contend that the joinder provision

itself constitutes Sapphire's agreement that they could
a. The “Scope” of Arbitration
enforce the general contract's arbitration agreement.
First, the Other Defendants contend that Sapphire's Specifically, they contend that, through the joinder
claims against them fall *525 within the scope of provision, Sapphire agreed to allow non-parties to
the general contract's arbitration agreement because the “require” arbitration if their presence is “required” for
scope includes “[a]ny Claim arising out of or related to complete relief to be afforded in the arbitration. The
the Contract,” and Sapphire expressly agreed that the Subcontractors, in particular, note that Sapphire and G.T.
arbitration could include parties other than G.T. Leach. Leach specifically revised the AIA form to add a reference
Specifically, the Other Defendants rely on a provision to “a Subcontractor” as a party whose presence would
of the general contract in which Sapphire and G.T. be expected in the arbitration. Because Sapphire seeks to
Leach agreed that “[a]ny arbitration may include, by recover the same damages from each of the defendants and
consolidation or joinder or any other manner, parties to hold all of the defendants jointly and severally liable
other than the Owner, Contractor, a Subcontractor, a for those damages, they assert, the arbitration can only
separate contractor ... and other persons substantially provide “complete relief” if all of them are parties to it.
involved in a common question of fact or law whose We do not agree.
presence is required if complete relief is to be accorded in
arbitration.” To begin with, the joinder provision states that an
arbitration “may include” other parties, and we find no
The Other Defendants argue that, through this “joinder basis on which to conclude that the parties intended the
provision,” Sapphire agreed that the scope of the word “may” to be mandatory rather than permissive in
arbitration would include Sapphire's claims against this context. Cf. Iliff v. Iliff, 339 S.W.3d 74, 81 (Tex.2011)
the Other Defendants because those claims “arise out (stating that the word “may” is “permissive” and “imports
of or relate to” the general contract, those claims the exercise of discretion”); Dall. Cnty. Cmty. Coll. Dist.
and Sapphire's claims against G.T. Leach involve v. Bolton, 185 S.W.3d 868, 874 (Tex.2005) (“The words
common questions of law or fact, and the Other ‘may’ and ‘shall’ mean different things, and ... [t]he context
Defendants' presence is “required” for complete relief in this case does not require an interpretation of the

58 Tex. Sup. Ct. J. 532
permissive word ‘may’ to mean something other than make their joinder “required”; rather, it allows for their
its plain meaning.”); Wichita Cnty., Tex. v. Hart, 917 joinder, but only if their joinder is “required” to provide
S.W.2d 779, 782 (Tex.1996) (“The Legislature's use of complete relief. We conclude that the joinder provision
the permissive *526 term ‘may’ in the Whistleblower does not give the Other Defendants, who are not parties
Act's venue provision, in light of its contemporaneous to the general contract, a legal right to require Sapphire to
reorganization of the venue statute, strongly suggests arbitrate with them.
that the Act's venue provision is permissive.”). The
original AIA form provided that “[n]o arbitration shall The Other Defendants contend that, at a minimum,
include, ... parties other than the Owner, Contractor, a the joinder provision gives G.T. Leach a contractual
separate Contractor, ... and other persons substantially right to join others whose presence is “necessary to
involved in a common question of fact or law whose completely resolve the dispute,” even if it does not give
presence is required if complete relief is to be accorded those other parties the right to join themselves. In light
in arbitration.” In its original form, the provision thus of the provision's permissive language and references to
prohibited joinder of any but the listed parties (at least, the necessity of each party's “consent,” as we have just
absent written consent of all the parties), but it did not discussed, we disagree. Moreover, even if the contract gave
require joinder of the listed parties. Sapphire and G.T. G.T. Leach such a right, G.T. Leach has not requested
Leach revised this provision to state that “Any [instead of that relief in this Court. G.T. Leach asks this Court
“No”] arbitration may [instead of “shall”] include parties to “order the claims brought by Sapphire against [G.T.
other than” the listed parties, and added “Subcontractors” Leach] to arbitration,” without reference to the claims
to the list. The effect of their revisions was to remove brought by Sapphire against the Other Defendants.
the prohibition against including parties “other than”
those listed. Because they changed “shall” to “may,”
they did not require the joinder of unlisted parties, but
c. The Definition of “Contractor”
neither did they require the joinder of the listed parties.
In fact, they retained a sentence from the original form The Engineers and Insurance Brokers point out that the
providing that a party's “[c]onsent to arbitration involving general contract states that it is an agreement between
an additional person or entity ... shall not constitute “the Owner” and “the Contractor,” and that Sapphire
consent to arbitration of a claim not described therein or *527 and G.T. Leach each signed the agreement in
with a person or entity not named or described therein.” those respective capacities. They note, however, that the
contract provides that the term “Contractor” includes
The provision thus permits the parties to the general any contractor who executes a separate agreement with
contract to consent to the joinder of additional parties the owner. Since Sapphire is suing them for breach of
in the arbitration, but it does not require them to do so. separate agreements directly between each of them and
Ultimately, the Other Defendants concede as much by Sapphire, they contend that they are each a “Contractor”
repeatedly acknowledging throughout their briefs that the under the general contract and thus entitled to enforce its
joinder provision “allows inclusion or joinder,” “allow[s] arbitration agreement. The contract, however, expressly
them to be joined” so that they “could participate” in provides that the “Contract Documents shall not be
the arbitration, and “permits all parties to arbitrate” construed to create a contractual relationship of any
together. Nevertheless, they contend that, because this kind ... between [Sapphire] and a Subcontractor ... or [ ]
clause is ambiguous as to whether it is mandatory or between any persons or entities other than [Sapphire] and
permissive, we must construe it as mandatory in support
[G.T. Leach].” 20
of the law's presumption in favor of arbitration. This
presumption, however, requires that doubt “as to waiver,
In summary, we find no language in the general contract
scope, and other issues not relating to enforceability—
that gives the Other Defendants rights to enforce the
must be resolved in favor of arbitration.” Poly–Am., 262
general contract's arbitration clause against Sapphire.
S.W.3d at 348 (emphasis added). And, in any event, we
We thus conclude that Sapphire did not agree in the
do not find the language here to be ambiguous. The fact
general contract to arbitrate its claims against the Other
that the provision refers to other parties as those whose
Defendants.
presence “is required” to accord complete relief does not

58 Tex. Sup. Ct. J. 532
to compel arbitration under contract between contractor

2. No Equitable Estoppel and owner).
[31] As an alternative to the argument that Sapphire
expressly agreed that they can enforce the general The Other Contractors contend that Sapphire's claims
contract's arbitration provisions, the Other Defendants against them seek a “direct benefit” under the general
argue that Sapphire is equitably estopped from denying its contract, even though they are not parties to that contract,
assent to such an agreement. We do not agree. because the claims “arise from and must be determined by
reference to” the general contract. More specifically, they
[32] [33] [34] We have recognized that, under principles assert that the work that they performed was necessary
of equitable estoppel, “a litigant who sues based on a only because of the general contract, and without the
contract subjects him or herself to the contract's terms ..., general contract they would have had no duties of their
including the Arbitration Addendum.” FirstMerit Bank, own to perform. Sapphire's claims thus “relate to and
52 S.W.3d at 755–56; see Meyer, 211 S.W.3d at 305 arise out of” the general contract, they contend, because
(listing cases so holding). This is because the claimant they are claims for work performed “pursuant to” the
cannot “have it both ways”; it cannot, “on the one hand, general contract. The Subcontractors also note that the
seek to hold the non-signatory liable pursuant to duties general contract required G.T. Leach to “include terms
imposed by the agreement, which contains an arbitration in the subcontracts ... binding its subcontractors ... to the
provision, but, on the other hand, deny arbitration's applicable terms of this agreement.”
applicability because the defendant is a non-signatory.”
Meyer, 211 S.W.3d at 306. This equitable principle applies Sapphire is not suing the Other Defendants, however, for
when a claimant seeks “direct benefits” under the contract breach of obligations under the general contract. Rather,
that contains the arbitration agreement. Kellogg Brown & Sapphire alleges in its petition that the Other Defendants
Root, 166 S.W.3d at 739. “Whether a claim seeks a direct each breached duties that they each “contractually
benefit from a contract containing an arbitration clause agreed” to perform, and failed to perform them as a
turns on the substance of the claim, not artful pleading.” reasonable professional would have performed them. We
Weekley Homes, 180 S.W.3d at 131–32. agree that Sapphire is not seeking direct benefits under
the general contract. We read Sapphire's allegations to
[35] [36] [37] [38] It is not enough, however, that therefer to separate agreements in which the Engineers
party's claim “relates to” the contract that contains the agreed with Sapphire to provide engineering services,
arbitration agreement. Kellogg Brown & Root, 166 S.W.3d the Insurance Brokers agreed with Sapphire to provide
at 741. Instead, the party must seek “to derive a direct insurance services, and the Subcontractors agreed with
benefit”—that is, a benefit that “stems directly”—from
G.T. Leach to provide construction-related services. 22
that contract. Id.; In re Morgan Stanley & Co., 293 S.W.3d
182, 184 (Tex.2009). The claim must “depend *528 on the
The record and briefs in this case reflect that Sapphire
existence” of the contract, Meyer, 211 S.W.3d at 307, and
contends that the Engineers and Insurance Brokers
be unable to “stand independently” without the contract,
contracted directly with Sapphire and are what the general
Kellogg Brown & Root, 166 S.W.3d at 739–40. The alleged
contract refers to as a “separate contractor” rather than a
liability must “arise[ ] solely from the contract or must
“subcontractor.” Thus, *529 although Sapphire's breach
be determined by reference to it.” Weekley Homes, 180
of contract claims against the Engineers may “relate to”
S.W.3d at 132. But “when the substance of the claim arises
the general contract, they “arise out of” and directly
from general obligations imposed by state law, including
seek the benefits of a separate alleged agreement between
statutes, torts and other common law duties, or federal
Sapphire and the Engineers. Similarly, Sapphire alleges
law,” rather than from the contract, “direct benefits”
that the Insurance Brokers “contracted with Sapphire to
estoppel does not apply, even if the claim refers to or
procure adequate insurance to protect Sapphire while the
relates to the contract. 21 Morgan Stanley, 293 S.W.3d at Sapphire condominiums were being built” and “breached
184 n.2; see also Kellogg Brown & Root, 166 S.W.3d at 740– that agreement thereby damaging Sapphire.” These claims
41 (holding that subcontractor's quantum meruit claim depend on an alleged insurance-procurement agreement
against contractor did not justify direct benefits estoppel between Sapphire and the Insurance Brokers, not the
general contract between Sapphire and G.T. Leach.

58 Tex. Sup. Ct. J. 532
Finally, the Other Defendants argue that Sapphire is

And finally, Sapphire asserts that the Subcontractors equitably estopped from refusing to arbitrate its tort
breached obligations they accepted in their subcontracts claims against them because those claims assert only
with G.T. Leach, not in the general contract to which negligent performance of contractual duties, and thus seek
Sapphire was a party. While these claims may bear some only damages resulting from the breach of contractual
relationship to the general contract, the fact that the duties rather than duties imposed by law. Under these
claims would not have arisen but for the existence of circumstances, they contend, the allegedly negligent
the general contract is not enough to establish equitable breaches can “only be characterized as a breach of
estoppel. See Kellogg Brown & Root, 166 S.W.3d at contract,” and the claims thus “sound in contract, not
739–40. Sapphire's contract claims against the Other tort.” This argument raises a complex legal doctrine: the
Defendants do not, on their face, seek a “direct benefit” “economic loss” rule, sometimes referred to in this context
under the general contract; rather, the record at this stage as the law of “contorts.” See, e.g., Sw. Bell Tel. Co.
indicates that they seek direct benefits under other alleged v. DeLanney, 809 S.W.2d 493, 494–95 (Tex.1991); id. at
contracts. Under these circumstances, we cannot conclude 495 (Gonzales, J., concurring). We need not address this
that the “direct benefits” theory of equitable estoppel doctrine here, however, because even if Sapphire's tort
authorizes the Other Defendants to rely on the arbitration claims sound in contract, they do no arise solely out of or
provision in Sapphire's general contract with G.T. Leach. otherwise seek direct benefits under the general contract.
See Morgan Stanley, 293 S.W.3d at 184; Weekley Homes, See Kellogg Brown & Root, 166 S.W.3d at 740–41. While
180 S.W.3d at 133; Kellogg Brown & Root, 166 S.W.3d at they have some relationship to the general contract, the
739–40. mere fact that the claims would not have arisen but for that
contract is not enough to establish equitable estoppel. See
In addition, the Other Defendants argue that, even if id. at 739–40. We therefore hold that equitable estoppel
Sapphire is not suing them for breach of the general does not apply to enable the Other Defendants to compel
contract, it is seeking to hold them jointly and severally Sapphire to arbitrate its tort claims against them under the
liable for the damages that Sapphire alleges G.T. Leach's general contract.
breach of that contract caused. Specifically, the Insurance
Brokers contend that, “if Sapphire seeks to hold the
Insurance Defendants liable for damages arising from B. Arbitration Under the Subcontracts
G.T. Leach's alleged breach of the [general contract], [39] Finally, we turn to the Subcontractors' arguments
then Sapphire must necessarily rely on the existence of that Sapphire agreed through the subcontracts to arbitrate
its claims against the Subcontractors, or alternatively, that
the [general contract].” 23 But contrary to the Insurance
Sapphire is equitably estopped from denying its assent to
Brokers' argument, Sapphire's pleadings do not assert
the arbitration agreement in the subcontracts. While we
that the Insurance Brokers are jointly and severally liable
note that Sapphire is not a signatory to the subcontracts,
for the damages allegedly resulting from G.T. Leach's
its claims that the Subcontractors “contractually agreed”
breach of contract, 24 and the parties have not identified to perform their services and are liable to Sapphire
any doctrine that would permit Sapphire to hold them for having breached those agreements at least appear
jointly and severally liable *530 under the facts of this to be “based on” and “directly seek benefits” under
case. 25 “Texas law permits joint and several liability for the subcontracts, and thus Sapphire may be equitably
most actions based in tort, as long as ‘the percentage of estopped to deny obligations under the subcontracts. See
responsibility attributed to the defendant with respect to FirstMerit Bank, 52 S.W.3d at 755–56. We need not decide
a cause of action is greater than 50 percent.’ ” Sharyland that issue, however, because we conclude that, even if the
Water Supply Corp. v. City of Alton, 354 S.W.3d 407, 424 subcontracts are binding on Sapphire, they do not require
(Tex.2011) (quoting TEX. CIV. PRAC. & REM. CODE § the parties to arbitrate these claims.
33.013(b)(1)). But the Insurance Brokers' “direct benefits”
estoppel argument is premised on Sapphire seeking to hold *531 The Subcontractors provided their respective
them jointly and severally liable for G.T. Leach's breach services pursuant to essentially identical subcontracts
of contract, not its torts. that they entered into with G.T. Leach. Both of these
subcontracts contain three sections that pertain to the

58 Tex. Sup. Ct. J. 532
arbitration of disputes between the parties. First, section effect to all of the provisions with reference to the whole
11.1 states the parties' agreement to arbitrate disputes: instrument, Myers v. Gulf Coast Minerals Mgmt. Corp.,
361 S.W.2d 193, 196 (Tex.1962); and (4) we must construe
All claims, disputes and other the provisions together if we can, rather than allow one to
matters in question arising out of, cancel the other, In re U.S. Home Corp., 236 S.W.3d 761,
or relating to, this Subcontract 765 (Tex.2007).
or the breach thereof shall be
decided by arbitration in accordance We conclude that there is no way to give full effect to
with the Construction Industry both provisions, and that one must necessarily “nullify”
Arbitration Rules of the American the other at least to some extent. If we give effect to
Arbitration Association unless the the agreement to arbitrate in section 11.1, for example,
parties mutually agree otherwise. then we must necessarily conclude that the agreement
does “contain a provision for the mandatory arbitration
Section 11.3 then states that, if G.T. Leach “enter[s]
of disputes,” and thus nullify section 12.13's disclaimer.
into arbitration with [Sapphire] or others regarding
The Subcontractors argue that we can give effect to both
matters relating to this Subcontract, Subcontractor will
by construing the disclaimer to mean that arbitration
agree, if requested by [G.T. Leach] to consolidation
is “mandatory” unless all parties mutually agree not
of this arbitration with [G.T. Leach's] arbitration with
to arbitrate, in which case arbitration would not be
[Sapphire],” and in that case the Subcontractors “shall
mandatory. But parties can always mutually agree not
be bound by the result of the arbitration with [Sapphire]
to do what they previously agreed to do, and in any
to the same degree as [G.T. Leach].” Finally, however,
event, section 11.1 already provides that the parties can
section 12.13 states that the parties do not agree to
“mutually agree” not to arbitrate.
mandatory arbitration:
Notwithstanding any provision Generally, we must give the subcontracts their plain
to the contrary contained meaning and enforce them without rendering either
in the Contract Documents, provision entirely superfluous. Cf. El Paso Field Servs.,
Subcontractor expressly agrees that L.P. v. MasTec N. Am., Inc., 389 S.W.3d 802, 808
this Subcontract does not contain (Tex.2012) (prohibiting such a result); see also Moayedi,
a provision for the mandatory 438 S.W.3d at 7; Mercer v. Hardy, 444 S.W.2d 593, 595
arbitration of disputes, nor does (Tex.1969). But we cannot do *532 that when the plain
it incorporate by reference such a meaning of one provision unambiguously requires that
provision if such is contained in we not enforce another. See Tex. Lottery Comm'n v. First
the [general] contract between [G.T. State Bank of DeQueen, 325 S.W.3d 628, 637 (Tex.2010).
Leach] and [Sapphire]. There is a direct conflict between section 11.1's provision
that all disputes “shall be decided by arbitration” and
The court of appeals held that the disclaimer in this section section 12.13's provision that “this Subcontract does not
12.13 “nullif [ies]” the arbitration agreement in section contain a provision for the mandatory arbitration of
11.1, and Sapphire relies on that holding here. disputes.” And if that were all that the two provisions
provided, an ambiguity might exist that requires us to rely
The Subcontractors contend that section 12.13's on canons of construction to determine the parties' intent.
disclaimer does not nullify the agreement in section
11.1 because (1) the agreement appears earlier within But section 12.13 explicitly states that the
the contract, and “terms stated earlier in an agreement Subcontract does not require mandatory arbitration
must be favored over subsequent terms” in that same “[n]otwithstanding any provision to the contrary” in any
agreement, Coker v. Coker, 650 S.W.2d 391, 393 of the contract documents. Cf. In re Lee, 411 S.W.3d 445,
(Tex.1983); (2) the agreement is more specific than the 454 (Tex.2013) ( “The use of the word ‘notwithstanding’
disclaimer, and specific provisions control over general indicates that the Legislature intended section 153.0071
provisions, see Forbau v. Aetna Life Ins. Co., 876 S.W.2d to be controlling.”). Like the statute at issue in DeQueen,
132, 133–34 (Tex.1994); (3) we must consider and give which expressly provided that any conflicting “rule of

58 Tex. Sup. Ct. J. 532
law, statute, or regulation ... is ineffective,” the language

of section 12.13 “specifically provide[s] the means for
resolving conflicts” by providing that, in the event IV.
of any conflict, section 12.13 prevails. DeQueen, 325
S.W.3d at 632, 637. There is thus no ambiguity, and
Conclusion
we need not rely on canons of construction like the
rules that earlier or more specific provisions prevail. Id. We affirm in part and reverse in part. We affirm the
Although these canons provide useful tools for resolving portion of the court of appeals' judgment affirming the
conflicting provisions, there is no conflict to resolve here trial court's denial of the Engineers', Insurance Brokers',
because the plain language of section 12.13 resolves the and Subcontractors' motions to compel arbitration of
conflict. Id. at 638. We therefore conclude that, even if Sapphire's claims against them, and we reverse the portion
Sapphire is equitably estopped from denying its assent of the court of appeals' judgment affirming the trial court's
to the agreements contained in the subcontracts, those denial of G.T. Leach's motion to compel arbitration of
agreements do not include a valid, enforceable agreement Sapphire's claims against it. We remand this case to the
to arbitrate its claims against the Subcontractors. The trial court for further proceedings consistent with this
court of appeals, therefore, did not err in affirming the trial opinion.
court's denial of the Subcontractors' motions to compel
arbitration.
All Citations
We therefore affirm the court of appeals with respect
to the trial court's denial of the Insurance Brokers', 458 S.W.3d 502, 58 Tex. Sup. Ct. J. 532
Engineers', and Subcontractors' motions to compel
arbitration.
Footnotes
1 “It is the policy of this state to encourage the peaceable resolution of disputes ... through voluntary settlement procedures,”
including binding and nonbinding arbitration. TEX. CIV. PRAC. & REM. CODE §§ 154.002, 154.027.
2 “A court shall order the parties to arbitrate on application of a party showing ... an agreement to arbitrate;” otherwise, “the
court shall deny the application.” Id. § 171.021(a)(1), (b).
3 Atlas Comfort is now known as Comfort Systems USA—South Central.
4 Sapphire initially filed two separate lawsuits, one against the Insurance Brokers and another against the architects who
designed the project. The architects first named G.T. Leach, the Subcontractors, and the Engineers as responsible third
parties, and Sapphire amended its pleadings to name them as defendants in that suit. When the Insurance Brokers
learned of these developments in that suit, they named G.T. Leach, the Subcontractors, and the Engineers as responsible
third parties in this suit. The architects later settled and resolved all claims asserted by and against them.
5 See Act of May 4, 1995, 74th Leg., R.S., ch. 136, § 1, sec. 33.004(e), 1995 Tex. Gen. Laws 971, 973, amended by Act
of June 2, 2003, 78th Leg., R.S., ch. 204, § 4.04, sec. 33.004(e), 2003 Tex. Gen. Laws 847, 856, repealed by Act of May
24, 2011, 82d Leg., R.S., ch. 203, § 5.02, sec. 33.004(e), 2011 Tex. Gen. Laws 757, 759.
6 456 S.W.3d 570.
7 Although we generally lack jurisdiction over interlocutory appeals, see TEX. GOV'T CODE § 22.225(b)(3), we have
jurisdiction to review a court of appeals' interlocutory judgment when its holding creates an inconsistency with prior
precedent “that should be clarified to remove unnecessary uncertainty in the law and unfairness to litigants.” Id. §
22.225(c), (e); see also Richmont Holdings, Inc. v. Superior Recharge Sys., L.L.C., 392 S.W.3d 633, 635 n.3 (Tex.2013)
(per curiam) (“We have jurisdiction to hear an appeal from an interlocutory order denying arbitration when the court of
appeals' decision conflicts with prior precedent.”). In this case, the court of appeals' holding creates such an inconsistency
with our decision in Perry Homes v. Cull, 258 S.W.3d 580, 587–92 (Tex.2008), and with the court of appeals' decision
in In re Global Constr. Co., 166 S.W.3d 795, 798–99 (Tex.App.—Houston [14th Dist.] 2005, no pet.), regarding the
issue of whether courts or arbitrators should decide whether a contractual deadline bars a demand for arbitration. The
inconsistency on this issue gives us jurisdiction, which permits us to address and resolve all of the issues that all of the

58 Tex. Sup. Ct. J. 532
parties raise in this case. See, e.g., Brown v. Todd, 53 S.W.3d 297, 301 (Tex.2001) (“As we have repeatedly recognized,
if our jurisdiction is properly invoked on one issue, we acquire jurisdiction of the entire case.”).
8 The general contract utilized a “Standard Form of Agreement Between Owner and Contractor” (Form A111–1997) and a
form of “General Conditions of the Contract for Construction” (Form A201–1997), both published by the American Institute
of Architects. Sapphire and G.T. Leach substantially revised these forms, however, by striking and adding language
throughout the contract to reflect their specific agreements. As revised, the arbitration section addresses numerous details
including the process for selecting the arbitrator(s), the rules governing the arbitration, the location and timing of the
arbitration, rights to discovery, finality and appeals from the arbitration award, and the duty to continue performing under
the contract while the arbitration is pending. As discussed further below, one section addresses the consolidation and
joinder of other parties within the arbitration proceeding.
9 By the time Sapphire named G.T. Leach as a defendant—and thus by the time G.T. Leach filed its motion to compel
arbitration—the two-year statute of limitations applicable to Sapphire's negligence claims had already run, but the four-
year statute applicable to Sapphire's breach-of-contract claims had not. The court of appeals did not mention this
distinction, but instead stated broadly that “[t]he parties do not dispute that the applicable statute of limitations had expired
when G.T. Leach sought arbitration.” 455 S.W.3d at 575 n.6; see also id. at 577 (stating that “G.T. Leach does not contest
that the statute of limitations for Sapphire's claims had expired when it filed its motion to compel arbitration.”). These
statements were incorrect. Although the parties did agree that the two-year statute on Sapphire's negligence claims had
expired, they also agreed that the four-year statute on Sapphire's breach-of-contract claims had not. Since we conclude
that the arbitrators must resolve Sapphire's contractual-deadline arguments, however, we need not consider the court
of appeals' error on this point, and we leave it to the arbitrators to resolve all issues related to the construction and
application of the contractual deadline in this case.
10 Sapphire cites to Parks v. Developers Surety & Indemnity Co., 302 S.W.3d 920, 924 (Tex.App.–Dallas 2010, no pet.)
(refusing to consider unconscionability as a defense to contract claim because the defendant failed to plead and assert
it in the trial court), and Posey v. Southwestern Bell Yellow Pages, Inc., 878 S.W.2d 275, 281 (Tex.App.–Corpus Christi
1994, no writ) (“Because the Poseys failed to assert in the court below that the limitation of liability clause was void,
unconscionable or unenforceable, we may not reverse that portion of the summary judgment on appeal.”).
11 Specifically, Sapphire argued: “The most prejudicial aspect of allowing arbitration this late in the game is that the Statute
of Limitations has already run on all of Plaintiff's negligence claims against all Defendants. This effect is so prejudicial
that the express language of the contract prohibits arbitration in this situation.”
12 Although G.T. Leach did not specifically argue in the court of appeals that the arbitrators must decide the contractual-
deadline issue, it did more broadly assert that “there is no legitimate issue as to the arbitrability of all of the issues between
Sapphire and GTL,” and “[b]ecause all of Sapphire's claims against [G.T. Leach] are clearly arbitrable under a valid and
enforceable arbitration provision, the only potentially viable argument Sapphire presents against enforcement is waiver.”
Because “disposing of appeals for harmless procedural defects is disfavored,” and “[a]ppellate briefs are to be construed
reasonably, yet liberally, so that the right to appellate review is not lost by waiver,” Perry v. Cohen, 272 S.W.3d 585, 587
(Tex.2008) (per curiam), G.T. Leach's broad assertions were arguably sufficient to encompass all supporting arguments,
including the argument that Sapphire's claim that the contractual deadline bars G.T. Leach's arbitration demand was
“clearly arbitrable.” See, e.g., Plexchem Int'l, Inc. v. Harris Cnty. Appraisal Dist., 922 S.W.2d 930, 930–31 (Tex.1996)
(holding that the assertion in the court of appeals that “[t]he trial court erred by granting ... summary judgment” was
“sufficient to preserve error and to allow argument as to all possible grounds upon which summary judgment should
have been denied”); see also TEX. R. APP. P. 38.1(f) (“The statement of an issue or point [in an appellate brief] will be
treated as covering every subsidiary question that is fairly included.”). We need not decide that issue, however, since we
conclude that G.T. Leach did not waive its argument even if it failed to raise it in the court of appeals.
13 We appear to have once held to the contrary in In re K.A.F., 160 S.W.3d 923 (Tex.2005), in which we stated that, although
petitioner's “constitutional complaints relate to her appeal and therefore could not have been asserted in the trial court,
she was required to raise them in the court of appeals in order to preserve error.” Id. at 928 (holding that petitioner “waived
these arguments by failing to raise them in the court of appeals”). In support of these statements, however, we cited
two cases in which we had addressed only the well-established rule that a party must preserve error by asserting its
complaints in the trial court. Id. at 928 (citing In re B.L.D., 113 S.W.3d at 350–51 (citing cases for the proposition that
objections and errors “must be preserved in the trial court”); Tex. Dep't of Protective & Regulatory Servs. v. Sherry, 46
S.W.3d 857, 861 (Tex.2001) (refusing to consider constitutional arguments that petitioner did not assert in the trial court).
We cited no rule or authority in K.A.F. to support the proposition that a petitioner waives an argument by failing to raise it
in the court of appeals when the petitioner's complaint first arises from that court's judgment. Consistent with our holdings

58 Tex. Sup. Ct. J. 532
in Bunton and Gilbert, as well as our holding today, our statement in K.A.F. should be read to mean that we may treat
such an argument as waived, as we did in that case, but we are not required to do so.
14 The general contract provides for arbitration under the TAA, and each of the defendants sought to compel arbitration
under that Act. While the Federal Arbitration Act (FAA) might also apply, no party argues that the FAA preempts the
TAA on any issue in this case, or that the TAA and FAA materially differ on any such issue. We therefore presume that
the TAA governs, but we may find guidance in court decisions addressing both acts. Cf. Ellis v. Schlimmer, 337 S.W.3d
860, 862 (Tex.2011) (observing that FAA preempts TAA “only when it or other state law would not allow enforcement
of an arbitration agreement that the FAA would enforce” and that party seeking to avoid application of TAA has burden
of raising that issue).
15 In deciding these questions of arbitrability, courts apply the common principles of general contract law to determine the
parties' intent. In re Poly–Am., L.P., 262 S.W.3d 337, 348 (Tex.2008).
16 The Court in Poly–America referenced a “strong federal presumption” in favor of arbitration because the contracts in that
case provided for arbitration under the FAA. Poly–Am., 262 S.W.3d at 348. But the Court has observed in other cases
that Texas law also strongly favors arbitration of disputes and recognizes a presumption in favor of arbitrability. See, e.g.,
Prudential Secs. Inc. v. Marshall, 909 S.W.2d 896, 898–99 (Tex.1995).
17 The general contract defines a “Claim” as
a demand or assertion by one of the parties seeking, as a matter of right, adjustment or interpretation of Contract
terms, payment of money, extension of time or other relief with respect to the terms of the Contract. The term “Claim”
also includes other disputes and matters in question between [Sapphire] and [G.T. Leach] arising out of or relating
to the Contract.
18 See, e.g., United SteelWorkers of Am., AFL–CIO–CLC v. Saint Gobain Ceramics & Plastics, Inc., 505 F.3d 417, 418 (6th
Cir.2007) (holding that application of contractual time limit was issue for arbitrators rather than courts); Marie v. Allied
Home Mortg. Corp., 402 F.3d 1, 11 (1st Cir.2005) (holding that trial court erred in interpreting and applying contractual
requirement that “[a]rbitration under this section must be initiated within sixty days” of event giving rise to the claim
because that issue was for arbitrators to decide); Shearson Lehman Hutton, Inc. v. Wagoner, 944 F.2d 114, 120–21 (2d
Cir.1991) (“Although Conticommodity [Services Inc. v. Philipp & Lion, 613 F.2d 1222, 1224–25 (2d Cir.1980) ] involved
a one-year time limitation set forth in the arbitration agreement itself, we stated emphatically that any limitations defense
—whether stemming from the arbitration agreement, arbitration association rule, or state statute—is an issue to be
addressed by the arbitrators.”); Nursing Home & Hosp. Union No. 434 AFL–CIO–LDIU by Mackson v. Sky Vue Terrace,
Inc., 759 F.2d 1094, 1097 (3d Cir.1985) (rejecting argument that grievances were “not subject to the arbitration process
because [the other party] did not comply with the specific time limits for filing grievances under the agreement” and
stating that “[e]ven assuming [that] argument has merit, the law is clear that matters of procedural arbitrability, such
as time limits, are to be left for the arbitrator once the court determines that the parties have agreed in the contract to
submit the subject-matter of the dispute to arbitration”); see also McNamara v. Yellow Transp., Inc., 570 F.3d 950, 957
(8th Cir.2009) (adopting reasoning of Marie in context of a party's argument that it was harmed by other party's delay
in seeking arbitration because by that time party would be contractually barred from initiating arbitration, but directing
trial court to retain jurisdiction on remand so that party opposing arbitration would not be left without a forum); Glass v.
Kidder Peabody & Co., 114 F.3d 446, 455 (4th Cir.1997) (“Defenses of laches, mere delay, statute of limitations, and
untimeliness constitute a broad category of waiver defenses that may be raised to defeat compelled arbitration. Laches,
like its companion defenses, however, is a matter of ‘procedural arbitrability’ solely for the arbitrators' decision and not
for the court.”).
19 The agreement at issue in Rubiola gave the “parties” the right to demand arbitration and defined “parties” to include
not only “each and all persons and entities signing this agreement,” but also all “individual partners, affiliates, officers,
directors, employees, agents, and/or representatives of any party to such documents, and ... any other owner and holder
of this agreement.” Rubiola, 334 S.W.3d at 222–23. We agreed that it thus “expressly provides that certain non-signatories
are to be parties to the agreement.” Id. at 224.
20 In addition, a supplemental provision of the general contract states that “[n]o person or entity shall be deemed to be
a third party beneficiary of any provisions of the Contract, nor shall any provisions thereof be interpreted to create
a right of action or otherwise permit anyone not a signatory party to the Contract to maintain an action for personal
injury or property damage.” While the Other Defendants contend that this provision was in an unsigned supplement
to the general contract and, in any event, does not expressly prohibit demands for arbitration, they concede that the
contract expressly incorporates these provisions as part of the “Contract Documents.” In any event, this provision reflects
Sapphire's intent that other parties not have rights under the general contract more clearly than any provision on which

58 Tex. Sup. Ct. J. 532
the Other Defendants rely reflects an intent that they have such rights. Even ignoring this provision, the lack of any
provision by which Sapphire agrees to allow the Other Defendants to compel arbitration of Sapphire's claims against
them defeats their attempts to do so.
21 Even if “direct benefits” estoppel does not apply based on the claims in the lawsuit, we have recognized that “a nonparty
may seek or obtain direct benefits from a contract by means other than a lawsuit” and that application of the doctrine
may be based on “conduct during the performance of the contract” rather than conduct during the lawsuit. See Weekley
Homes, 180 S.W.3d at 132–33, 135 (holding that “when a nonparty consistently and knowingly insists that others treat
it as a party, it cannot later ‘turn[ ] its back on the portions of the contract, such as an arbitration clause, that it finds
distasteful’ ”) (citations omitted). The parties do not advance this theory here.
22 The Other Defendants point out that Sapphire's experts filed reports in the trial court in which they relied in part on the
general contract's specification and notes to establish the standards for the Other Defendants' contractual performance.
These reports, however, do not suggest that the general contract imposed the duty to meet these specifications. Instead,
it appears that Sapphire contends that the Other Defendants' separate contractual agreements included promises to
comply with these specifications.
23 Alternatively, the Insurance Brokers argue that
if Sapphire seeks to hold [them] jointly and severally liable for damages with respect to Sapphire's tort claims
against [G.T. Leach], then Sapphire must necessarily rely on allegations of interdependent and concerted misconduct
between those parties. Either way, Sapphire satisfies one or both bases for imposing equitable estoppel under this
Court's decision in Meyer and thus must be compelled to arbitrate its claims against the Insurance Defendants.
But we declined to adopt the “concerted misconduct” theory of equitable estoppel in In re Merrill Lynch Trust Co. FSB,
235 S.W.3d 185, 191–92 (Tex.2007). The Insurance Brokers do not address Merrill Lynch or raise any argument that
this case is distinguishable in any manner material to our analysis of the “concerted misconduct” theory in that case.
We therefore decline to reconsider that decision here.
24 In fact, Sapphire's fourth amended petition does not reference “joint and several liability” at all. The Other Defendants
quote Sapphire's counsel as having orally argued to the trial court that the defendants are jointly and severally liable for
all damages, but we must look to the pleadings to determine the nature of Sapphire's claims.
25 Cf. S. Union Co. v. City of Edinburg, 129 S.W.3d 74, 87 (Tex.2003) (noting that Texas law has recognized specific
legal theories under which corporate structure can be disregarded to hold corporate actors jointly and severally liable
for corporation's contractual obligations); TEX. BUS. ORGS. CODE § 152.304(a) (imposing joint and several liability on
partners for “all” partnership obligations); TEX. GOV'T CODE § 60.152(b)(1) (authorizing contractual assumption of joint
and several liability in certain government contracts); TEX. LAB. CODE § 407A.056 (requiring contractual assumption
of joint and several liability for group and employer under certain group self-insurance agreements); TEX. NAT. RES.
CODE § 161.323 (imposing joint and several liability on “veteran purchaser” and subsequent assignees of veteran with
respect to certain land contracts under some circumstances).

Horizon Health Corp. v. Tyler-Holmes Memorial Hosp., 284 F.Supp.2d 439 (2003)
Remedies and Proceedings for

Enforcement in General
284 F.Supp.2d 439
United States District Court, When determining whether parties should be
N.D. Mississippi, compelled to arbitrate a dispute, first, the
Western Division. court must determine whether the parties
agreed to arbitrate the dispute; once the court
HORIZON HEALTH CORP., Plaintiff, finds that the parties agreed to arbitrate, it
v. must consider whether any federal statute
TYLER–HOLMES MEMORIAL HOSPITAL; or policy renders the claims nonarbitrable. 9
Board of Trustees of Tyler–Holmes Memorial U.S.C.A. § 1 et seq.
Hospital; and Board of Supervisors of
Montgomery County, Mississippi, Defendants.
No. 3:02CV093–D–D. [3] Alternative Dispute Resolution

| Merits of controversy
Aug. 18, 2003. When conducting the two-pronged analysis
in determining whether parties should be
Successor to management consultation company brought
compelled to arbitrate a dispute, courts must
action against hospital, its board of trustees, and
not consider the merits of the underlying
board of supervisors of county arising out of breach
action. 9 U.S.C.A. § 1 et seq.
of a management contract pertaining to company's
management of a geropsychiatric treatment program Cases that cite this headnote
at hospital. Plaintiff moved to compel arbitration.
The District Court, Davidson, Chief Judge, held that
arguments advanced by hospital went to the merits of the [4] Alternative Dispute Resolution
underlying dispute, thus should be decided by arbitrator. Arbitrability of dispute
Motion granted. Merits of controversy
Under the Federal Arbitration Act (FAA), the
federal district court ascertains only whether
the arbitration clause covers the allegations
West Headnotes (9)
at issue; if the dispute is within the scope
of the arbitration clause, the court may not
[1] Alternative Dispute Resolution delve further into the merits of the dispute. 9
Arbitration favored; public policy U.S.C.A. § 1 et seq.
The Federal Arbitration Act (FAA) expresses
a strong national policy in favor of [5] Alternative Dispute Resolution
arbitration, and any doubts concerning the Merits of controversy
scope of arbitrable issues should be resolved Arguments advanced by hospital, in response
in favor of arbitration. 9 U.S.C.A. § 1 et seq. to motion to compel arbitration brought by
management company related to a contract
Cases that cite this headnote dispute with hospital, that the Mississippi
Community Hospital Act (MCHA) did
[2] Alternative Dispute Resolution not require public hospitals to submit to
Arbitrability of dispute arbitration, that the arbitration agreement
violated the MCHA, and that the MCHA
did not permit public entities from making a

contract that extended beyond the term of the agreement against a non-signatory, courts
majority of the board members went to the should ask whether she is bound by that
merits of the underlying dispute, thus should agreement under traditional principles of
be decided by arbitrator. 9 U.S.C.A. § 1 et seq.; contract and agency law.
West's A.M.C. § 41–13–35.

Matters to Be Determined by Court Attorneys and Law Firms
Where a defense relates to a contract as a *440 John B. Clark, Daniel, Coker, Horton & Bell,
whole, and not specifically to an arbitration Jackson, MS, for plaintiff.
clause, then there is no distinction between
defenses which render a contract voidable Eugene R. Naylor, Wise, Carter, Child & Caraway,
and defenses which render a contract void; Jackson, MS, Alan D. Lancaster, Liston/Lancaster,
both should be submitted to the arbitrator. 9 Winona, MS, for defendants.

OPINION GRANTING MOTION
TO COMPEL ARBITRATION
Preemption DAVIDSON, Chief Judge.
States Presently before the court is the Plaintiff's motion to

Particular cases, preemption or compel arbitration. Upon due consideration, the court
supersession finds that the motion should be granted.
The strong federal policy favoring arbitration
preempts state laws that act to limit the
availability of arbitration. 9 U.S.C.A. § 1 et
A. Factual Background
seq.
Plaintiff Horizon Health Corporation (“Horizon”) is a
corporation organized under the laws of the State of Texas
with its principal place of business in Texas. Horizon
[8] Commerce has asserted claims against Tyler–Holmes Memorial
Arbitration Hospital (“Tyler–Holmes”), the Board of Trustees of
The Federal Arbitration Act (FAA), resting Tyler–Holmes (“Trustees”), and the Board of Supervisors
on Congress's authority under the Commerce of Montgomery County, Mississippi (“Supervisors”),
Clause, creates a body of federal substantive arising out of a breach of a management contract
law that is applicable in both federal and state pertaining to a geropsychiatric treatment program at
courts. U.S.C.A. Const. Art. 1, § 8, cl. 3; 9 Tyler–Holmes hospital. Tyler–Holmes is a community
U.S.C.A. § 1 et seq. hospital organized under the laws of the State of
Mississippi, with its principal place of business in Winona,
Cases that cite this headnote Mississippi.
On or about March 1, 2000, Tyler–Holmes

and Perspectives Health Management Corporation
Persons affected or bound
(“Perspectives”), entered into an agreement for
Because arbitration is a creature of contract Perspectives to provide management-consultation services
law, when asked to enforce an arbitration to Tyler–Holmes at Winona, Mississippi. Subsequently,

on or about June 4, 2001, Tyler–Holmes and 10, 104 S.Ct. 852, 857, 79 L.Ed.2d 1 (1984); Mouton
Perspectives executed an amended agreement (“Amended v. Metropolitan Life Ins. Co., 147 F.3d 453, 456 (5th
Management Agreement”), in which Perspectives agreed Cir.1998).
to reduce the monthly management fee. This was
done, at least partially, to assist Tyler–Holmes with [2] [3] [4] The Fifth Circuit has directed that courts
financial *441 difficulties. The Amended Management are to perform a two-step inquiry to determine whether
Agreement contains a mandatory arbitration clause, parties should be compelled to arbitrate a dispute.
requiring that all disputes and claims relating to the Primerica Life Ins. Co. v. Brown, 304 F.3d 469, 471 (5th
Agreement shall be settled by arbitration. On or about Cir.2002); R.M. Perez & Assoc., Inc. v. Welch, 960 F.2d
October 5, 2001, Horizon purchased most, if not all, of 534, 538 (5th Cir.1992) (citing Mitsubishi Motors Corp. v.
the assets from Perspectives, including certain accounts Soler Chrysler–Plymouth, 473 U.S. 614, 105 S.Ct. 3346,
receivable. Horizon thus became the successor to the 87 L.Ed.2d 444 (1985)). “First, the court must determine
rights of Perspectives as Manager under the Amended whether the parties agreed to arbitrate the dispute. Once
Management Agreement. According to Tyler–Holmes, the court finds that the parties agreed to arbitrate, it must
the geropsychiatric program experienced decreases in consider whether any federal statute or policy renders the
patient numbers, and the services provided through the claims nonarbitrable.” Primerica Life Ins. Co., 304 F.3d
Amended Management Agreement became unnecessary. at 471 (citations omitted). “When conducting this two-
Tyler–Holmes inquired about new terms for a new, pronged analysis, courts must not consider the merits of
and presumably more favorable, agreement. Apparently, the underlying action.” Id. (citing Snap–On Tools Corp.
Horizon was not interested in the proposed terms. v. Mason, 18 F.3d 1261, 1267 (5th Cir.1994)). “Under ...
Thereafter, Tyler–Holmes terminated the Agreement. the FAA, the federal district court ascertains only whether
the arbitration clause covers the allegations at issue. If the
Horizon filed this suit on or about June 12, 2002, to collect dispute is within the scope of the arbitration clause, the
approximately $778,000 which, according to Horizon, court may not delve further into the merits of the dispute.”
Tyler–Holmes owes in arrears and lost profits. The Id. (citations and internal quotes omitted).
complaint asserts a cause of action for, inter alia, breach of
contract. Thereafter, Horizon filed this motion to compel
arbitration and to stay this case pending arbitration.
C. Discussion
The parties do not dispute that the Agreement at issue

B. Discussion contains the following mandatory arbitration provision:
1. The Agreement's Arbitration Provision

*442 X.
[1] Congress provided in the Federal Arbitration Act
(FAA) that a written agreement to arbitrate in a contract
ARBITRATION, ATTORNEYS' FEES
involving interstate commerce “shall be valid, irrevocable,
and enforceable, save upon such grounds as exist at All disputes and claims relating to any provision
law or in equity for the revocation of any contract.” 9 hereof or relating to or arising out of the parties'
U.S.C. § 2 (1999). Section Three of the FAA specifically relationship or the creation or termination thereof
contemplates that parties, such as the Plaintiff, that are (including, without limitation, any claim that any
aggrieved by another party's failure to arbitrate under a provision of this Agreement, or any specification,
written agreement, may file a motion to stay the trial of an standard or procedure or any other obligation of
action until such arbitration has been had in accordance Hospital or Manager or both is illegal or otherwise
with the terms of the agreement. 9 U.S.C. § 3 (1999). unenforceable or voidable under any law, ordinance, or
In addition, the FAA expresses a strong national policy ruling) shall be settled by arbitration at the Office of the
in favor of arbitration, and any doubts concerning the American Arbitration Association in Mississippi which
scope of arbitrable issues should be resolved in favor is nearest to the Hospital, in accordance with the United
of arbitration. Southland Corp. v. Keating, 465 U.S. 1,

States Arbitration Act (9 U.S.C. Section 1 et seq.) And not permit a public entity to make a contract that extends
the Rules of American Arbitration Association. All beyond the term of a majority of the board's members
awards of the arbitration shall be binding and non- might ultimately excuse Tyler–Holmes from compliance
appealable except as otherwise provided in the United with the contract. However, that also involves getting
States Arbitration Act.... The parties hereby agree the to the merits and should be decided by an arbitrator.
rendering of an award by the arbitrator or arbitrators Both of these arguments go the Amended Management
shall be a condition precedent to the initiation of any Agreement as a whole, and are not directed at the
legal proceeding with respect to any dispute arising in arbitration provision. The Fifth Circuit has stated “unless
connection with this Agreement. a defense relates specifically to the arbitration *443
Tyler–Holmes does not argue, and the court does not agreement, it must be submitted to the arbitrator as part of
find any federal statute or policy that renders the claims the underlying dispute.” Primerica Life Ins. Co., 304 F.3d
nonarbitrable. As such, the court must determine whether at 472. Where a defense relates to a contract as a whole,
the parties agreed to arbitrate the dispute. The arbitration and not specifically to an arbitration clause, then there is
clause is broad, and clearly the dispute in question falls no distinction between defenses which render a contract
within the scope of the arbitration agreement. voidable and defenses which render a contract void; both
should be submitted to the arbitrator. Id. at n. 2 (citing
Tyler–Holmes argues that the Amended Management Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S.
Agreement is invalid and/or voidable under Mississippi 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967)).
law, and as such, the arbitration agreement is not
enforceable. Tyler–Holmes advances three reasons to [7] [8] Tyler–Holmes' second assertion is that the
support such a position. First, Tyler–Holmes argues that MCHA and opinions of the Mississippi Attorney General
the arbitration agreement cannot be enforced because a hold that public bodies such as Tyler–Holmes may not
material term of the Amended Management Agreement be required to submit to arbitration. “Even if [Tyler–
violates Miss.Code § 41–13–35(5)(k) of the Mississippi Holmes is correct], the strong federal policy favoring
Community Hospital Act (“MCHA”). Tyler–Holmes arbitration preempts state laws that act to limit the
asserts that the MCHA requires that certain “financing availability of arbitration.” Saturn Distribution Corp.
arrangement[s],” such as are supposedly in the Amended v. Paramount Saturn, Ltd., 326 F.3d 684, 687 (5th
Management Agreement, be approved by the owner of the Cir.2003)(citing Southland Corp., 465 U.S. at 16, 104
hospital by virtue of a resolution. As such, Tyler–Holmes S.Ct. 852). Furthermore, “[t]he Arbitration Act, resting on
argues that because the entire agreement is invalid, the Congress's authority under the Commerce Clause, creates
arbitration clause cannot be enforced. Second, Tyler– a body of federal substantive law that is applicable in both
Holmes asserts that the MCHA and opinions of the federal and state courts.” IP Timberlands Operating Co.
Mississippi Attorney General hold that public bodies v. Denmiss Corp., 726 So.2d 96, 107 (Miss.1998)(citing
such as Tyler–Holmes may not be required to submit to Moses H. Cone Memorial Hosp. v. Mercury Constr.
arbitration. Third, Tyler–Holmes asserts that the MCHA Corp., 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983))
does not permit a public entity to make a contract (emphasis added). As such, Tyler–Holmes' arguments
that extends beyond the term of a majority of the about state law limiting the FAA are not well taken.
board's members. Tyler–Holmes asserts that the Amended
Management Agreement extends beyond the term of the [9] Finally, the court notes that Tyler–Holmes does
majority of the Tyler–Holmes' Trustees. not contest that the Trustees and Supervisors can be
compelled to arbitrate as well under traditional agency
[5] [6] As to the first and third reasons submitted principles. Horizon notes that Supervisors grant Trustees
by Tyler–Holmes, the court is of the opinion that these broad powers to govern community hospitals. Trustees
arguments are getting into the merits of the underlying in turn are authorized to employ administrators, such
dispute. Whether the Amended Management Agreement as Greg Mullen, the hospital administrator who signed
can be enforced because a material term of the Agreement the agreements in the case sub judice. Because arbitration
violates certain “financing arrangement[s]” in Miss.Code is a creature of contract law, when asked to enforce
§ 41–13–35(5)(k) should be decided by the arbitrator. an arbitration agreement against a non-signatory, courts
Similarly, Tyler–Holmes' assertion that the MCHA does should ask “whether ... she is bound by that agreement

under traditional principles of contract and agency the claims in this case are arbitrable. As *444 such, the
parties' claims shall be dismissed without prejudice.
law.” Mississippi Fleet Card, LLC v. Bilstat, Inc., 175
F.Supp.2d 894, 901 (S.D.Miss.2001) (citation omitted).
A separate order in accordance with this opinion shall
See also Fleetwood Enterprises, Inc. v. Gaskamp, 280
issue this day.
F.3d 1069, 1076 (5th Cir.2002)(quoting Thomson–CSF,
S.A. v. American Arbitration Ass'n, 64 F.3d 773, 776
(2d. Cir.1995))(Stating there are several “theories under
‘common law principles of contract and agency law’ that ORDER GRANTING MOTION
provide a basis ‘for binding non-signatories to arbitration TO COMPEL ARBITRATION
agreements.’ ”). As such, the court finds that Horizon's
arguments are well taken, and Plaintiff's motion to compel Pursuant to an opinion issued this day, it is hereby
arbitration shall be granted against all Defendants. ORDERED that
(1) the Plaintiff's motion to compel arbitration (docket

entry 14–2) is GRANTED;
D. Conclusion
(2) the Plaintiff's claims shall be submitted to
For the above stated reasons, the Plaintiff's motion to arbitration, in accordance with the arbitration
compel arbitration is granted. The court is of the opinion agreement;
that the parties agreed to arbitrate the dispute. The court
is also of the opinion that no federal statute or policy (3) the Plaintiff's motion to stay the case (docket entry
renders the claims nonarbitrable. Finally, the court finds 14–1) is DENIED as moot;
that this cause should be dismissed without prejudice. The
(4) as arbitration has been compelled and all issues in
Fifth Circuit has held that Section Three of the FAA
this case disposed of, this case is CLOSED. Any of
(which provides that the court “shall ... stay the trial of
the parties may seek, by motion, to reopen this case
the action”) was not intended to limit dismissal of a case
in the event further action is required by the court.
in the proper circumstances and that if all of the issues
raised in the district court are arbitrable, dismissal of the
case is proper. See Alford v. Dean Witter Reynolds, Inc., All Citations
975 F.2d 1161, 1164 (5th Cir.1992) (holding that retaining
jurisdiction and staying “serve[s] no purpose” when all 284 F.Supp.2d 439
issues are arbitrable). As was the case in Alford, all of

In re Amos, 397 S.W.3d 309 (2013)
The Court of Appeals has concurrent

mandamus jurisdiction with the Court of
397 S.W.3d 309
Criminal Appeals in criminal law matters.
Dallas. Cases that cite this headnote
In re Heidi AMOS, Relator.
[2] Mandamus
No. 05–12–01500–CV. Remedy at Law
|
Mandamus
March 6, 2013.
Criminal prosecutions
Synopsis Prohibition
Background: Defendant filed motion to recuse original Existence and Adequacy of Other
trial judge. An assigned recusal hearing judge granted Remedies
the motion. Original trial judge filed motion for Prohibition
reconsideration. The recusal hearing judge scheduled a Proceedings in criminal prosecutions
hearing on the motion for reconsideration. Defendant
Mandamus and prohibition are available in
petitioned for writs of mandamus and prohibition as
a criminal proceeding if the relator shows (1)
means to challenging the recusal hearing judge's decision.
that the act she seeks to compel or prohibit
does not involve a discretionary or judicial
decision and (2) that she has no adequate
Holdings: The Court of Appeals, Fitzgerald, J., held that: remedy at law to redress the harm that she
alleges will ensue.
[1] recusal rule prohibited original trial judge's motion for
reconsideration; Cases that cite this headnote
[2] assigned recusal hearing judge exceeded her authority [3] Mandamus
when she attempted to entertain original trial judge's Nature and existence of rights to be
motion for reconsideration; protected or enforced
Mandamus
[3] any failure to notify judge of the hearing on defendant's Nature of acts to be commanded
motion to recuse did not violate judge's due process rights;
Prohibition
and
Acts and Proceedings of Courts, Judges,
and Judicial Officers
[4] claims challenging original trial judge's motion for
reconsideration and appointed recusal hearing judge's To establish that the act sought to be
order granting a rehearing on the matter would be compelled or prohibited does not involve a
reviewed for the first time in original mandamus and discretionary or judicial decision, for purposes
prohibition proceedings. of seeking writs of mandamus or prohibition,
the relator must show that she has a clear right
to the relief sought, meaning that the facts
Petition for writ of mandamus conditionally granted. and circumstances dictate only one rational
decision under unequivocal, well settled, and
clearly controlling legal principles.
West Headnotes (16) 2 Cases that cite this headnote
[1] Mandamus [4] Mandamus

Jurisdiction and authority

In re Amos, 397 S.W.3d 309 (2013)
Courts and judicial officers subject to

mandamus [7] Judges
Effect on acts and proceedings of judge
Prohibition
Acts and Proceedings of Courts, Judges, If a judge recuses himself or herself, the judge
and Judicial Officers thereby voluntarily steps out of the case for
all purposes and another judge is immediately
When a relator seeks extraordinary relief that
assigned to hear and dispose of the case.
amounts to the undoing of an accomplished
Vernon's Ann.Texas Rules Civ.Proc., Rule
judicial act, that relief is more in the nature of
18a(f)(2)(A).
mandamus than prohibition.
[8] Judges
[5] Judges
Determination of objections
The “refer rule” requires the challenged judge
Original trial judge's motion for
to refer a recusal motion to another judge to
reconsideration of order granting criminal
decide the motion in the first instance and
defendant's recusal motion was improper in
allows only the newly assigned judge, a judge
the first instance, such that the assigned
other than the challenged judge, to hear and
recusal hearing judge's act of signing the
rule upon the motion to recuse; this process
order granting reconsideration and setting
affords the State and the defendant a fair and
defendant's motion to recuse for a new hearing
impartial forum in which each may litigate
was also improper; once the original trial
the merits of the motion. Vernon's Ann.Texas
judge referred the recusal motion for another
Rules Civ.Proc., Rule 18a.
judge to decide, the recusal rule prohibited
original trial judge from taking any further Cases that cite this headnote
action in the case until the motion was
decided, except for good cause stated in
writing or on the record, and rule even [9] Judges
prohibited original trial judge from filing Determination of objections
a response to the recusal motion. Vernon's Recusal process contemplates the resolution
Ann.Texas Rules Civ.Proc., Rules 18a(f)(2) of the recusal motion through the exercise
(A), 18a(c)(2). of the independent judgment of the assigned
judge absent any outside pressure; it would
2 Cases that cite this headnote defeat the purpose of the refer rule, requiring
the challenged judge to refer a recusal motion
[6] Judges to another judge to decide the motion in the
Determination of objections first instance, to permit the challenged judge
to insert herself in her official capacity as
The purpose of the “recuse-or-refer rule”
judge in order to exert pressure upon and
requiring the challenged judge to either
influence the assigned judge's judgment, as
recuse or refer a recusal motion to another
such a situation is not just inappropriate but
judge to decide the motion is to preserve
blatantly improper for a challenged judge to
public confidence in the impartiality of the
take action designed to influence the outcome
judiciary by minimizing a judge's involvement
of the matter at issue. Vernon's Ann.Texas
in recusal proceedings. Vernon's Ann.Texas

In re Amos, 397 S.W.3d 309 (2013)
When an otherwise qualified assigned judge

[10] Judges renders an order in a criminal case that
Determination of objections exceeds the authority conferred by his or her
Judges order of assignment, the order is erroneous,
Effect on acts and proceedings of judge although not void.
When enforcing the refer rule, requiring the
challenged judge to refer a recusal motion to
another judge to decide the motion in the first
instance, courts make no distinction between [14] Constitutional Law
that period during which the recusal motion is Removal; recusal
pending and the period immediately following Judges
the ruling by the assigned judge; once a judge Determination of objections
has been recused, the prudent approach is for
Original trial judge had no protected interest
the recused judge and the assigned judge to
in presiding over defendant's particular
have no further communications with each
criminal case, and thus, any failure to notify
other concerning any aspect of that case.
judge of the hearing on defendant's motion
Vernon's Ann.Texas Rules Civ.Proc., Rule
to recuse did not violate judge's due process
18a.
rights. U.S.C.A. Const.Amend. 14.
[11] Judges
[15] Mandamus
Criminal prosecutions
Assigned recusal hearing judge exceeded
Prohibition
her authority when she attempted to
Proceedings in criminal prosecutions
entertain original trial judge's motion for
reconsideration after assigned recusal hearing Claims challenging original trial judge's
judge had decided the motion to recuse motion for reconsideration of recusal order
and the presiding administrative judge had and appointed recusal hearing judge's order
transferred and reassigned the case to a new granting a rehearing on the matter would
judge in a new court. be reviewed for the first time in original
mandamus and prohibition proceedings even
Cases that cite this headnote though criminal defendant failed to oppose
or object to appointed recusal hearing
judge's reconsideration order, where original
[12] Judges
trial judge and appointed recusal hearing
Duration of authority
judge each acted without authorization and
The terms of the assignment order control directing defendant to make her objections
the extent of the visiting judge's authority before appointed recusal hearing judge
and when it terminates; thus, an otherwise possibly would have resulted in yet another
qualified assigned judge's action outside the original proceeding, and defendant was
scope of his or her assignment presents a afforded little or no time to respond to original
procedural irregularity. trial judge's motion for reconsideration.
Cases that cite this headnote Cases that cite this headnote
[13] Judges [16] Mandamus

Authority and Proceedings of Special or Vacation of judgment or order
Substitute Judges

In re Amos, 397 S.W.3d 309 (2013)
If a district judge enters an order for which he Pirtle orally found “the appearance of impropriety, the
has no authority, mandamus will issue. appearance of prejudice ... sufficient” to justify recusal,
and she signed an order granting the motion to recuse
Cases that cite this headnote that same day. On October 1, the presiding administrative
judge transferred the case to a new judge, the Honorable
Jeffrey Rosenfield, Dallas County Criminal Court of
Appeals No. 2.
About three weeks later, Judge Mullin filed a motion for
*311 Michael R. Casillas, Assistant District Attorney, reconsideration addressed to Judge Pirtle. Judge Mullin
Chief Prosecutor, Dallas, TX, for Appellant. argued that Judge Pirtle should reconsider and deny
Amos's motion for recusal because Judge Mullin was a
L.T. Butch Bradt, Houston, TX, Brady T. Wyatt III,
necessary party to the hearing, had not received notice of
Attorney at Law, Dallas, TX, for Appellees.
the hearing, and therefore had no opportunity to “cross-
Before Justices MOSELEY, FITZGERALD, and examine [the] witnesses, nor to present any witnesses
MYERS. or evidence to contravene the issues addressed.” 2 She
also argued that the motion for recusal did not establish
bias or prejudice sufficient to justify recusal. On October
OPINION 26, Judge Pirtle signed an order granting Judge Mullin's
motion for reconsideration and setting the motion to
Opinion by Justice FITZGERALD. recuse for a new hearing on November 1.
Relator Heidi Amos is the defendant in a pending criminal

Amos filed a petition for writ of mandamus or writ of
case. She filed a motion to recuse the trial judge presiding
prohibition in this Court on October 30, see In re Amos,
over her case, a former judge was assigned to decide the
No. 05–12–01463–CV, 2012 WL 5397108 (Tex.App.-
motion to recuse, and that judge granted the motion. The
Dallas Nov. 6, 2012, orig. proceeding) (mem. op.)
recused judge then filed a motion for reconsideration, and
(denying the petition for noncompliance with the Texas
the assigned judge signed an order purporting to grant
Rules of Appellate Procedure), and she filed a revised
rehearing of the motion to recuse and to set the motion
petition seeking the same relief on November 6. Thus, in
for a new hearing. By a petition for writ of mandamus and
this mandamus proceeding, Amos is the relator, Judge
writ of prohibition, Amos asks us to prevent the assigned
Pirtle is the respondent, and the State is the real party
judge from reconsidering her recusal order. We conclude
in interest. See TEX. R. APP. P. 52.2. We stayed Judge
that Amos has a clear right to the relief sought and that
Pirtle's order granting rehearing pending the disposition
she has no adequate remedy by appeal. Accordingly, we
of this original proceeding.
conditionally grant the writ of mandamus.
II. ANALYSIS
I. FACTS
A. Criminal mandamus standards
Amos filed a motion to recuse the trial judge presiding
[1] [2] [3] [4] We have concurrent mandamus
in her criminal case, the Honorable Etta Mullin, Dallas
jurisdiction with the Texas Court of Criminal Appeals
County *312 Criminal Court No. 5. The presiding
in criminal-law matters. Padilla v. McDaniel, 122 S.W.3d
administrative judge assigned the motion to a former
805, 807 (Tex.Crim.App.2003) (orig. proceeding) (per
judge, the Honorable Sue Pirtle, for decision. On
curiam). Mandamus and prohibition are available in a
September 28, 2012, Judge Pirtle conducted a hearing on
criminal proceeding if the relator shows (1) that the
the motion. Counsel for Amos and the State appeared;
act she seeks to compel or prohibit does not involve a
Amos did not appear. Counsel for Amos and counsel for
discretionary or judicial decision and (2) that she has
the State testified at the hearing. 1 The State presented no no adequate remedy at law to redress the harm that
other evidence and had no objections to the motion. Judge she alleges will ensue. Simon v. Levario, 306 S.W.3d

In re Amos, 397 S.W.3d 309 (2013)
318, 320 (Tex.Crim.App.2009) (orig. proceeding); see (A) (concerning motions to recuse filed before evidence
also In re State ex rel. Weeks, 391 S.W.3d 117, 122– has been offered at trial). The rules even provide that
23 (Tex.Crim.App. 2013) (orig. proceeding); De Leon the challenged judge “should not file a response to the
v. Aguilar, 127 S.W.3d 1, 5 (Tex.Crim.App.2004) (orig. motion.” TEX. R. CIV. P. 18a(c)(2).
proceeding). The first prong requires the relator to
show that she has a clear right to the relief sought, [8] [9] The “refer rule” requires a challenged judge to
meaning that the facts and circumstances dictate only refer the recusal motion to the presiding judge in the
one rational decision under unequivocal, well-settled, and first instance, and allows only the newly assigned judge,
clearly controlling legal principles. Simon, 306 S.W.3d a judge other than the challenged judge, to hear and
at 320. When a relator seeks extraordinary relief that rule upon the motion to recuse. This process affords the
amounts to the undoing of an accomplished judicial act, parties—the State and the defendant—a fair and impartial
that relief is more in *313 the nature of mandamus than forum in which each may litigate the merits of the motion.
prohibition. Id. at 320 n. 2. Further, this process contemplates the resolution of the
motion through the exercise of the independent judgment
of the assigned judge absent any outside pressure. It
B. Clear right to relief would defeat the purpose of the “refer rule” to permit the
challenged judge to insert herself in her official capacity
1. Impropriety of the motion for reconsideration
as judge in order to exert pressure upon and influence
[5] We conclude that Judge Mullin's motion for
the assigned judge's judgment. It is not just inappropriate
reconsideration was improper, and thus that Judge Pirtle
but blatantly improper for a challenged judge to take
clearly erred by signing the order granting reconsideration
action designed to influence the outcome of the matter
and setting Amos's motion to recuse for a new hearing.
at issue. To hold otherwise would seriously compromise
the independence of the assigned judge and undermine the
[6] “Recuse” means both to remove oneself as a judge
integrity of the judicial recusal process.
in a particular case and to challenge or object to a
judge as being disqualified from hearing a particular
[10] We make no distinction between that period during
case, such as because of prejudice. BLACK'S LAW
which the motion is pending and the period immediately
DICTIONARY 1303 (8th ed. 2004). Texas Rule of Civil
following the ruling by the assigned judge. Once a
Procedure 18a, which governs motions to recuse, applies
judge has been recused, the prudent approach is for
in criminal cases. Arnold v. State, 853 S.W.2d 543, 544
the recused judge and the assigned judge to have no
(Tex.Crim.App.1993). Under that rule, the challenged
further communications with each other concerning any
judge must either recuse or refer the motion for another
aspect of that case. See Mosley v. State, 141 S.W.3d
judge to decide. De Leon, 127 S.W.3d at 5. The purpose of
816, 833 (Tex.App.-Texarkana 2004, pet. ref'd). Judicial
the recuse-or-refer rule is to preserve public confidence in
action prohibited during the pendency of the recusal
the impartiality of the judiciary “by minimizing a judge's
motion should not be tolerated after *314 the assigned
involvement in recusal proceedings.” Carmody v. State
judge rules on the motion. In both instances, the rules
Farm Lloyds, 184 S.W.3d 419, 422 (Tex.App.-Dallas 2006,
plainly discourage any attempt by the challenged judge to
no pet.).
influence the judgment of the assigned judge.
[7] If a judge recuses himself or herself, the judge thereby

Additionally, there is some authority holding that the
voluntarily steps out of the case for all purposes and
parties to a criminal case are the State and the accused,
another judge is immediately assigned to hear and dispose
and that no third party may intervene in a criminal
of the case. If a judge refers the motion to recuse to
case. See Bell v. State, No. 01–05–01180–CR, 2006 WL
the presiding administrative judge, the rules require the
3628916, at *5 (Tex.App.-Houston [1st Dist.] Dec. 14,
challenged judge to step aside and another judge to
2006, no pet.) (mem. op., not designated for publication)
be assigned to resolve the motion. Once the challenged
(trial judge was not required to refer motion to recuse
judge refers the motion for another judge to decide, the
filed by third-party “public interest organization”); In re
challenged judge must take no further action in the case
Wingfield, 171 S.W.3d 374, 381 (Tex.App.-Tyler 2005,
until the motion is decided, except for good cause stated
orig. proceeding) (“Unlike the Rules of Civil Procedure,
in writing or on the record. TEX. R. CIV. P. 18a(f)(2)

In re Amos, 397 S.W.3d 309 (2013)
the Code of Criminal Procedure makes no provision for omitted). 3 Thus, an otherwise qualified assigned judge's
a third party to intervene in a ‘criminal action.’ ”). In action outside the scope of his or her assignment presents
Wingfield, the court went so far as to state that the trial a “procedural irregularity.” Wilson v. State, 977 S.W.2d
judge “had no discretion to consider the issues raised” 379, 380 (Tex.Crim.App.1998). In Wilson, a former judge
by purported intervenors in a criminal case. 171 S.W.3d was *315 assigned to a particular trial court for a specific
at 381. By analogy, Judge Pirtle had no discretion to five-week period, and he presided over the appellant's trial
consider the issues raised by Judge Mullin in her motion in that court even though his assignment had expired three
for reconsideration. days before the trial started. Id. at 379. The appellant
complained about the judge's lack of authority for the
Based on the foregoing authorities, we conclude that first time on appeal. Id. at 379–80. The court of criminal
Judge Mullin's motion for reconsideration was wholly appeals held that a defendant may challenge an otherwise
improper and without authority. Under the circumstances qualified judge's authority to preside in a particular case
of this case, after Amos filed the motion to recuse and by means of a pretrial objection (rather than a quo
Judge Mullin declined to recuse herself, Rule 18a(f)(2) warranto proceeding, as had been the rule previously),
(A) obliged Judge Mullin to take no further action in but the challenge cannot be raised for the first time on
the case until the issue of her recusal was decided. Once appeal. Id. at 380; accord Jackson v. State, No. 05–10–
Judge Pirtle granted the motion to recuse, Judge Mullin 01190–CR, 2012 WL 955361, at *2 (Tex.App.-Dallas Mar.
should not have involved herself in the case further. Cf. 22, 2012, no pet.) (not designated for publication) (“An
Dunn v. Cnty. of Dallas, 794 S.W.2d 560, 562 (Tex.App.- appellant may not object, for the first time on appeal, to
Dallas 1990, no writ) (once judge recused himself, he a procedural irregularity in the assignment of a former
could take no further action in the case except for good judge who is otherwise qualified.”). We conclude, based
cause stated in the order). Rule 18a(c)(2) states expressly on Wilson, that when an otherwise qualified assigned
that a challenged judge should not file a response to the judge renders an order in a criminal case that exceeds the
motion; it follows that a judge who has actually been authority conferred by his or her order of assignment, the
recused should not file a motion for reconsideration of order is erroneous, although not void.
that decision. See Mosley, 141 S.W.3d at 833 (stating that
a recused judge generally should have no communications In this case, the order of assignment by the presiding
with the judge ultimately assigned to the case). Any administrative judge provided as follows:
involvement by the recused judge after recusal can only
disserve the public policy of preserving public confidence Pursuant to Rule 18a, Texas Rules of Civil Procedure,
in the impartiality of the judiciary. See Carmody, 184 I [hereby] assign the:
S.W.3d at 422. We conclude that Judge Mullin should not
have filed the motion for reconsideration, and that Judge Honorable Sue Pirtle
Pirtle acted contrary to settled law when she granted the
Former Judge of The 382nd District Court
motion for reconsideration.
to the
2. The termination of Judge Pirtle's authority County Criminal Court # 5 of Dallas County, Texas
[11] In addition to the foregoing, we conclude that
Judge Pirtle exceeded her authority when she attempted This assignment is for the purpose of the assigned judge
to entertain Judge Mullin's motion for reconsideration hearing a Motion to Recuse as stated in the Conditions
after Judge Pirtle had decided the motion to recuse and of Assignment. This assignment is effective immediately
the presiding administrative judge had transferred and and shall continue for such time as may be necessary for
reassigned the case to a new judge in a new court. the assigned judge to hear and pass on such motion.
CONDITION(S) OF ASSIGNMENT:
[12] [13] “The terms of the assignment order control
the extent of the visiting judge's authority and when it Cause No. MA–10–6876: The State of Texas vs. Heidi
terminates.” Mangone v. State, 156 S.W.3d 137, 139– Amos.
40 (Tex.App.-Fort Worth 2005, pet. ref'd) (footnote

In re Amos, 397 S.W.3d 309 (2013)
therefore any failure to notify Judge Mullin of the recusal

Based on the language of this order, Judge Pirtle's hearing did not violate Judge Mullin's constitutional
authority in the case arguably expired on September 28, rights.
2012, when she ruled on Amos's motion to recuse. But we
need not decide this issue because in our view Judge Pirtle We conclude Amos has shown a clear right to relief from
definitely lost any authority she had on October 1, 2012, Judge Pirtle's order granting reconsideration of Amos's
when the presiding administrative judge transferred and motion to recuse.
reassigned Amos's criminal case to a new court, Dallas
County Criminal Court of Appeals No. 2. The transfer
order does not recognize or mention any continuing power C. Error preservation and adequate remedy at law
in Judge Pirtle to exercise any judicial authority in the case. [15] We next consider whether we should deny Amos's
Judge Pirtle's attempt to continue acting in the case after petition because she did not present any of her arguments
the case had been transferred in its entirety to a new judge to Judge Pirtle before filing this original proceeding. See
and court was improper and without authority. In re Watkins, 369 S.W.3d 702, 706 (Tex.App.-Dallas
2012, orig. proceeding). Under the particular facts of this
case, we conclude that Amos's failure to oppose or object
3. The State's response to Judge Pirtle's reconsideration order is excusable. The
[14] At our request, the State filed a response to Amos's record indicates that Judge Mullin served her motion for
petition. The State suggests that Judge Pirtle's order reconsideration by first-class mail on October 23, 2012,
granting reconsideration may have been proper as a way and Judge Pirtle granted reconsideration, apparently
of vindicating Judge Mullin's due-process rights. In her without a hearing, by order signed on Friday, October 26.
motion for reconsideration, Judge Mullin averred that Thus, depending on when Amos received the motion for
she had not been given notice of the recusal hearing reconsideration, she had little or no time to respond to
before Judge Pirtle, and she argued, among other things, the motion for reconsideration before Judge Pirtle granted
that the lack of notice violated her rights under the it. Moreover, Judge Pirtle's October 26 order set the new
Due Course of Law Clause of the Texas Constitution. hearing on Amos's motion to recuse at 10:00 a.m. on
See TEX. CONST. art. I, § 19. One element of a claim Thursday, November 1, again giving Amos little time to
under this clause is the existence of a constitutionally react. Amos's decision to seek emergency and mandamus
protected interest. See In re J.W.T., 872 S.W.2d 189, relief from this Court, which she did on October 30, was
194 (Tex.1994). Although the Texas Supreme Court has understandable under the circumstances. Although she
said that a public officer's interest in his or her elected could have presented her argument at the November 1
position is a protected interest, Tarrant Cnty. v. Ashmore, hearing, her contention is that Judge Pirtle could not
635 S.W.2d 417, 422 (Tex.1982), *316 we have found no properly set or conduct such a hearing in the first place.
authority that a trial judge's interest in presiding over a Under these circumstances, we conclude it is proper for us
particular case is constitutionally protected such that she to address the merits in this proceeding instead of directing
must be given notice of a hearing of a motion to recuse. In Amos to make her objections before Judge Pirtle, possibly
cases decided under the federal Due Process Clause, courts resulting in yet another original proceeding afterwards.
have held that possession of a constitutionally protected
interest in public employment generally does not give the [16] The court of criminal appeals has said that appeal
holder a protected interest in any particular job duties or is ordinarily an adequate remedy for an erroneous ruling
responsibilities. See Richards v. City of Weatherford, 145 on a motion to recuse. De Leon, 127 S.W.3d at 6. But
F.Supp.2d 786, 790–91 (N.D.Tex.2001), aff'd, 275 F.3d 46 Amos is not challenging an order granting or denying a
(5th Cir.2001). We generally construe the Due Course of motion to recuse; she is challenging an assigned judge's
Law Clause in the same way as its federal counterpart. consideration of an improper motion for reconsideration
Tex. Workers Comp. Comm'n v. Patient Advocates of filed by a recused judge. “ ‘If a district judge enters
Tex., 136 S.W.3d 643, 658 (Tex.2004). By analogy, Judge an order for which he has no authority, mandamus
Mullin had no protected interest in presiding over Amos's will issue.’ ” State ex rel. Cobb v. Godfrey, 739 S.W.2d
particular criminal case. We conclude that the order 47, 48 (Tex.Crim.App.1987) (orig. proceeding) (quoting
recusing Judge Mullin in a single case did not infringe any State ex rel. Holmes v. Denson, 671 S.W.2d 896, 899
interest protected by the Due Course of Law Clause, and (Tex.Crim.App.1984) (orig. proceeding)). In Godfrey, the

In re Amos, 397 S.W.3d 309 (2013)
trial judge attempted to grant a new trial after the authority over the case. In the civil context, mandamus
will lie when a court issues an order that actively
defendant's motion for new trial had been overruled by
interferes with the jurisdiction of another court possessing
operation of law. See id. at 47–48. The court of criminal
dominant jurisdiction. See In re Puig, 351 S.W.3d 301, 306
appeals granted mandamus relief, concluding *317 that
(Tex.2011) (orig. proceeding) (per curiam). We conclude
the judge lacked authority to take that action. Id. at 50.
that mandamus should issue to forestall any interference
with Judge Rosenfield's authority over this criminal case.
We conclude that mandamus is appropriate on the facts
of this case. Judge Mullin acted without authority when
she filed the motion for reconsideration, and Judge Pirtle
acted contrary to settled law when she granted the motion III. CONCLUSION
for reconsideration. If we withhold mandamus relief, any
further proceedings by Judge Pirtle will be improper, and For the foregoing reasons, we conditionally grant Amos's
any orders or judgments resulting from those proceedings petition for writ of mandamus. The writ will issue only
will be erroneous and subject to reversal, resulting in a if Judge Pirtle fails to vacate her October 26, 2012 Order
waste of judicial resources. Cf. De Leon, 127 S.W.3d at Granting Motion for Reconsideration of Order of Recusal
7 (indicating that mandamus may be appropriate where and Setting Hearing Date. We deny Amos's petition to the
reversal is so certain that a trial would be a waste extent she requests a writ of prohibition.
of judicial resources). Moreover, Judge Pirtle's attempt
to continue taking judicial action conflicts with the
All Citations
order of the presiding administrative judge transferring
Amos's case to Judge Rosenfield and interferes with his 397 S.W.3d 309
Footnotes
1 Counsel for the State testified in part, “I don't think that she [Judge Mullin] can be fair and impartial in your case with
Ms. Amos.”
2 Judge Mullin did not categorically state that she had no prior knowledge of the hearing.
3 The rule is the same in civil cases. See, e.g., Davis v. Crist Indus., Inc., 98 S.W.3d 338, 341 (Tex.App.-Fort Worth
2003, pet. denied) (“The terms of the assignment order control[ ] the extent of the visiting judge's authority and when
it terminates.”).

In re Christus Spohn Health System Corp., 231 S.W.3d 475 (2007)

231 S.W.3d 475
Corpus Christi–Edinburg. [2] Mandamus
Presumptions and Burden of Proof
In re CHRISTUS SPOHN HEALTH The relator requesting a writ of mandamus
SYSTEM CORPORATION d/b/ has the burden to establish that the trial court
a Christus Spohn Hospital Shoreline. abused its discretion.
No. 13–07–399–CV. Cases that cite this headnote

|
July 31, 2007.
[3] Mandamus
Synopsis Acts and Proceedings of Courts, Judges,
Background: Decedent's survivors brought wrongful and Judicial Officers
death action against decedent's former employer arising Mandamus
out of murder in employer's parking garage. Employer Civil Proceedings Other Than Actions
filed motion to compel arbitration. The trial court If a trial court erroneously denies a party's
denied the motion, and employer petitioned for writ of motion to compel arbitration under the
mandamus. Federal Arbitration Act (FAA), the movant
has no adequate remedy at law and is entitled
to a writ of mandamus.
Holdings: The Court of Appeals, Corpus Christi–
Edinburg, Valdez, C.J., held that:
[1] employer substantially invoked the judicial process, [4] Alternative Dispute Resolution
and Evidence
There is a strong presumption against waiver
[2] survivors were prejudiced by employer's action. of arbitration rights.

Writ denied.

Evidence
West Headnotes (23) A heavy burden of proof is required to
establish waiver of arbitration rights, and
[1] Mandamus the court must resolve all doubt in favor of
Remedy by Appeal or Writ of Error arbitration.
Mandamus Cases that cite this headnote

Matters of Discretion
A writ of mandamus will issue to correct a
clear abuse of discretion when there is no
Trial or Hearing
adequate remedy by appeal; a trial court
abuses its discretion if it reaches a decision so Whether a party has waived its contractual
arbitrary and unreasonable as to amount to a right to arbitrate is a question of law.
clear and prejudicial error of law or if it clearly 1 Cases that cite this headnote
fails to correctly analyze or apply the law.

opposing party proved that it suffered

[7] Alternative Dispute Resolution prejudice as a result.
Waiver or Estoppel
Waiver of the right to arbitration may be 2 Cases that cite this headnote
express or implied.
Suing or Participating in Suit
The judicial process has been substantially
[8] Alternative Dispute Resolution invoked such that a right to arbitration
Waiver or Estoppel has been waived when the party seeking
Whether waiver of the right to arbitration has arbitration has taken specific and deliberate
occurred depends on the individual facts and actions, after the filing of suit, that are
circumstances of each case. inconsistent with a right to arbitrate or
has actively tried, but failed, to achieve a
Cases that cite this headnote satisfactory result through litigation before
turning to arbitration.
Waiver or Estoppel
Waiver of the right to arbitration occurs only
where a party has acted inconsistently with its [14] Alternative Dispute Resolution
right to arbitrate and such actions prejudiced Suing or Participating in Suit
the other party. Actions that are inconsistent with the right to
arbitrate and thus raise the issue of waiver of
Cases that cite this headnote that right may include some combination of
filing an answer, setting up a counterclaim,
[10] Alternative Dispute Resolution pursuing extensive discovery, moving for a
Suing or Participating in Suit continuance, and failing to timely request
A party waives an arbitration clause when it arbitration.
substantially invokes the judicial process to
the other party's detriment.

[11] Alternative Dispute Resolution Examples that indicate the party is attempting
Waiver or Estoppel to achieve a satisfactory result through
Waiver of an arbitration right must be litigation before turning to arbitration such
intentional. that the right to arbitration is waived include
moving for summary judgment or seeking a
Cases that cite this headnote final resolution of the dispute.

The test for determining waiver of the right
to arbitration is two-pronged: (1) whether
the party seeking arbitration substantially Attempts at settlement do not evidence waiver
invoked the judicial process, and (2) whether of the right to arbitration.

opponent's incurring costs and fees due to the

Cases that cite this headnote movant's actions or delay.

Waiver or Estoppel
Delay alone generally does not establish [22] Alternative Dispute Resolution
waiver of the right to arbitration. Suing or Participating in Suit
Decedent's employer substantially invoked
Cases that cite this headnote the judicial process for purposes of waiver
of right to arbitration in wrongful death
[18] Alternative Dispute Resolution action brought by decedent's survivors, where
Suing or Participating in Suit employer did not request arbitration until
14 months after lawsuit was filed, two
Purely defensive measures do not
separate trial settings had been passed and the
substantially invoke the judicial process as
matter had already been set for trial a third
required to waive a right to arbitration.
time, at employer's request, before employer
2 Cases that cite this headnote moved to compel arbitration, employer had
sought substantive discovery on the merits,
pertaining to both liability and damages,
through numerous discovery requests and
motions, and employer had filed a third-party
A party does not substantially invoke petition, had filed a motion for contempt,
the judicial process and waive a right and had attempted to impose sanctions which
to arbitration merely by participating in suggested that it was attempting to achieve
discovery; in contrast, pursuing extensive a satisfactory result through the judicial
discovery may substantially invoke the process.
judicial process.

[20] Alternative Dispute Resolution Suing or Participating in Suit
Decedent's survivors were prejudiced by
Even when a party has substantially invoked employer's act in invoking the judicial
the judicial process, a party's right to process such that employer waived right
arbitration is not waived absent a clear to arbitration in wrongful death action;
showing that the opposing party has been survivors' counsel testified by affidavit as
prejudiced. to the expenses incurred and the time
spend on depositions and discovery, that
he would have used a different discovery
strategy had employer timely requested
[21] Alternative Dispute Resolution arbitration, and that he would have limited
Waiver or Estoppel the depositions and expenses incurred because
In determining whether a party has been of the limits customarily proposed in
prejudiced such that the right to arbitration arbitration proceedings, and survivor testified
has been waived, courts focus on factors such by affidavit that he and his children had been
as: (1) the movant's access to information that receiving counseling and were expecting the
is not discoverable in arbitration and (2) the matter to be resolved.

(orig.proceeding); Serv. Corp. Int'l v. Lopez, 162 S.W.3d

Cases that cite this headnote 801, 808 (Tex.App.-Corpus Christi 2005, no pet.).
II. Background
This is a premises liability case. Debra Slough worked
*477 Charles W. Hurd, III, Joy M. Soloway, Fulbright
as a nurse at Christus Spohn Shoreline. Jesus Alvarez
& Jaworski, Christine Kirchner, Jennifer Simons, Stephen
abducted Slough from Christus Spohn's parking garage
J. Knight, Chamberlain, Hrdlicka, White, Williams &
and murdered her. Debra Slough's husband, Corey
Martin, Houston, Darrell L. Barger, Hartline, Dacus,
Slough, filed suit against Christus Spohn individually and
Barger, Dreyer, Corpus Christi, for relator.
on behalf of their three minor children. Relator contends
David T. Bright, Watts Law Firm, Robert C. Hilliard, that the trial court erred in failing to grant its motion
Hilliard & Munoz, Corpus Christi, for real party in to compel arbitration based on an arbitration clause
interest. included in its employee benefit plan. Real parties in
interest contend, inter alia, that there is neither a valid
Before Chief Justice VALDEZ and Justices BENAVIDES arbitration agreement nor that their claims fall within
and VELA. the scope of that agreement. Real parties in interest raise
further defenses to arbitration, including waiver, estoppel,
and procedural and substantive unconscionability. We
OPINION conclude that the issue of waiver is dispositive of this
matter. See Tex.R.App. P. 47.1.
Opinion by Chief Justice VALDEZ.
Relator, Christus Spohn Health System Corporation d/

b/a Christus Spohn Hospital Shoreline, seeks a writ of III. Applicable Law
mandamus ordering the trial court to compel arbitration
[4] [5] [6] [7] [8] There is a strong presumption
of a wrongful death claim brought by real parties in
against waiver of arbitration rights. In re Bank One, 216
interest, the family of a deceased employee. We deny the
S.W.3d 825, 827 (Tex.2007); In re D. Wilson Constr.
petition for writ of mandamus.
Co., 196 S.W.3d 774, 783 (Tex.2006) (orig.proceeding);
see In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 763
(Tex.2006) (orig.proceeding). A “heavy burden of proof”
I. Standard of Review is required to establish waiver of arbitration rights, and
the court must resolve all doubt in favor of arbitration. In
[1] [2] [3] A writ of mandamus will issue to correct
re Bruce Terminix Co., 988 S.W.2d 702, 702 (Tex.1998).
a clear abuse of discretion when there is no adequate
Whether a party has waived its contractual right to
remedy by appeal. See Walker v. Packer, 827 S.W.2d 833,
arbitrate is a question of law. See In re Oakwood Mobile
840 (Tex.1992). A trial court abuses its discretion if it
Homes, 987 S.W.2d 571, 574 (Tex.1999) (orig.proceeding).
reaches a decision so arbitrary and unreasonable as to
Waiver may be express or implied. EZ Pawn Corp. v.
amount to a clear and prejudicial error of law or if it
Mancias, 934 S.W.2d 87, 89 (Tex.1996) (orig.proceeding);
clearly fails to correctly analyze or apply the law. In re
Southwind Group, Inc. v. Landwehr, 188 S.W.3d 730,
Ford Motor Co., 165 S.W.3d 315, 317 (Tex.2005). The
735 (Tex.App.-Eastland 2006, orig. proceeding). Whether
relator has the burden to establish that the trial court
waiver has occurred depends on the individual facts and
abused its discretion. See id. If a trial court erroneously
circumstances of each case. Southwind Group, Inc., 188
denies a party's motion to compel arbitration under the
S.W.3d at 735; Williams Indus., Inc. v. Earth Dev. Sys.
FAA, the movant has no adequate remedy at law and
Corp., 110 S.W.3d 131, 135 (Tex.App.-Houston [1st Dist.]
is entitled *478 to a writ of mandamus. In re Nexion
2003, no pet.); Sedillo v. Campbell, 5 S.W.3d 824, 827
Health at Humble, Inc., 173 S.W.3d 67, 69 (Tex.2005)
(Tex.App.-Houston [14th Dist.] 1999, no pet.).

[9] [10] [11] [12] Waiver occurs only where “a partydispute. Williams Indus., Inc., 110 S.W.3d at 135. In this
has acted inconsistently with its right to arbitrate and regard, we would note that attempts at settlement do not
such actions prejudiced the other party.” In re Oakwood evidence waiver. In re Certain Underwriters at Lloyd's, 18
Homes, 987 S.W.2d at 574. Stated differently, “a party S.W.3d at 876; D. Wilson Constr. Co. v. McAllen Indep.
waives an arbitration clause when it substantially invokes Sch. Dist., 848 S.W.2d 226, 230 (Tex.App.-Corpus Christi
the judicial process to the other party's detriment.” In re 1992, writ dism'd w.o.j.).
Bank One, 216 S.W.3d at 827; see In re Vesta, 192 S.W.3d
at 763. Waiver of an arbitration right must be intentional. [17] [18] [19] Delay alone generally does not establish
In re Bank One, 216 S.W.3d at 827; EZ Pawn Corp., waiver. In re Vesta, 192 S.W.3d at 763. Similarly, purely
934 S.W.2d at 89; In re Certain Underwriters at Lloyd's, defensive measures do not substantially invoke the judicial
18 S.W.3d 867, 872 (Tex.App.-Beaumont 2000, orig. process. See Transwestern Pipeline Co. v. Horizon Oil &
proceeding). Therefore, the test for determining waiver Gas Co., 809 S.W.2d 589, 593 (Tex.App.-Dallas 1991,
is two-pronged: (1) did the party seeking arbitration writ dism'd w.o.j.) (citing filing of general denial to
substantially invoke the judicial process, and (2) did the preclude default judgment and filing of protective order
opposing party prove that it suffered prejudice as a result. in response to discovery request as examples of defensive
Perry Homes v. Cull, 173 S.W.3d 565, 569–70 (Tex.App.- measures); see also In re Serv. Corp. Int'l, 85 S.W.3d 171,
Fort Worth 2005, pet. granted). 174 (Tex.2002) (orig.proceeding) (holding that objecting
to trial setting showed intent to avoid rather than to
[13] The judicial process has been substantially invoked participate in judicial process). A party does not, for
when the party seeking arbitration has taken specific instance, substantially invoke the judicial process merely
and deliberate actions, after the filing of suit, that are by participating in discovery. In re Bruce Terminix Co.,
inconsistent with a right to arbitrate or has actively 988 S.W.2d at 704; Southwind Group, Inc., 188 S.W.3d
tried, but failed, to achieve a satisfactory result through at 736–737; In re Nasr, 50 S.W.3d 23, 27 (Tex.App.-
litigation before turning to arbitration. In re Vesta Group, Beaumont 2001, orig. proceeding). In contrast, pursuing
*479 Inc., 192 S.W.3d at 763; Williams Indus., 110 extensive discovery may substantially invoke the judicial
S.W.3d at 135. Compare Sedillo, 5 S.W.3d at 827 (waiver process. Southwind Group, Inc., 188 S.W.3d at 736–737;
may occur when a party has taken specific and deliberate Nationwide of Bryan, Inc., 969 S.W.2d at 522.
acts after suit has been filed that are inconsistent with the
right to arbitrate), and Nationwide of Bryan v. Dyer, 969 [20] [21] Even when a party has substantially invoked
S.W.2d 518, 521 (Tex.App.-Austin 1998, no pet.) (same), the judicial process, a party's right to arbitration is not
with Grand Homes 96, L.P. v. Loudermilk, 208 S.W.3d 696, waived absent a clear showing that the opposing party has
703–704 (Tex.App.-Fort Worth 2006, pet. filed) (waiver been prejudiced. See In re Vesta Ins. Group, 192 S.W.3d
may occur when a party has actively tried, but failed, to at 763; In re Bruce Terminix Co., 988 S.W.2d at 704. In
achieve a satisfactory result in litigation before turning determining whether or not a party has been prejudiced,
to arbitration); Southwind Group, Inc., 188 S.W.3d at 736 courts focus on factors such as: (1) the movant's access to
(same); Williams Indus., Inc., 110 S.W.3d at 135 (same). information that is not discoverable in arbitration; and (2)
the opponent's incurring costs and fees due to the movant's
[14] [15] [16] Actions that are inconsistent with the actions or delay. See In re Bruce Terminix Co., 988 S.W.2d
right to arbitrate and thus raise the issue of waiver may at 704; Southwind Group, Inc., 188 S.W.3d at 737; Williams
include some combination of filing an answer, setting up Indus., Inc., 110 S.W.3d at 135.
a counterclaim, pursuing extensive discovery, moving for
a continuance, and failing to timely request arbitration.
See In re Certain Underwriters at Lloyd's, 18 S.W.3d at
IV. Analysis
872–873; Sedillo, 5 S.W.3d at 827; Central Nat'l Ins. Co.
v. Lerner, 856 S.W.2d 492, 494 (Tex.App.-Houston [1st We now turn to the procedural history of this matter. The
Dist.] 1993, orig. proceeding). Examples that indicate the underlying lawsuit was originally filed on December 16,
party is attempting to achieve a satisfactory result through 2005. Spohn did not move to compel arbitration *480
litigation before turning to arbitration include moving for until February 8, 2007, after the case had been set for
summary judgment or seeking a final resolution of the trial on three separate dates and almost fourteen months

after the inception of the lawsuit. Spohn filed an amended mentioning *481 an alleged right to arbitration, Spohn
motion to compel arbitration on February 22, 2007. The presented seventeen of its employees for deposition.
trial court heard arguments on the motion to compel
arbitration on March 2, 2007, and requested supplemental The parties, including Spohn, sought affirmative relief
briefing, which was subsequently filed in April and May. regarding their discovery efforts. In the criminal cause
On June 20, 2007, Spohn filed a petition for writ of pending against Jesus Alvarez filed in the 156th District
mandamus complaining of the trial court's failure to rule Court of Bee County, Texas, Spohn moved to hold
and argued that the trial court's failure to rule was a denial counsel for real parties in interest in contempt of court
of the motion to compel “[f]or all practical purposes.” The based on alleged discovery abuse. While we ordinarily
trial court entered an order denying Spohn's motion to would not consider actions in a separate cause as
compel arbitration on June 28, 2007. During the fourteen- indicative of waiver, we would note that Spohn's motion
month interval before the motion to compel arbitration for contempt expressly stated that:
was filed, the parties substantially litigated this case. The
real parties added an additional defendant to the lawsuit, Movant seeks a contempt finding
and Spohn filed a motion for leave to designate Jesus from this Court, so it may
Alvarez as a responsible third party and filed an original present such finding to [respondent
third party petition seeking to add claims against Jesus in this underlying proceeding] in
Alvarez to the lawsuit. Spohn also applied for a temporary connection with various steps civil
restraining order and temporary injunction against real defense counsel will take to suppress
parties in interest, which were granted by the trial court. the use of the improperly obtained
video and/or transcript of Mr.
As mentioned previously, the matter was set for trial on Alvarez's sworn statement, for any
no less than three occasions before Spohn first mentioned purpose, in the civil matter.
the issue of arbitration. Spohn participated in a docket
Accordingly, we construe Spohn's actions in this separate
control conference and a docket control order was entered
lawsuit as part of its strategic plan of defense in the
setting this matter for trial on December 3, 2006, with an
underlying matter that would be inconsistent with a right
alternate setting for April 2, 2007. After plaintiffs added
to arbitrate. Moreover, real parties in interest sought and
an additional defendant, the parties agreed to pass the
received sanctions against Spohn in the instant case for its
December setting and proceed with the April 2, 2007
failure to identify persons with relevant knowledge and its
setting. On January 3, 2007, Spohn filed a verified motion
representations regarding the lack of video surveillance of
for continuance, requesting that the trial date be reset, and
Spohn's premises, when it possessed, but failed to identify
also requested entry of a Level III discovery plan. The
or produce, video surveillance of Spohn's premises on the
trial court granted Spohn's motion for continuance and,
date of Debra Slough's abduction and murder.
on January 8, 2007, reset the case for trial in August of
2007.
Finally, counsel for real parties in interest testified, by
affidavit, that he had asked counsel for Spohn early
During this same fourteen-month period of time before
in the litigation whether there were any reasons real
Spohn moved to compel arbitration, the parties engaged
parties could not bring the claims set out in their petition
in voluminous discovery. Spohn initiated and commenced
because he was concerned that Spohn might consider
a significant amount of affirmative discovery. In addition
decedent Debra Slough to be an employee within the
to standard requests for disclosure, Spohn sent seven
course and scope of her employment, and thus subject
separate sets of written discovery to real parties in
to the employee benefit plan containing the arbitration
interest. These discovery requests, which are part of
agreement. Counsel stated that Spohn repeatedly and
the record, are substantive and address the merits of
expressly denied this. Counsel for Spohn also took the
the case, including both liability and damage issues. 1 position that Slough's murder did not qualify as an
Spohn also ordered nineteen sets of business records from “event” under the employee benefit plan because of a
third parties. Spohn filed numerous discovery motions, “criminal act by a third party.” Further, Spohn has denied
including eight motions to compel, and requested entry any benefits to the Slough family under the employee
of an agreed protective order. Without referencing or benefit plan.

$60,000 to $70,000 in expenses in developing this matter

[22] Considering the individual facts and circumstances for trial. Counsel further testified that he and co-counsel
of this case, we conclude that Spohn substantially spent more than 1,000 hours on the case in preparing
invoked the judicial process. Although delay alone does it for trial, and, estimating their hourly rate at $350
not establish waiver, fourteen months passed before per hour, had invested more than $350,000 in attorney's
Christus moved to compel arbitration, and, under these fees. Counsel deposed seventeen witnesses before Spohn
circumstances, we would conclude that Spohn failed to moved to compel arbitration and ordered records through
timely request arbitration. See In re Certain Underwriters depositions on written questions from twenty-three non-
at Lloyd's, 18 S.W.3d at 872–873; Sedillo, 5 S.W.3d at 827. parties. Counsel propounded twelve substantive sets of
Two separate trial settings had been passed and the matter written discovery to Spohn. Counsel testified that, had
had already been set for trial a third time, at Spohn's Spohn requested arbitration before discovery, he would
request via a verified motion for continuance, before have used a different discovery strategy and limited
Spohn moved to compel arbitration. Cf. Interconex, Inc. the depositions and expenses incurred because of the
v. Ugarov, 224 S.W.3d 523, 534–35 (Tex.App.-Houston limits customarily proposed in arbitration proceedings.
[1st Dist.] 2007, no pet.) (movant acted inconsistently with Counsel further testified that Spohn's failure to identify
its right to arbitrate when it requested that the case be fact witnesses and failure to acknowledge the existence of,
reset and failed to file a motion to compel arbitration until or produce, video surveillance of its premises on the date
shortly before trial, which it had specifically requested of the incident, greatly increased the time and expense of
and caused to be set at a certain date). According to this lawsuit. Finally, counsel for real parties testified that
the written discovery contained in the record, Spohn he had relied on representations by Spohn's counsel that
sought substantive discovery on the merits, pertaining to this was not an “event” under Spohn's plan because of a
both liability and damages, through numerous discovery “criminal act by a third party.”
requests and motions. Southwind Group, Inc., 188 S.W.3d
at 736–737; Nationwide of Bryan, Inc., 969 S.W.2d at Corey Slough testified by affidavit that he and his children
522. Moreover, Spohn's third-party petition, motion for were expecting this matter to be resolved by trial in
contempt, and attempt to impose sanctions constitute April or August, and having to continue this matter via
specific and deliberate actions that are inconsistent *482 arbitration, with no specific end date in sight, would be
with the right to arbitrate and suggest that Spohn was “highly prejudicial and detrimental” to him and his three
attempting to achieve a satisfactory result through the daughters. “We have been receiving counseling to get
judicial process. through this ordeal, and it will be very prejudicial for this
to keep going because of Spohn's agreement to the trial
While none of these factors alone would establish waiver setting, and now trying to back out of it....”
of the right to arbitration, the combination herein does.
See In re Certain Underwriters at Lloyd's, 18 S.W.3d at Based on the record, we conclude that real parties in
872–873; Sedillo, 5 S.W.3d at 827; Central Nat'l Ins. Co. interest have made a clear showing of prejudice. See In re
v. Lerner, 856 S.W.2d 492, 494 (Tex.App.-Houston [1st Vesta Ins. Group, 192 S.W.3d at 763.
Dist.] 1993, orig. proceeding).
[23] Having determined that Spohn substantially

V. Conclusion
invoked the judicial process, we next consider whether
real parties in interest have made a clear showing that Even given the strong presumption against waiver, we
they have been prejudiced. See In re Vesta Ins. Group, 192 conclude that Spohn substantially invoked the judicial
S.W.3d at 763; In re Bruce Terminix Co., 988 S.W.2d at process to its opponents' detriment. Real parties in interest
704. have identified acts by Spohn that are inconsistent with
its right to arbitrate and have further shown resultant
In the instant case, counsel for real parties in interest prejudice on their part. Accordingly, the Court, having
testified by affidavit that compelling arbitration would examined and fully considered the petition for writ
“greatly prejudice” real parties in interest. Counsel of mandamus and response thereto is of the opinion
testified that real parties in interest spent approximately that relator has not shown itself entitled to the relief

sought. Accordingly, the petition for writ of mandamus All Citations

is DENIED. See Tex.R.App. P. 52.8(a). Any pending
motions are dismissed as moot. 231 S.W.3d 475
Footnotes
1 Written discovery propounded by Spohn includes: (1) Spohn's first set of interrogatories and first request for production
to Corey Slough, individually (thirteen interrogatories and thirteen requests for production); (2) Spohn's first request for
production to Corey Slough, as representative of the estate of Debra Slough, deceased (nine interrogatories); (3) Spohn's
second request for production and first set of interrogatories to Corey Slough, as representative of the estate of Debra
Slough, deceased (seven requests for production and one interrogatory); (4) Spohn's third request for production to Corey
Slough, as representative of the estate of Debra Slough, deceased (twelve requests for production); (5) Spohn's first set
of interrogatories and requests for production to Corey Slough, as next friend to Katelyn Slough (fourteen interrogatories
and ten requests for production); (6) Spohn's first set of interrogatories and requests for production to plaintiff, Corey
Slough, as next friend to Holly Slough (same); and (7) Spohn's first set of interrogatories and requests for production to
plaintiff, Corey Slough, as next friend to Stacey Slough (same).

In re Fleetwood Homes of Texas, L.P., 257 S.W.3d 692 (2008)
51 Tex. Sup. Ct. J. 1066
A party waives an arbitration clause in a

contract by substantially invoking the judicial
KeyCite Yellow Flag - Negative Treatment process to the other party's detriment or
Distinguished by El Paso Healthcare System, Ltd. v. Green, Tex.App.-
prejudice.
El Paso, February 29, 2016
257 S.W.3d 692 19 Cases that cite this headnote
In re FLEETWOOD HOMES OF TEXAS, L.P. [3] Alternative Dispute Resolution

and Fleetwood Enterprises, Inc., Relators. Waiver, laches, or estoppel
Waiver of the contractual right to arbitration
No. 06–0943. is a legal question for the court, based on the
| totality of the circumstances.
June 20, 2008.
Synopsis
Background: Owner of mobile home parks brought
action against manufacturer of mobile homes, relating to [4] Alternative Dispute Resolution
manufacturer's cancellation of parties' dealer agreement. Suing or participating in suit
The 278th District Court, Walker County, Kenneth Defendant manufacturer of mobile homes did
H. Keeling, J., denied defendant's motion to compel not impliedly waive its right to arbitration,
arbitration. Manufacturer petitioned for writ of under dealer agreement with plaintiff owner
mandamus. The Waco Court of Appeals, 2006 WL of mobile home parks, by failing to pursue
3028222, denied the petition. Manufacturer petitioned for its arbitration demand for eight months
writ of mandamus. while discussing a trial setting and allowing
limited discovery, where plaintiff was not
prejudiced; defendant took no depositions
and instead merely noticed one deposition
[Holding:] The Supreme Court held that defendant did not
before canceling it and merely served one set
impliedly waive its contractual right to arbitration.
of written discovery the day before it moved
to compel arbitration, and defendant filed no
Writ conditionally granted. dispositive motions, nor did it wait until eve of
trial to move to compel.

West Headnotes (7)
[1] Alternative Dispute Resolution Unconscionability
Suing or participating in suit Arbitration clause of dealer agreement
Parties that conduct full discovery, file between manufacturer of mobile homes
motions going to the merits, and seek and owner of mobile home parks was
arbitration only on the eve of trial waive any not substantively unconscionable, though it
contractual right to arbitration. limited both parties' right to discovery; limited
discovery was one of arbitration's most
17 Cases that cite this headnote distinctive features.

[6] Costs
Prevailing party

51 Tex. Sup. Ct. J. 1066
Absent a contractual agreement, Texas law home parks in southeast Texas that also sells and leases
allows attorney fees only for a prevailing mobile homes. The agreement included an arbitration
plaintiff. V.T.C.A., Civil Practice & Remedies clause covering “any dispute, controversy or claim among
Code §§ 38.001, 38.002. the Parties.” In August 2005 Fleetwood cancelled the
agreement on the ground that Gulf was planning to sell or
3 Cases that cite this headnote use mobile homes at a location other than that specified
in the dealer agreement.
Unconscionability After Gulf filed suit in October 2005, Fleetwood filed
an answer demanding arbitration, *694 but did not
Arbitration clause of dealer agreement
actually move to compel arbitration until July 2006. Gulf
between manufacturer of mobile homes and
opposed the motion on two grounds: express waiver and
owner of mobile home parks, allowing either
unconscionability.
party to recover attorney fees as prevailing
party, was not substantively unconscionable.
[2] [3] “[A] party waives an arbitration clause by
2 Cases that cite this headnote substantially invoking the judicial process to the other
party's detriment or prejudice.” Perry Homes v. Cull, 2008
WL 1922978, at *4, 258 S.W.3d 589, 590 (Tex.2008).
Waiver is a legal question for the court based on the
Attorneys and Law Firms totality of the circumstances, and asks whether a party has
substantially invoked the judicial process to an opponent's
*693 Michael J. Craddock, Felicia Norvell, David detriment, the latter term meaning inherent unfairness
Charles Routzon Jr., Craddock Reneker & Davis, L.L.P., caused by “a party's attempt to have it both ways by
Rachel Elizabeth Khirallah, Dallas, TX, for Relator. switching between litigation and arbitration to its own
advantage.” Id. 2008 WL 1922978, at *8, at 596.
Michael Allen Starzyk, April Lee Walter, Starzyk &
Associates, P.C., Alan M. Bush, Woodlands, TX, for Real Gulf argues that Fleetwood expressly waived arbitration,
Party in Interest. pointing to several emails from Fleetwood's counsel
regarding a proposed trial setting, culminating in the
Opinion
following:
PER CURIAM.
I have reviewed the Setting Request
[1] Parties that “conduct full discovery, file motions and would ask that we try to
going to the merits, and seek arbitration only on the get a setting in March.... Given
eve of trial” waive any contractual right to arbitration. the documentation I received last
In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 764 week and the work we need to
(Tex.2006). The relators here did none of those, instead do as a result of those documents,
merely discussing a potential trial setting and sending Fleetwood is not going to be in
a set of written discovery the day before moving to a position to try this case in
compel arbitration. The trial court held the relators December. If you are agreeable to
waived arbitration, and a divided court of appeals denied this, we could sign an agreed Setting
mandamus relief. 2006 WL 3028222. We disagree, and Request, otherwise, I will have to
thus conditionally grant it. See In re Weekley, 180 S.W.3d oppose the request after you submit
127, 130 (Tex.2005) (“Mandamus relief is proper to it and request a later setting.
enforce arbitration agreements governed by the FAA.”).
We need not decide whether Gulf is correct that express
waiver is governed by different rules than those that
Fleetwood Enterprises, Inc., manufactures mobile homes.
govern implied waiver, as we disagree that this rises to the
In January 2005 it signed a dealer agreement with Gulf
level of an express waiver. Nothing in this communication
Regional Services, Inc., an owner and developer of mobile

51 Tex. Sup. Ct. J. 1066
expressly waives arbitration or revokes the arbitration arbitration limits its right to discovery. But limited
discovery is one of arbitration's “most distinctive
demand Fleetwood included in every answer it filed.
features.” Perry Homes, 2008 WL 1922978, at *9, 258
S.W.3d at 587; see also Preston v. Ferrer, 552 U.S.
[4] Instead, the question here is whether Fleetwood
346, ––––, 128 S.Ct. 978, 169 L.Ed.2d 917 (2008) (“A
impliedly waived arbitration by failing to pursue its
prime objective of an agreement to arbitrate is to achieve
arbitration demand for eight months while discussing
streamlined proceedings and expeditious results.”). Gulf's
a trial setting and allowing limited discovery. We have
argument that “streamlined” discovery makes arbitration
already answered that question “No.” In EZ Pawn Corp.
unconscionable would nullify almost all arbitration
v. Mancias, we held a party had not waived arbitration
agreements. We hold that arbitration's limits on discovery
by filing an answer, discussing a docket-control order,
for both parties does not make it unconscionable. See In re
sending written discovery, noticing a deposition, and
Palm Harbor Homes, Inc., 195 S.W.3d 672, 678 (Tex.2006)
agreeing to postpone a trial setting. 934 S.W.2d 87, 90
(“The test for substantive unconscionability is whether,
(Tex.1996). Gulf points out correctly that the movant in
given the parties' general commercial background and
EZ Pawn had not yet “discovered” the arbitration clause
the commercial needs of the particular trade or case, the
until after these actions had already taken place. Id. at 89.
clause involved is so one-sided that it is unconscionable
But our opinion was based on the nonmovant's failure to
under the circumstances existing when the parties made
show any prejudice, id. at 90, a requirement we recently
the contract.” (internal quotation marks omitted)).
reaffirmed. See Perry Homes, 2008 WL 1922978, at *7,
258 S.W.3d at 595.
[6] [7] Second, Gulf asserts the agreement here is
unconscionable because it allows the prevailing party to
As in EZ Pawn, the evidence here is legally insufficient
recover attorney's fees. It is true that absent a contractual
to support a finding of prejudice. Gulf does not
agreement like this, Texas law allows attorney's fees
explain how it possibly could have been prejudiced by
only for a prevailing plaintiff. See TEX. CIV. PRAC. &
exchanging emails about a trial setting. Moreover, while
REM.CODE § 3 8.001–.002. But allowing both parties to
these communications are a factor to be considered in
recover fees hardly makes an agreement “one-sided”; such
the totality-of-the-circumstances, they are not the only
agreements, common in commercial contexts, surely make
factors. See id. 2008 WL 1922978, at *10, at 599. Here,
them less so.
Fleetwood took no depositions, although it noticed one
deposition before cancelling it. 1 It served one set of
Because Gulf has failed to show that Fleetwood waived
written discovery the day before it moved to compel
its contractual right to arbitration, we conditionally grant
arbitration. It filed no dispositive motions, nor did it
Fleetwood's petition for writ of mandamus and direct the
wait until the eve of *695 trial to move to compel.
trial court to compel arbitration. We are confident that the
Taken together, these actions are not enough to overcome
trial court will promptly comply, and our writ will issue
the presumption against waiver. See In re Vesta Ins.
only if it does not.
Group, Inc., 192 S.W.3d 759, 763 (Tex.2006); In re Bruce
Terminix, 988 S.W.2d 702, 704 (Tex.1998).
All Citations
[5] Gulf also argues the arbitration clause is substantively
unconscionable, citing two reasons. First, it asserts that 257 S.W.3d 692, 51 Tex. Sup. Ct. J. 1066
Footnotes
1 Gulf deposed three Fleetwood representatives, but does not explain how it was prejudiced in being allowed to do so. See
Perry Homes, 2008 WL 1922978, at *10, 258 S.W.3d at 599 (“[A] party who requests lots of discovery is not prejudiced by
getting it and taking it to arbitration in the same way [as] a party who produces lots of discovery ....”) (emphasis in original).

In re Flores, Not Reported in S.W.3d (2016)
2016 WL 890969
to cover mass murder, computer crimes resulting in mass

murder, and mass murder which could be constituted
2016 WL 890969
as a threat to the public interest of health and safety.”
Relator's petition for writ of mandamus does not comply
SEE TX R RAP RULE 47.2 FOR with the rules of appellate procedure. It does not include
DESIGNATION AND SIGNING OF OPINIONS. the certification required by rule 52.3(j) and does not
include an appendix or record. See TEX.R.APP. P.
Court of Appeals of Texas, 52.3(j), 52.3(k), 52.7(a). Although these deficiencies alone
Dallas. are sufficient to deny the petition, see In re Butler, 270
S.W.3d 757, 759 (Tex.App.—Dallas 2008, no pet.), in the
In re Eric Flores, Relator
interest of judicial economy, we consider the petition.
No. 05–16–00210–CV
Mandamus relief is appropriate in a criminal case only
|
when a relator establishes (1) that he has no adequate
Opinion Filed March 9, 2016
remedy at law to redress his alleged harm, and (2)
Original Proceeding from the 416th Judicial District that what he seeks to compel is a ministerial act, not
Court, Collin County, Texas, Trial Court Cause No. 416– a discretionary or judicial decision. In re Allen, 462
81913–2015 S.W.3d 47, 49 (Tex.Crim.App.2015) (orig.proceeding).
The parties to a criminal case are the State and the
Attorneys and Law Firms accused, and no third party may intervene in a criminal
case. In re Amos, 397 S.W.3d 309, 314 (Tex.App.—Dallas
Eric Flores, El Paso, TX, for relator.
2013, orig. proceeding); see also In re Wingfield, 171
Brian W. Wice, Houston, TX, for real party in interest. S.W.3d 374, 381 (Tex.App.—Tyler 2005, orig. proceeding)
(“Unlike the Rules of Civil Procedure, the Code of
Before Justices Bridges, Brown, and Stoddart Criminal Procedure makes no provision for a third party
to intervene in a ‘criminal action.’ ”). A trial court has
no discretion to consider issues raised by third parties in
MEMORANDUM OPINION a criminal case. In re Amos, 397 S.W.3d at 314; In re
Wingfield, 171 S.W.3d at 381. Thus, the trial court had
Opinion by Justice Stoddart no ministerial duty to allow relator to seek joinder of
additional offenses against the defendant in this case.
*1 In this petition for writ of mandamus relator, who
is an inmate, complains that the trial court has refused We DENY the petition for writ of mandamus.
to allow him to file a motion in a criminal case pending
against another criminal defendant “for joinder of certain
offense[s] stating that the defendant had also committed All Citations
other criminal offense[s] such as conspiracy of fabrication
Not Reported in S.W.3d, 2016 WL 890969

In re Kellogg Brown & Root, Inc., 166 S.W.3d 732 (2005)
48 Tex. Sup. Ct. J. 678

Distinguished by Zbranek Custom Homes, Ltd. v. Allbaugh, Tex.App.-
Austin, December 23, 2015
166 S.W.3d 732 [1] Action
Supreme Court of Texas. Moot, Hypothetical or Abstract
Questions
In re KELLOGG BROWN & ROOT, INC., Relator. Appeal and Error
Want of Actual Controversy
No. 03–1129.
A case becomes moot if a controversy ceases
|
to exist between the parties at any stage of the
Argued Dec. 1, 2004.
legal proceedings, including the appeal.
|
Decided May 20, 2005. 114 Cases that cite this headnote
Synopsis
Background: Second-tier subcontractor brought action [2] Alternative Dispute Resolution
against first-tier subcontractor and contractor to recover Review
damages on breach of contract and quantum meruit Conclusion of arbitration between contractor
theories and obtain a declaratory judgment on ownership and first-tier subcontractor did not render
of collateral and liens. Contractor moved to abate suit or moot second-tier subcontractor's challenge to
compel second-tier subcontractor to join arbitration with order compelling arbitration, even though
first-tier subcontractor despite second-tier subcontractor's court could no longer compel the second-tier
status as non-signatory. The District Court, Harris subcontractor to join the arbitration.
County, Mark D. Davidson, J., denied motion.
Contractor appealed and sought writ of mandamus. The Cases that cite this headnote
Houston Court of Appeals, First District, Evelyn V.
Keyes, J., 126 S.W.3d 176, conditionally granted writ
and ordered trial court to issue order compelling second-
Want of Actual Controversy
tier subcontractor to arbitrate. Second-tier subcontractor
petitioned for writ of mandamus. A case is not rendered moot simply because
some of the issues become moot during the
appellate process.
Holdings: The Supreme Court, Jefferson, C.J., held that: 28 Cases that cite this headnote
[1] conclusion of arbitration between contractor and

first-tier subcontractor did not render moot second-tier
Validity
subcontractor's challenge to order compelling arbitration,
and
Disputes and Matters Arbitrable Under
Agreement
[2] second-tier subcontractor was not required to arbitrate
its quantum meruit claim against contractor under direct In general, a party seeking to compel
benefits estoppel theory. arbitration under the Federal Arbitration Act
(FAA) must establish that: (1) there is a
valid arbitration agreement, and (2) the claims
Relief conditionally granted. raised fall within that agreement's scope. 9

48 Tex. Sup. Ct. J. 678
Persons Affected or Bound

Under certain circumstances, principles of
Construction in Favor of Arbitration
contract law and agency may bind a non-
Alternative Dispute Resolution signatory to an arbitration agreement. 9
Evidence U.S.C.A. § 1 et seq.
Doubts regarding an agreement's scope are
resolved in favor of arbitration because there 23 Cases that cite this headnote
is a presumption favoring agreements to
arbitrate under the Federal Arbitration Act [10] Alternative Dispute Resolution
(FAA). 9 U.S.C.A. § 1 et seq. Waiver or Estoppel
59 Cases that cite this headnote Estoppel

Contracts
Under “direct benefits estoppel,” a non-
signatory plaintiff seeking the benefits of
Constitutional and Statutory Provisions
a contract is estopped from simultaneously
and Rules of Court
attempting to avoid the contract's burdens,
Alternative Dispute Resolution such as the obligation to arbitrate disputes.
Evidence
The presumption in favor of agreements to 33 Cases that cite this headnote
arbitrate arises only after the party seeking
to compel arbitration proves that a valid [11] Alternative Dispute Resolution
arbitration agreement exists; the purpose of Waiver or Estoppel
the Federal Arbitration Act (FAA) is to make
A non-signatory plaintiff may be compelled
arbitration agreements as enforceable as other
by direct benefits estoppel to arbitrate if it
contracts, not more so. 9 U.S.C.A. § 1 et seq.
seeks to enforce terms of a contract containing
121 Cases that cite this headnote an arbitration provision.

What Law Governs
Under the Federal Arbitration Act (FAA), Waiver or Estoppel
ordinary principles of state contract law
If a non-signatory's claims can stand
determine whether there is a valid agreement
independently of the underlying contract, then
to arbitrate. 9 U.S.C.A. § 1 et seq.
arbitration generally should not be compelled
34 Cases that cite this headnote under theory of direct benefits estoppel.

Contractual or Consensual Basis
[13] Implied and Constructive Contracts
Because arbitration is contractual in nature, Work and Labor in General; Quantum
the Federal Arbitration Act (FAA) generally Meruit
does not require parties to arbitrate when they
“Quantum meruit” is an equitable remedy
have not agreed to do so. 9 U.S.C.A. § 1 et seq.
that is based upon the promise implied by
7 Cases that cite this headnote law to pay for beneficial services rendered and
knowingly accepted.
[9] Alternative Dispute Resolution 36 Cases that cite this headnote

48 Tex. Sup. Ct. J. 678
containing an arbitration provision, that

[14] Implied and Constructive Contracts relationship does not, in itself, bind the
Contract for Services non-signatory to the arbitration provision;
A party generally cannot recover under instead, a non-signatory should be compelled
quantum meruit when there is a valid contract to arbitrate a claim only if it seeks, through
covering the services or materials furnished. the claim, to derive a direct benefit from the
contract containing the arbitration provision.
[15] Implied and Constructive Contracts
Effect of Express Contract [19] Estoppel
A party to a contract may seek alternative Contracts
relief under both contract and quasi-contract Non-signatory second-tier subcontractor
theories. was not bound by arbitration clause
in contractor's agreement with first-tier
19 Cases that cite this headnote subcontractor and, therefore, was not
required to arbitrate its quantum meruit
[16] Alternative Dispute Resolution claim against contractor under direct
Disputes and Matters Arbitrable Under benefits estoppel theory; the second-tier
Agreement subcontractor's asserted right to payment
Alternative Dispute Resolution stemmed directly from the agreement with
Pleading the first-tier subcontractor, and the second-
tier subcontractor was effectively precluded
Pleading in the alternative under both
from asserting rights under main contract
contract and quasi-contract theories does not
which stated that the approved use of
defeat the effect of an arbitration clause
any subcontractor created no contractual
that broadly covers all disputes between
relationship between the subcontractor and
signatories that arise out of the underlying
contractor.
agreement.
[20] Mechanics' Liens

Mechanics and Artisans
Mechanics' Liens
Materialmen
Waiver or Estoppel
The self-executing constitutional lien attaches
Under direct benefits estoppel, a non-
to buildings and special-order articles that are
signatory plaintiff cannot be compelled to
made or repaired by mechanics, materialmen,
arbitrate on the sole ground that, but for the
and artisans who have a direct contractual
contract containing the arbitration provision,
relationship with the owner of the property.
it would have no basis to sue.
Vernon's Ann.Texas Const. Art. 16, § 37.
[18] Estoppel
Contracts
Under direct benefits estoppel, although a
non-signatory's claim may relate to a contract

48 Tex. Sup. Ct. J. 678
compelled, we conditionally grant mandamus relief and

Attorneys and Law Firms order the court of appeals to vacate its order.
*734 Jack G. Carnegie, John L. Hagan, Jones Day,
Kevin B. Finkel, Johnson Finkel DeLuca & Kennedy,
P.C., Houston, for relator. I
Jeffrey Raizner, Doyle Raizner LLP, Jack F. Burleigh,

Houston, Ira E. Hoffman, Grayson Kubli & Hoffman, Factual Background
P.C., McLean, Jeff H. Galloway, John Fellas, Hughes
In October 1999, MacGREGOR (USA), Inc. contracted
Hubbard & Reed LLP, New York, NY, for real party in
with Ingalls Shipbuilding, Inc. (“Ingalls”) to build
interest.
elevator trunks for two cruise ships. MacGREGOR
Jeffery T. Nobles, Beirne Maynard & Parsons, L.L.P., (USA) assigned the contract to its sister company,
Robert Bryan Tobor, Houston, Clint Alexander Corrie, *735 MacGREGOR (FIN) Oy 1 (“MacGregor”). In
Joseph Lawrence Mira, Bierne, Maynard & Parsons, LLP, August 2000, MacGregor subcontracted part of the
Dallas, John D. White, Jones Walker Waechter Poitevent job to Unidynamics, which agreed to fabricate a set
Carrere & Denegre, The Woodlands, for Gulf Coast of the elevator trunks for one of the ships. 2 In June
Holdings Inc. 2001, Unidynamics and KBR entered into a second-tier
subcontract, under which KBR agreed to furnish labor,
Opinion
equipment, and facilities to fabricate the elevator trunks.
Chief Justice JEFFERSON delivered the opinion of the In the fabrication subcontract between MacGregor and
Court. Unidynamics, the parties agreed that: “Any disputes
arising from the interpretation or application of this
In this original proceeding, the question is whether contract including any document pertaining thereto, shall
Kellogg Brown & Root, Inc. (“KBR”), as a non- be settled by arbitration in accordance with General
signatory to a contract containing an arbitration Conditions (ECE 188), (Appendix 10).” 3 The second-
clause, must arbitrate its claims against Unidynamics, tier subcontract between Unidynamics and KBR did not
Inc. (“Unidynamics”) and MacGREGOR (FIN) Oy contain an arbitration provision.
(“MacGregor”)—the signatories to the contract. The
trial court denied MacGregor's motion, which sought to After the ship buyer declared bankruptcy in November
compel KBR to pursue its claims in an ongoing arbitration 2001, Ingalls directed MacGregor to cease work and
between MacGregor and Unidynamics. The court of notify its subcontractors to do the same. MacGregor
appeals held that the trial court abused its discretion and directed Unidynamics to comply with “the same
conditionally granted mandamus relief, ordering the trial instructions that Ingalls gave MacGregor.” Unidynamics
court to vacate its order denying MacGregor's motion and conveyed those instructions to KBR. On or around
“issue an order compelling KBR to arbitrate all claims.” November 5, 2001, KBR ceased work, stored the elevator
126 S.W.3d 176, 184. KBR sought mandamus relief in this trunks and other equipment, and sent Unidynamics
Court. invoices for unpaid fabrication services and storage costs.
Because KBR had not been paid in full, it asserted liens on
Approximately two months after KBR filed its the elevator trunk fabrications, parts, and other materials
petition here, the arbitration between MacGregor and (the “collateral”).
Unidynamics concluded. As a result, the relief MacGregor
requested in the lower courts—that KBR be compelled “to A dispute then arose between MacGregor and
pursue its claims in the arbitration between MacGregor Unidynamics regarding who owned the collateral and
(FIN) and Unidynamics”—is no longer available. The who owed KBR for the fabrication services and
case is not moot, however, because the parties continue to storage costs. The dispute stemmed from MacGregor
dispute whether KBR should be compelled to “arbitrate and Unidynamics' Agreement Concerning Passing of
all claims” pursuant to the court of appeals' order. Id. Title (the “Title Agreement”), executed on December
at 184. Because we conclude that KBR cannot be so 5, 2001, and fully incorporated into their fabrication

48 Tex. Sup. Ct. J. 678
subcontract. Among other things, the Title Agreement action should be abated because the collateral's ownership
provided that full title to the collateral would pass was “the very issue ... being arbitrated before the ICC.”
irrevocably to MacGregor immediately after MacGregor MacGregor, Unidynamics, and KBR then negotiated an
made two payments to Unidynamics, which were to agreement, which the trial court entered as an Agreed
occur no later than December 19, 2001. The Title Order. Pursuant to that order, MacGregor agreed to post
Agreement further required Unidynamics to release the a $1,000,000 bond and, upon presentation of the bond,
collateral to MacGregor upon MacGregor's request. It KBR agreed to release the collateral to MacGregor. 5
is undisputed that MacGregor timely paid Unidynamics; MacGregor posted the bond on October 28, 2002.
however, Unidynamics asserted that the payments were
ineffective to pass title to MacGregor. When MacGregor Meanwhile, on October 18, 2002, MacGregor filed a
demanded that Unidynamics release the elevator trunks, motion to abate the state court proceedings pending
Unidynamics refused. The collateral remained in KBR's its arbitration with Unidynamics or, in the alternative,
possession. to compel KBR to pursue its claims in the ongoing
arbitration between MacGregor and Unidynamics. The
trial court denied MacGregor's motion. On December
II 19, 2002, MacGregor filed an interlocutory appeal and
a petition for writ of mandamus in the court of appeals,
contending that the trial court abused its discretion.
Procedural Background The court of appeals dismissed the interlocutory appeal
as moot and conditionally granted mandamus relief,
In May 2002, pursuant to the arbitration provision
ordering the trial court “to vacate its order denying
in the fabrication subcontract, MacGregor asked the
MacGregor's plea in abatement and motion to compel
International Chamber of Commerce (“ICC”) to arbitrate
arbitration, to issue an order compelling KBR to
its dispute with Unidynamics. Among other things,
arbitrate all claims, and to stay all proceedings pending
MacGregor sought: (1) damages for breach of contract
by Unidynamics for failure to release the collateral, (2) arbitration.” 6 126 S.W.3d at 184–85.
a determination *736 as to which defendant owned the
collateral, and (3) a determination regarding MacGregor's On December 9, 2003, KBR petitioned this Court for
proportionate responsibility for the storage costs KBR a writ of mandamus. On February 4, 2004, while the
billed Unidynamics. Unidynamics filed an answer and petition was pending before us, the arbitration between
asserted counterclaims. MacGregor and Unidynamics MacGregor and Unidynamics concluded, and the ICC
then commenced arbitration in Paris, France. issued a final arbitration award. KBR does not contest
that award.
While the arbitration was proceeding, both MacGregor
and Unidynamics demanded that KBR release the
collateral. KBR refused the demands and, on September III
17, 2002, filed suit against both companies in Harris
County. KBR claimed that Unidynamics breached its
contract and, in the alternative, that it was entitled to Mootness
recover quantum meruit damages against Unidynamics
[1] [2] As a preliminary matter, we must decide
and MacGregor. KBR also sued for declaratory relief to
whether the ICC's final arbitration *737 award moots
determine which defendant owned the collateral. Subject
this mandamus proceeding. A case becomes moot if a
to the court's ruling on ownership, KBR sought a judicial
controversy ceases to exist between the parties at any stage
declaration that it possessed valid constitutional and
of the legal proceedings, including the appeal. Allstate
statutory liens against the collateral in its possession. 4 Ins. Co. v. Hallman, 159 S.W.3d 640, 642 (Tex.2005);
MacGregor answered and sought a temporary restraining Bd. of Adjustment of San Antonio v. Wende, 92 S.W.3d
order, temporary injunction, and permanent injunction 424, 427 (Tex.2002); Williams v. Lara, 52 S.W.3d 171,
directing KBR to release the collateral. Unidynamics 184 (Tex.2001). This case stems from the lower courts'
opposed MacGregor's application, arguing that the court action on MacGregor's motion to “compel [ ] KBR to

48 Tex. Sup. Ct. J. 678
pursue its claims in the arbitration between [MacGregor] [4] [5] [6] The parties do not dispute the court of
and Unidynamics.” Because that arbitration is over, KBR appeals' holding that the arbitration provision at issue
can no longer be compelled to “join the arbitration.” is governed by the Federal Arbitration Act (“FAA”).
See 126 S.W.3d at 183 (concluding that the trial court See 9 U.S.C. §§ 1–16; 126 S.W.3d at 181. In general,
abused its discretion by refusing to compel KBR to join a party seeking to compel arbitration under the FAA
the ongoing arbitration). The question, then, is whether must establish that: (1) there is a valid arbitration
this proceeding is moot. agreement, and (2) the claims raised fall within that
agreement's scope. In re FirstMerit Bank, 52 S.W.3d
[3] A case is not rendered moot simply because some 749, 753 (Tex.2001); In re Oakwood Mobile Homes, Inc.,
of the issues become moot during the appellate process. 987 S.W.2d 571, 573 (Tex.1999). Doubts regarding an
See Allstate, 159 S.W.3d at 642–43 (holding that a dispute agreement's scope are resolved in favor of arbitration
concerning attorney's fees preserved a live controversy in because there is a presumption favoring agreements to
an otherwise moot appeal); Camarena v. Tex. Employment arbitrate under the FAA. In re FirstMerit Bank, 52 S.W.3d
Comm'n, 754 S.W.2d 149, 151 (Tex.1988) (same). In this at 753; Cantella & Co. v. Goodwin, 924 S.W.2d 943, 944
case, the court of appeals ordered the trial court “to issue (Tex.1996). However, “the presumption arises only after
an order compelling KBR to arbitrate all claims.” 126 the party seeking to compel arbitration proves that a valid
S.W.3d at 184. Although it is no longer possible for KBR arbitration agreement exists,” *738 J.M. Davidson, Inc.
to join the Paris arbitration, the court of appeals' ultimate v. Webster, 128 S.W.3d 223, 227 (Tex.2003), because “the
directive has no temporal component. It requires KBR to purpose of the FAA was to make arbitration agreements
“arbitrate all claims.” as enforceable as other contracts, not more so.” Bridas
S.A.P.I.C. v. Gov't of Turkm., 345 F.3d 347, 354 n. 4 (5th
The live controversy in this proceeding is whether Cir.2003) (citations omitted); see also E.E.O.C. v. Waffle
KBR must arbitrate those claims that remain now that House, Inc., 534 U.S. 279, 293, 122 S.Ct. 754, 151 L.Ed.2d
the arbitration between MacGregor and Unidynamics 755 (2002) (“The FAA directs courts to place arbitration
has concluded. KBR's petition consisted of: (1) a agreements on equal footing with other contracts....”).
breach-of-contract claim against Unidynamics; (2) in the
alternative, a quantum meruit claim against Unidynamics [7] [8] [9] Under the FAA, ordinary principles of state
and MacGregor; and (3) a declaratory judgment action to contract law determine whether there is a valid agreement
determine the collateral's owner and to establish that KBR to arbitrate. First Options of Chi., Inc. v. Kaplan, 514 U.S.
possessed valid liens. The arbitrator determined that, 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995); Wash.
pursuant to the Title Agreement between MacGregor Mut. Fin. Group, LLC v. Bailey, 364 F.3d 260, 264 (5th
and Unidynamics, title to the collateral passed from Cir.2004); J.M. Davidson, Inc., 128 S.W.3d at 227–28; In re
Unidynamics to MacGregor on December 10, 2001. KBR Halliburton Co., 80 S.W.3d 566, 568 (Tex.2002). Because
is satisfied with this resolution of the ownership dispute, arbitration is contractual in nature, the FAA generally
and thus, we need not address whether the ownership “does not require parties to arbitrate when they have
dispute must be arbitrated. Additionally, we need not not agreed to do so.” Volt Info. Scis., Inc. v. Bd. of Trs.
address whether KBR should be compelled to arbitrate of Leland Stanford Junior Univ., 489 U.S. 468, 478–79,
its claims against Unidynamics, because the parties now 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989) ( “Arbitration
agree that those claims are not subject to arbitration. under the [FAA] is a matter of consent, not coercion....”),
Our inquiry is accordingly limited to determining whether quoted in E.E.O.C., 534 U.S. at 293–94, 122 S.Ct. 754;
KBR must arbitrate its quantum meruit and lien-validity see also Bridas, 345 F.3d at 361 (citing J. Douglas Uloth
claims against MacGregor. & J. Hamilton Rial, III, Equitable Estoppel as a Basis
for Compelling Nonsignatories to Arbitrate—A Bridge Too
Far?, 21 Rev. Litig. 593, 632 (2002)). Federal and Texas
state courts have recognized, however, that “[i]t does
IV
not follow ... that under the [FAA] an obligation to
arbitrate attaches only to one who has personally signed
Discussion the written arbitration provision”; instead, under certain
circumstances, principles of contract law and agency may

48 Tex. Sup. Ct. J. 678
bind a non-signatory to an arbitration agreement. Fisser compelled to arbitrate. Moreover, we recognize that it is
v. Int'l Bank, 282 F.2d 231, 233 (2d Cir.1960), quoted in important for federal and state law to be as consistent as
Int'l Paper Co. v. Schwabedissen Maschinen & Anlagen, possible in this area, because federal and state courts have
206 F.3d 411, 416 (4th Cir.2000), and Thomson–CSF, S.A. concurrent jurisdiction to enforce the FAA. See Moses H.
v. Am. Arbitration Ass'n, 64 F.3d 773, 776 (2d Cir.1995); Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1,
see also Bailey, 364 F.3d at 267 (quoting Thomson– 25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). Our decision
CSF, 64 F.3d at 776); In re FirstMerit Bank, 52 S.W.3d today rests on state law, but it is informed by persuasive
at 755 (citing Nationwide of Bryan, Inc. v. Dyer, 969 and well-reasoned federal precedent.
S.W.2d 518, 520 (Tex.App.-Austin 1998, no pet.)); S.W.
Tex. Pathology Assocs. v. Roosth, 27 S.W.3d 204, 208 Federal courts have recognized six theories, arising out
(Tex.App.-San Antonio 2000, pet. dism'd w.o.j.). of common principles of contract and agency law, that
may bind non-signatories to arbitration agreements: (1)
Although state law determines the validity of an incorporation by reference; (2) assumption; (3) agency;
arbitration agreement, courts have applied both federal (4) alter ego; (5) equitable estoppel, and (6) third-party
and state law to determine the related, but distinct, issue beneficiary. See, e.g., Bridas, 345 F.3d at 356. 7 Here,
of whether non-signatory plaintiffs should be compelled MacGregor asserts that KBR is bound to arbitrate
to arbitrate their claims. See, e.g., Bailey, 364 F.3d at under the doctrine of “direct benefits estoppel”—a type
267–68 (applying federal law); Bridas, 345 F.3d at 355– of equitable estoppel that federal courts apply in the
63 (applying federal law); Fleetwood Enters. v. Gaskamp, arbitration context. See, e.g., Bailey, 364 F.3d at 268;
280 F.3d 1069, 1074–77 (5th Cir.2002) (applying state Bridas, 345 F.3d at 361–62; E.I. DuPont de Nemours & Co.
law); Roosth, 27 S.W.3d at 208–09 (applying state law); v. Rhone Poulenc Fiber & Resin Intermediates, S.A.S., 269
Dyer, 969 S.W.2d at 520 (applying state law); Lakeland F.3d 187, 199–201 (3d Cir.2001); Int'l Paper Co., 206 F.3d
Anesthesia, Inc. v. United Healthcare of La., Inc., 871
at 418. 8
So.2d 380, 392–95 (La.Ct.App.2004) (applying federal
and state law). The FAA does not specify whether state or
[10] [11] [12] Under “direct benefits estoppel,” a non-
federal law governs, and the United States Supreme Court
signatory plaintiff seeking the benefits of a contract is
has not directly addressed the issue.
estopped from simultaneously attempting to avoid the
contract's burdens, such as the obligation to arbitrate
Federal courts of appeals, however, have frequently
disputes. R.J. Griffin & Co. at 160–61; Bailey, 364 F.3d
applied federal substantive law when deciding whether
at 268; Int'l Paper Co., 206 F.3d at 418 (“[T]he doctrine
a non-signatory must arbitrate. See, e.g., Bailey, 364
recognizes that a party may be estopped from asserting
F.3d at 267 n. 6; Bridas, 345 F.3d at 355–63; InterGen
that the lack of his signature precludes enforcement of
N.V. v. Grina, 344 F.3d 134, 142–50 (1st Cir.2003);
the contract's arbitration clause when he has consistently
Dominium Austin Partners v. Emerson, 248 F.3d 720,
maintained that other provisions of the same contract
728 (8th Cir.2001); Int'l Paper Co., 206 F.3d at 417 n.
should be enforced to benefit him.”); Thomson–CSF,
4; Thomson–CSF, 64 F.3d at 778–79. The Fourth and
64 F.3d at 778. Thus, a non-signatory plaintiff may be
Fifth Circuits have reasoned that “ ‘federal substantive
compelled to arbitrate if it seeks to enforce terms of a
law of arbitrability’... resolve[s] this question,” because
contract containing an arbitration provision. See R.J.
the determination of whether a non-signatory is bound
Griffin & Co., 384 F.3d at 161–64; Bailey, 364 F.3d at
“presents no state *739 law question of contract
268; Bridas, 345 F.3d at 361–62 (“Direct benefits estoppel
formation or validity.” R.J. Griffin & Co. v. Beach Club II
applies when a nonsignatory ‘knowingly exploits the
Homeowners Ass'n, 384 F.3d 157, 160 n. 1 (4th Cir.2004)
agreement containing the arbitration clause.’ ”) (quoting
(quoting Int'l Paper Co., 206 F.3d at 417 n. 4); Bailey,
E.I. DuPont de Nemours & Co., 269 F.3d at 199); Int'l
364 F.3d at 267 n. 6 (same). We are not convinced that
Paper Co., 206 F.3d at 418. For example, if a non-
state law plays no role in making this determination. See
signatory's breach-of-warranty and breach-of-contract
Roosth, 27 S.W.3d at 208–09 (applying state law); Dyer,
claims are based on certain terms of a written contract,
969 S.W.2d at 520 (applying state law). Nevertheless, we
then the non-signatory cannot avoid an arbitration
are mindful of the extensive body of federal precedent that
provision within that contract. See Int'l Paper Co., 206
has explored the extent to which non-signatories can be
F.3d at 418. If, however, a non-signatory's *740 claims

48 Tex. Sup. Ct. J. 678
can stand independently of the underlying contract, then MacGregor and Unidynamics; therefore, the scope of that
arbitration generally should not be compelled under this subcontract's arbitration clause does not answer whether
theory. See, e.g., R.J. Griffin & Co., 384 F.3d at 164; KBR must arbitrate.
Bridas, 345 F.3d at 362.
[17] To advance its estoppel theory, MacGregor
Consistent with the federal doctrine of “direct benefits contends that KBR's quantum meruit claim is “based on”
estoppel,” this Court has held that a non-signatory the fabrication subcontract in the sense that KBR's labor
plaintiff may be compelled to arbitrate if its claims and services were linked inextricably to that subcontract.
are “based on a contract” containing an agreement to It is true, of course, that KBR was fabricating trunks
arbitrate. In re FirstMerit Bank, 52 S.W.3d at 755 (“[A] that were at the contract's core and that, in performing
litigant who sues based on a contract subjects him or the work, KBR relied on the fabrication subcontract's
herself to the contract's terms.”). In FirstMerit Bank, specifications. However, under “direct benefits estoppel,”
the non-signatory plaintiffs sued the signatory defendant a non-signatory plaintiff cannot be compelled to arbitrate
for, among other things, breach of contract, revocation on the sole ground that, but for the contract containing
of acceptance, and breach of warranty. Id. at 752–53, the arbitration provision, it would have no basis to sue.
755. By bringing the breach-of-contract and breach- The work to be performed under a second-tier subcontract
of-warranty claims, the plaintiffs sought benefits that will inherently be related to and, to a certain extent,
stemmed directly from the contract's terms. We concluded defined by contracts higher in the chain. See Black's Law
that, by seeking to enforce the contract, the non-signatory Dictionary 1464 (8th ed.2004) (defining subcontractor as
plaintiffs “subjected themselves to the contract's terms, “[o]ne who is awarded a portion of an existing contract
including the Arbitration Addendum.” Id. at 756; see by a contractor, esp. a general contractor”). If this were a
also Roosth, 27 S.W.3d at 208 (“The nonsignatory cannot sufficient basis for binding a non-signatory subcontractor,
enforce specific terms of the agreement while seeking to arbitration agreements would become easier to enforce
avoid the arbitration provision.”). than other contracts, counter to the FAA's purpose. See
*741 InterGen, 344 F.3d at 145–46 (noting that federal
The issue here is whether KBR sought to enforce courts have “been hesitant to estop a nonsignatory seeking
terms of the fabrication subcontract by (1) bringing a to avoid arbitration”).
quantum meruit claim against MacGregor, or (2) seeking
a declaration that it possessed valid liens. We begin with [18] We conclude that, under “direct benefits estoppel,”
quantum meruit. although a non-signatory's claim may relate to a contract
containing an arbitration provision, that relationship does
[13] [14] [15] [16] Quantum meruit is an equitablenot, in itself, bind the non-signatory to the arbitration
remedy that “ ‘is based upon the promise implied by provision. Instead, a non-signatory should be compelled
law to pay for beneficial services rendered and knowingly to arbitrate a claim only if it seeks, through the claim, to
accepted.’ ” Vortt Exploration Co., Inc. v. Chevron U.S.A., derive a direct benefit from the contract containing the
Inc., 787 S.W.2d 942, 944 (Tex.1990) (quoting Truly v. arbitration provision. See Bailey, 364 F.3d at 268; MAG
Austin, 744 S.W.2d 934, 936 (Tex.1988)). A party generally Portfolio Consult., GMBH v. Merlin Biomed Group LLC,
cannot recover under quantum meruit when there is a 268 F.3d 58, 61 (2d Cir.2001) (“The benefits must be direct
valid contract covering the services or materials furnished. —which is to say, flowing directly from the agreement.”);
Murray v. Crest Constr., Inc., 900 S.W.2d 342, 345 Int'l Paper Co., 206 F.3d at 417–18; Thomson–CSF, 64
(Tex.1995); Woodard v. S.W. States, Inc., 384 S.W.2d 674, F.3d at 778–79; In re FirstMerit Bank, 52 S.W.3d at 755. 9
675 (Tex.1964) (“Recovery on an express contract and on
quantum meruit are inconsistent.”). A party to a contract [19] In its quantum meruit claim against MacGregor,
may, however, seek alternative relief under both contract KBR seeks payment for services rendered. KBR provided
and quasi-contract theories. Pleading in the alternative services pursuant to its contract with Unidynamics. KBR's
does not defeat the effect of an arbitration clause that asserted right to payment therefore stems directly from
broadly covers all disputes between signatories that arise the KBR–Unidynamics contract, not the fabrication
out of the underlying agreement. But in this case, KBR subcontract. The fabrication subcontract includes no
is not a signatory to the fabrication subcontract between provision for paying KBR. In fact, KBR is effectively

48 Tex. Sup. Ct. J. 678
precluded from asserting rights under that contract, Corpus Christi 1972, no writ) (discussing validity and
enforceability of warehouseman's lien).
which expressly provides that “Approved use of any
subcontractor creates no contractual relationship between
In this Court, MacGregor's sole argument for compelling
the subcontractor and [MacGregor].” 10 Thus, we
arbitration of KBR's lien-validity claims is that the claims
conclude that the court of appeals abused its discretion
require a determination of ownership, and thus, they are
to the extent it compelled KBR to arbitrate its quantum
“based on” the Title Agreement within the fabrication
meruit claim against MacGregor.
subcontract. 11 Ownership was, of course, a central
issue before and during the Paris arbitration. When the
[20] Having determined that KBR's quantum meruit
arbitration award resolved the ownership dispute, it also
claim is not subject to arbitration, we turn to KBR's
eliminated the only rationale that MacGregor has asserted
lien-validity claims. KBR sought a judicial declaration
thus far for arbitrating the liens' validity.
that it possessed valid constitutional and warehouseman's
statutory liens. See Tex. Const. art. XVI, § 37; Tex. Bus. &
We do not decide whether other arguments may exist to
Com.Code § 7.209(a)(1). The self-executing constitutional
compel KBR to arbitrate the validity of its liens. To the
lien attaches to buildings and special-order articles that
extent a lien dispute still remains, the trial court is in the
are made or repaired by mechanics, material men, and
best position to determine, on principles we have declared
artisans who have a direct contractual relationship with
today, whether it must be arbitrated.
the owner of the property. See Tex. Const. art. XVI,
§ 37; CVN Group, Inc. v. Delgado, 95 S.W.3d 234, 240
(Tex.2002) (“[F]or constitutional liens that *742 are
self-executing, there are no technical requirements....”); V
First Nat'l Bank v. Whirlpool Corp., 517 S.W.2d 262,
268 (Tex.1974) (holding that “the constitutional lien on
Conclusion
manufactured chattels is available ... only upon articles
made especially for a purchaser pursuant to a special We conditionally grant mandamus relief and order the
order and in accordance with the purchaser's plans or court of appeals to vacate its order compelling KBR to
specifications”); Hayek v. W. Steel Co., 478 S.W.2d 786, “arbitrate all claims.” See 126 S.W.3d at 184. The writ will
790 (Tex.1972); Strang v. Pray, 89 Tex. 525, 35 S.W. 1054, issue only if the court of appeals fails to comply.
1056 (1896). The warehouseman's lien arises “against the
bailor on the goods covered by a warehouse receipt or
on the proceeds thereof in his possession for charges for
storage or transportation ..., insurance, labor, or charges Justice JOHNSON did not participate in the decision.
present or future in relation to the goods, and for expenses
All Citations
necessary for preservation of the goods....” Tex. Bus. &
Com.Code § 7.209(a)(1); see also Flores v. Didear Van 166 S.W.3d 732, 48 Tex. Sup. Ct. J. 678
& Storage Co., 489 S.W.2d 406, 407–09 (Tex.Civ.App.-
Footnotes
1 The term “Oy” for Finnish companies is an abbreviation of “osakeyhtiö” (“osake” means “share,” “yhtiö” means “society”).
See http://encyclopedia. laborlawtalk.com/Oy (last visited May 18, 2005, and available in Clerk of Court's file).
2 In October 2000, MacGregor and Unidynamics entered into another subcontract, under which Unidynamics agreed to
preassemble and install the elevator trunks. That subcontract is not at issue in this case.
3 The arbitration provision in ECE 188 provided: “Any dispute arising out of the Contract shall be finally settled, in
accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce [“ICC”], by one or
more arbitrators designated in conformity with those Rules.”
4 See Tex. Const. art. XVI, § 37; Tex. Bus. & Com.Code § 7.209.
5 The parties agreed that the bond would be enforceable and payable in Texas, and that it would “constitute an unconditional
promise to pay upon demand accompanied by proof of Final Judgment adjudicating the validity and amount, if any, of
[KBR's] lien or liens against ... the collateral.”

48 Tex. Sup. Ct. J. 678
6 As of the date of this opinion, the trial court has not acted on the court of appeals' orders. Proceedings have not resumed
in the trial court since the court of appeals ordered a stay on January 9, 2003. See 126 S.W.3d at 180–81.
7 Most federal courts, however, list only five of these theories, omitting third-party beneficiary as a separate ground. See
Local Union No. 38, Sheet Metal Workers' Int'l Ass'n v. Custom Air Sys., Inc., 357 F.3d 266, 268 (2d Cir.2004); Javitch
v. First Union Sec., Inc., 315 F.3d 619, 629 (6th Cir.2003); Fleetwood, 280 F.3d at 1076; Employers Ins. of Wausau v.
Bright Metal Specialties, Inc., 251 F.3d 1316, 1322 (11th Cir.2001); Bel–Ray Co. v. Chemrite (Pty) Ltd., 181 F.3d 435,
446 (3d Cir.1999); Int'l Paper Co., 206 F.3d at 417; Thomson–C.S.F., 64 F.3d at 776.
8 While not all federal courts use the phrase “direct benefits estoppel,” we adopt that terminology from Bridas to describe
this form of estoppel. See 345 F.3d at 361–62.
9 Federal courts have also applied “direct benefits estoppel” to bind “non-signatories who, during the life of the contract,
have embraced the contract despite their non-signatory status but then, during litigation, attempt to repudiate the
arbitration clause in the agreement.” E.I. DuPont de Nemours & Co., 269 F.3d at 200; see also InterGen, 344 F.3d at 146
(holding equitable estoppel theory inapplicable to non-signatory that did not seek to derive direct benefits from contracts
“during their currency”); Am. Bureau of Shipping v. Tencara Shipyard S.P.A., 170 F.3d 349, 353 (2d Cir.1999) (holding
non-signatory who received lower insurance rates and ability to sail under French flag due to contract was bound by
arbitration clause within contract); In re VMS Ltd. P'ship Sec. Litig., 26 F.3d 50, 52 (7th Cir.1994) (holding wife bound by
arbitration clause that only her husband signed as she accepted benefits of investment services). We do not reach this
application of “direct benefits estoppel” here. MacGregor's argument for arbitration rests not on KBR's actions during the
life of the fabrication subcontract, but on KBR's attempt to benefit from that contract through litigation.
10 See MCI Telecomms. Corp. v. Tex. Utils. Elec. Co., 995 S.W.2d 647, 651 (Tex.1999) (“The intention to contract or confer
a direct benefit to a third party must be clearly and fully spelled out or enforcement by the third party must be denied.”);
City of LaPorte v. Taylor, 836 S.W.2d 829, 831 (Tex.App.-Houston [1st Dist.] 1992, no writ) (“Generally, in construction
contracts, in the absence of an express agreement to the contrary, a subcontractor is not in privity with the owner....”).
11 KBR's petition included the following:
29. Ownership. Given the Defendants' competing claims known to Plaintiff by the Defendants, Plaintiff seeks a
declaration from the Court as to which Defendant(s) possesses the ownership rights, title and interest in the elevator
shaft fabrications, component parts and other materials....
30. Constitutional Lien. Subject to the determination of ownership, Plaintiff also seeks a judicial declaration that
Plaintiff possesses a valid constitutional lien to the elevator shaft fabrications, component parts and other materials
pursuant to Article 16, § 37 of the Texas Constitution.
31. Statutory Lien. Subject to the determination of ownership, Plaintiff also seeks a judicial declaration that Plaintiff
possesses a valid statutory lien to the elevator shaft fabrications, component parts and other materials pursuant to
§ 7.209 of the Texas Business and Commerce Code.
(Emphasis added.)

In re Labatt Food Service, L.P., 279 S.W.3d 640 (2009)
28 IER Cases 1268, 52 Tex. Sup. Ct. J. 352

Declined to Follow by Boler v. Security Health Care, L.L.C., Okla.,
September 30, 2014
279 S.W.3d 640 [1] Mandamus
Supreme Court of Texas. Modification or Vacation of Judgment or
Order
In re LABATT FOOD SERVICE, L.P., Relator. Mandamus
Civil Proceedings Other Than Actions
No. 07–0419.
A party denied the right to arbitrate pursuant
|
to an agreement subject to the Federal
Argued Sept. 9, 2008.
Arbitration Act (FAA) does not have an
|
adequate remedy by appeal and is entitled to
Decided Feb. 13, 2009.
mandamus relief to correct a clear abuse of
|
discretion. 9 U.S.C.A. § 1 et seq.
Rehearing Denied May 1, 2009.
Synopsis
Background: Parents and children of employee brought
wrongful death action, in the 150th Judicial District [2] Appeal and Error
Court, Bexar County, Janet Littlejohn, J., against Cases Triable in Appellate Court
employer. The 57th Judicial District Court, Bexar County, Appeal and Error
Joe Frazier Brown, Jr., J., denied employer's motion Abuse of Discretion
to compel arbitration. Employer petitioned for writ of
Under an abuse of discretion standard, the
mandamus. The San Antonio Court of Appeals, 2007 WL
appellate court defers to the trial court's
1424092, denied the petition. Employer petitioned for writ
factual determinations if they are supported
of mandamus.
by evidence, but reviews the trial court's legal
determinations de novo.
Holdings: The Supreme Court, Johnson, J., held that: 97 Cases that cite this headnote
[1] under Texas law, the arbitration provision in an [3] Alternative Dispute Resolution
agreement between an employee and his employer, signed Scope and Standards of Review
before the employee's death and requiring arbitration
Whether an arbitration agreement is
pursuant to the Federal Arbitration Act, requires the
enforceable is subject to de novo review.
employee's wrongful death beneficiaries to arbitrate their
wrongful death claims against the employer even though 54 Cases that cite this headnote
they did not sign the agreement, disapproving of In re
Kepka, 178 S.W.3d 279, and Gomez v. Zardenetta, 1998
WL 19858, and
Matters to Be Determined by Court
[2] it was for the arbitrator, rather than the court, to Under the Federal Arbitration Act (FAA),
resolve beneficiaries' claim that entire contract signed by whether an arbitration agreement binds a
employee, including the arbitration clause, was invalid. nonsignatory is a gateway matter to be
determined by courts rather than arbitrators
unless the parties clearly and unmistakably
Writ conditionally granted. provide otherwise. 9 U.S.C.A. § 1 et seq.

may be bound to an arbitration clause when

[5] Alternative Dispute Resolution rules of law or equity would bind them to the
What Law Governs contract generally. 9 U.S.C.A. § 1 et seq.
Texas courts apply Texas procedural rules
in determining whether nonsignatories are 22 Cases that cite this headnote
bound by an arbitration agreement that is
subject to the Federal Arbitration Act (FAA). [10] Death
9 U.S.C.A. § 1 et seq. Creation of New Cause of Action
9 Cases that cite this headnote Death

Persons Entitled to Sue
Because, at common law, there was no
recognized cause of action for the wrongful
What Law Governs
death of another person, the Texas Legislature
Under the Federal Arbitration Act (FAA), enacted the Wrongful Death Act in order to
state law generally governs whether a litigant create a cause of action to allow a deceased
agreed to arbitrate, and federal law governs tort victim's surviving parents, children, and
the scope of the arbitration clause. 9 U.S.C.A. spouse to recover damages for their losses
§ 1 et seq. from the victim's death. V.T.C.A., Civil
Practice & Remedies Code § 71.002 et seq.
What Law Governs [11] Death
Texas Supreme Court would apply Right of Action of Person Injured
Texas substantive law rather than federal Death
substantive law when determining whether Defenses
nonsignatories were bound by an arbitration
Statutory wrongful death beneficiaries' claims
agreement that was subject to the Federal
place them in the exact “legal shoes” of the
Arbitration Act (FAA), and would endeavor
decedent, and they are subject to the same
to keep it consistent with federal law. 9
defenses to which the decedent's claims would
have been subject. V.T.C.A., Civil Practice &
12 Cases that cite this headnote Remedies Code § 71.003(a).

and Rules of Court
A purpose of the Federal Arbitration Act
Under Texas law, the arbitration provision
(FAA) is to make arbitration agreements as
in an agreement between an employee and
enforceable as other contracts, but not more
his employer, signed before the employee's
so. 9 U.S.C.A. § 1 et seq.
death and requiring arbitration pursuant to
16 Cases that cite this headnote the Federal Arbitration Act (FAA), requires
the employee's wrongful death beneficiaries to
arbitrate their wrongful death claims against
[9] Alternative Dispute Resolution the employer even though they did not sign the
Persons Affected or Bound agreement; disapproving of In re Kepka, 178
Nonsignatories to an arbitration agreement S.W.3d 279, and Gomez v. Zardenetta, 1998
subject to the Federal Arbitration Act (FAA)

WL 19858. 9 U.S.C.A. § 1 et seq.; V.T.C.A., A court may determine a specific challenge

Civil Practice & Remedies Code § 71.003(a). to the validity of the arbitration clause in a
contract, but a broader challenge to the entire
26 Cases that cite this headnote contract, either on a ground that directly
affects the entire contract or on the ground
[13] Death that one of the contract's provisions is illegal
Right of Action of Person Injured and renders the whole contract invalid, must
go to the arbitrator.
While damages for a wrongful death
action are for the exclusive benefit of the 18 Cases that cite this headnote
wrongful death beneficiaries and are meant to
compensate them for their own personal loss,
the cause of action is entirely derivative of the
decedent's rights. V.T.C.A., Civil Practice &
Remedies Code §§ 71.003(a), 71.004(a).
*642 Robert A. Valadez, Mark A. Giltner, Shelton &
Valadez, San Antonio, Nissa M. Dunn, for relator.
[14] Alternative Dispute Resolution Fidel Rodriguez Jr., San Antonio, Leo D. Figueroa, for
Existence and Validity of Agreement real party in interest.
It was for the arbitrator, rather than Opinion
the court, to resolve claim by employee's
wrongful death beneficiaries that employer Justice JOHNSON delivered the opinion of the Court.
could not compel them to arbitrate their
wrongful death claims pursuant to “Election Under Texas law, wrongful death beneficiaries are
of Comprehensive Benefits, Indemnity, and generally bound by a decedent's pre-death contractual
Arbitration Agreement” that employee had agreement because of the derivative nature of their claims.
executed with employer, which employer did In this case, we consider whether the arbitration provision
not provide workers' compensation insurance in an agreement between a decedent and his employer
but provided an occupational injury plan; requires the employee's wrongful death beneficiaries to
beneficiaries did not specifically challenge arbitrate their wrongful death claims against the employer
validity of arbitration clause and instead even though they did not sign the agreement. We hold that
broadly challenged the contract by asserting it does.
that the contract as a whole was invalid
because the indemnity clause violated the
Labor Code's provision that an employee's I. Background
cause of action against a non-subscriber
employer to recover damages for personal Labatt Food Service, L.P. does not provide workers'
injuries or death sustained in the course and compensation insurance to cover its employees in the
scope of employment could not be waived event of on-the-job injuries. Rather, it provides an
by an employee before the employee's injury “occupational injury plan” (the plan) under which
or death, with beneficiaries also asserting its employees may elect to participate. To become
that the arbitration clause was not severable. participants in the plan, employees sign an agreement
V.T.C.A., Labor Code § 406.033(e). entitled “Election of Comprehensive Benefits, Indemnity,
and Arbitration Agreement.” The agreement contains
24 Cases that cite this headnote several numbered paragraphs. Of primary relevance to
this proceeding are three of those paragraphs. Paragraph
[15] Alternative Dispute Resolution three provides that the employee elects to be covered
Existence and Validity of Agreement under the plan “individually and on behalf of heirs
and beneficiaries.” Paragraph three also provides that

the employee will indemnify Labatt from claims and

suits based on injury to or death of the employee from
B. Governing Law
occupational causes, except for claims filed pursuant to
the plan. Paragraph four consists of an arbitration clause [4] Under the FAA, whether an arbitration agreement
providing that disputes related to either the agreement, binds a nonsignatory is a gateway matter to be determined
the plan, or to an employee's occupational injury or by courts rather than arbitrators unless the parties clearly
death must be submitted to binding arbitration pursuant and unmistakably provide otherwise. In re Weekley
to the Federal Arbitration Act (FAA). See 9 U.S.C. §§ Homes, L.P., 180 S.W.3d 127, 130 (Tex.2005); see Howsam
1–16. Paragraph eight provides for the severability of any v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83–84, 123
invalid provision. S.Ct. 588, 154 L.Ed.2d 491 (2002). As this arbitration
agreement is silent about who is to determine whether
Carlos Dancy, Jr., an employee of Labatt, elected to particular persons are bound by the agreement, courts,
participate in the plan and signed an agreement. Dancy rather than the arbitrator, should determine the issue. See
later died from an apparent asthma attack that occurred First Options of Chic., Inc. v. Kaplan, 514 U.S. 938, 944–
while he was working. His parents and children filed a 45, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995).
wrongful death action against Labatt. Labatt responded
by filing a motion to compel arbitration in which it [5] [6] [7] [8] We apply Texas procedural rules in
asserted the arbitration agreement bound the wrongful determining whether nonsignatories are bound by an
death beneficiaries. The beneficiaries argued they were not arbitration agreement. In re Weekley Homes, 180 S.W.3d
bound by Dancy's arbitration agreement for two reasons: at 130. It is not entirely clear, however, if state or
(1) they were not signatories to the agreement, and (2) the federal substantive law governs whether nonsignatories
entire agreement was void because the indemnity clause are bound to arbitrate under an agreement subject to the
was a pre-injury waiver in violation of Texas Labor Code FAA. Id.; see Wash. Mut. Fin. Group, LLC v. Bailey,
section 406.033(e). 364 F.3d 260, 267 n. 6 (5th Cir.2004). Under the FAA,
state law generally governs whether a litigant agreed
The trial court denied Labatt's motion without stating its to arbitrate, and federal law governs the scope of the
reasons. The court of appeals denied mandamus relief. arbitration clause. In re Weekley Homes, 180 S.W.3d
Labatt now seeks mandamus relief from this Court. at 130. But whether nonsignatories are bound by an
arbitration agreement is a distinct issue that may involve
either or both of these matters. Id. at 130–31; see also
II. Are the Beneficiaries Bound to Arbitrate? In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 738
(Tex.2005) (noting whether nonsignatory plaintiffs should
be compelled to arbitrate their claims is related to validity
A. Standard of Review but is also a distinct issue). The FAA does not specify
whether state or federal law governs, and the United
[1] [2] [3] A party denied the right to arbitrate pursuant
States Supreme Court has not directly addressed the issue.
to an agreement subject to *643 the FAA does not
In re Weekley Homes, 180 S.W.3d at 130. Pending an
have an adequate remedy by appeal and is entitled to
answer from the United States Supreme Court, we have
mandamus relief to correct a clear abuse of discretion.
determined to apply state substantive law and endeavor
In re L & L Kempwood Assocs., L.P., 9 S.W.3d 125,
to keep it consistent with federal law. Id. We keep in
128 (Tex.1999). Under an abuse of discretion standard,
mind that a purpose of the FAA is “to make arbitration
we defer to the trial court's factual determinations if
agreements as enforceable as other contracts, but not
they are supported by evidence, but we review the trial
more so.” Prima Paint Corp. v. Flood & Conklin Mfg. Co.,
court's legal determinations de novo. Brainard v. State,
388 U.S. 395, 404 n. 12, 87 S.Ct. 1801, 18 L.Ed.2d 1270
12 S.W.3d 6, 30 (Tex.1999); see Walker v. Packer, 827
(1967); see Fleetwood Enter., Inc. v. Gaskamp, 280 F.3d
S.W.2d 833, 839–40 (Tex.1992). Whether an arbitration
1069, 1074 n. 5 (5th Cir.2002).
agreement is enforceable is subject to de novo review.
See J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227
Mindful of the foregoing, we move to the issue before us
(Tex.2003).
—whether an arbitration agreement governed by the FAA

binds the nonsignatory wrongful death beneficiaries of a beneficiaries are bound to arbitrate due to the derivative
party to the agreement. nature of their claims.
[10] [11] At common law there was no recognized cause

of action for the wrongful death of another person. Russell
C. Beneficiaries as Nonsignatories
v. Ingersoll–Rand Co., 841 S.W.2d 343, 344 (Tex.1992).
[9] We have previously determined that nonsignatories The Legislature enacted the Wrongful Death Act in
to an agreement subject to the FAA may be bound to order to create a cause of action to allow a deceased
an arbitration clause when rules of law or equity would tort victim's surviving parents, children, and spouse to
bind them to the contract generally. In re Weekley Homes, recover damages for their losses from the victim's death.
180 S.W.3d at 131 (noting that if state law would bind Shepherd v. Ledford, 962 S.W.2d 28, 31 (Tex.1998); see
a nonparty to a contract generally, the FAA appears to TEX. CIV. PRAC. & REM.CODE §§ 71.002–.004. Under
preempt an exception for arbitration clauses because the the Wrongful Death Act as it applies here, wrongful
FAA requires states to place arbitration *644 contracts death beneficiaries may pursue a cause of action “only if
on equal footing with other contracts); see also Allied– the individual injured would have been entitled to bring
Bruce Terminix Cos., Inc. v. Dobson, 513 U.S. 265, 281, an action for the injury if the individual had lived.”
115 S.Ct. 834, 130 L.Ed.2d 753 (2005) (noting that a TEX. CIV. PRAC. & REM.CODE § 71.003(a). This
state “may not ... decide that a contract is fair enough to language is not a recent innovation but is a recodification
enforce all its basic terms ... [yet] not fair enough to enforce of language which has consistently been part of the
its arbitration clause”). Therefore, we look to whether Wrongful Death Act. See Russell, 841 S.W.2d at 346.
the agreement signed by Dancy would generally bind his And we have consistently held that the right of statutory
beneficiaries under Texas law. beneficiaries to maintain a wrongful death action is
entirely derivative of the decedent's right to have sued for
Several rules of law and equity may bind nonsignatories to his own injuries immediately prior to his death. See id. at
a contract. For example, we have held that the principles 345–47. Thus, it is well established that statutory wrongful
of equitable estoppel and agency may bind nonsignatories death beneficiaries' claims place them in the exact “legal
to an arbitration agreement. In re Weekley Homes, 180 shoes” of the decedent, and they are subject to the same
S.W.3d at 131–35; see also In re Kellogg Brown & Root, defenses to which the decedent's claims would have been
166 S.W.3d at 739 (noting nonsignatories may be bound to subject. Id. at 347.
arbitration agreement under “direct benefits estoppel”); In
re Merrill Lynch Trust Co. FSB, 235 S.W.3d 185, 191–95 Accordingly, we long ago held that a decedent's pre-
(Tex.2007) (recognizing estoppel may bind a nonsignatory death contract may limit or totally bar a subsequent
to an arbitration agreement but holding plaintiffs were action by his wrongful death beneficiaries. See Sullivan–
not bound to arbitration agreement under “concerted Sanford Lumber Co. v. Watson, 106 Tex. 4, 155 S.W.
misconduct estoppel” because it was not a recognized 179, 180 (1913); Thompson v. Fort Worth & R.G. Ry.
theory of estoppel under Texas law); In re FirstMerit Co., 97 Tex. 590, 80 S.W. 990, 992 (1904); see also
Bank, N.A., 52 S.W.3d 749, 755–56 (Tex.2001) (holding Russell, 841 S.W.2d at 347 (affirming holdings *645
a nonsignatory who sues based on a contract subjects in Thompson and Sullivan–Sanford Lumber Co.). In
himself to the contract's terms, including its arbitration Thompson, R.K. Thompson sued to recover damages for
agreement). injuries he suffered while riding a train. He accepted a
settlement offer and executed a full release of the railway
Labatt argues that under these circumstances the company. 80 S.W. at 990. Shortly after signing the release,
beneficiaries should be bound by the agreement because Thompson died from his injuries. Id. at 991. His wife
(1) they are third party beneficiaries of the agreement; (2) and children then sued the railway company seeking to
they are bound by the agreement because of the derivative recover damages for his death. Id. at 990. The Court noted
nature of their claims; and (3) Texas Family Code section that if Thompson had survived, he would not have been
151.001 afforded Dancy the legal authority to bind his entitled to bring suit because of the contractual release and
minor children to the agreement. Because we determine it because the Wrongful Death Act provided, in language
is dispositive, we first consider Labatt's argument that the similar to the current Act, that beneficiaries were only

entitled to bring suit if the decedent would have been v. Boehmer, 700 S.W.2d 687, 690 (Tex.App.-Corpus
entitled to maintain an action for the injury. Id. at 991– Christi 1985, no writ) (release and settlement signed by
92. The Court held that although the beneficiaries were automobile accident victim barred survival and wrongful
not parties to the release, the contractual release signed death actions after victim died from injuries sustained in
by Thompson barred their wrongful death claims because accident).
they stood in the same legal shoes as Thompson and were
subject to the same contractual defenses. Id. at 992. [12] Despite this line of authority, the wrongful death
beneficiaries argue that agreements to arbitrate are
In Sullivan–Sanford Lumber Co., the Court again held different than other contracts, and they should not be
that a pre-death contractual release signed by a decedent bound by Dancy's agreement. We reject their argument.
barred a subsequent action by his wrongful death If we agreed with them, then wrongful death beneficiaries
beneficiaries. 155 S.W. at 180. The Sullivan–Sanford in Texas would be bound by a decedent's contractual
Lumber Company allowed non-employees to ride their agreement that completely disposes of the beneficiaries'
trains without charge but issued them boarding passes claims, but they would not be bound by a contractual
containing the following language: agreement that merely changes the forum in which *646
the claims are to be resolved. Not only would this be an
The user of this pass rides only anomalous result, we believe it would violate the FAA's
on the following conditions: (1) express requirement that states place arbitration contracts
This permit is accepted with the on equal footing with other contracts. 9 U.S.C. § 2; see
understanding that the person using Volt Info. Scs., Inc. v. Bd. of Trs. of Leland Stanford Junior
it assumes all risk of injury of Univ., 489 U.S. 468, 474, 109 S.Ct. 1248, 103 L.Ed.2d 488
any character while using the same (1989).
and hereby waives any claim for
damages in case of injury.... [13] The beneficiaries also argue that they should not
be bound because Dancy did not have the authority to
135 S.W. 635, 636 (Tex.Civ.App.-Texarkana 1911), rev'd,
bind them to the arbitration agreement when the wrongful
106 Tex. 4, 155 S.W. 179 (1913). J.A. Watson was riding a
death cause of action actually belongs to the surviving
train courtesy of a boarding pass when the train collided
spouse, children, and parents of the deceased. While it
with another train killing Watson. Id. His wife and
is true that damages for a wrongful death action are for
children sued the Lumber Company. Id. The Court held,
the exclusive benefit of the beneficiaries and are meant to
as it did in Thompson, that the beneficiaries were not
compensate them for their own personal loss, the cause of
entitled to recover under the Wrongful Death Act because
action is still entirely derivative of the decedent's rights.
Watson himself could not have recovered for his injuries
TEX. CIV. PRAC. & REM.CODE §§ 71.003(a), .004(a);
if he had survived, and his wrongful death beneficiaries
Russell, 841 S.W.2d at 347. Thus, regardless of the fact
were subject to the same contractual defenses that Watson
that Dancy's beneficiaries are seeking compensation for
would have been subject to had he sued. 155 S.W. at 180.
their own personal loss, they still stand in Dancy's legal
shoes and are bound by his agreement.
Consistent with our holdings in Thompson and Watson,
many courts of appeals have held that a decedent's
In the alternative, the beneficiaries urge us to circumvent
pre-death contract may limit or bar a subsequent
the derivative claim rule by holding that wrongful
wrongful death action. See Newman v. Tropical Visions,
death actions are analogous to and should be treated
Inc., 891 S.W.2d 713, 719 (Tex.App.-San Antonio
similarly to loss of consortium claims. A tort action
1994, writ denied) (pre-injury liability release signed
seeking damages for loss of consortium, however, is
by decedent before taking scuba diving lessons barred
fundamentally different than a statutory wrongful death
subsequent wrongful death and survival action against
action. If Dancy had suffered a severe but nonfatal
scuba instructor); Winkler v. Kirkwood Atrium Office
injury, his children would have been entitled to bring a
Park, 816 S.W.2d 111, 115 (Tex.App.-Houston [14th
claim to recover for the loss of care, guidance, love, and
Dist.] 1991, writ denied) (release executed by decedent
before joining health club precluded his beneficiaries from protection ordinarily provided by their father. 1 Reagan
bringing wrongful death and survival action); McClellan v. Vaughn, 804 S.W.2d 463, 466 (Tex.1990). Their lost

consortium claims would be derivative in the sense that however, resolve the issue based on what the contracting
the beneficiaries would be required to establish Labatt parties intended. Allen v. Pacheco, 71 P.3d 375, 379–80
was liable for their father's underlying injury in order to (Colo.2003) (beneficiaries bound when contract reflects
recover damages. Whittlesey v. Miller, 572 S.W.2d 665, intent of the parties to bind beneficiaries); Herbert v.
668 (Tex.1978). But loss of consortium claims are not Superior Court, 169 Cal.App.3d 718, 215 Cal.Rptr. 477,
entirely derivative as are wrongful death claims; instead, 480 (1985) (beneficiaries bound when contract reflects
they are separate and independent claims distinct from intent of the parties to bind beneficiaries).
the underlying action. Id. at 667, 669. Thus, a settlement
agreement signed by an injured spouse does not bar a A review of the cases decided based on statutory language
subsequent loss of consortium claim by the non-injured indicates that courts in states where wrongful death
spouse. Id. at 669. actions are recognized as independent and separate causes
of action are more likely to hold that the beneficiaries are
A wrongful death action is different than a loss of not bound by a decedent's agreement to arbitrate, see, e.g.,
consortium claim because the Wrongful Death Act Bybee, 189 P.3d at 46–47; Finney, 193 S.W.3d at 395, while
expressly conditions the beneficiaries' claims on the beneficiaries in states where wrongful death actions are
decedent's right to maintain suit for his injuries. TEX. wholly derivative in nature are generally held to be bound
CIV. PRAC. & REM.CODE § 71.003(a); see Russell, by a decedent's arbitration agreement. See Cleveland, 942
841 S.W.2d at 346. The Legislature created an entirely So.2d at 118–19; Ballard, 327 N.W.2d at 372; Bybee,
derivative cause of action when it enacted the Wrongful 189 P.3d at 46 (“Courts that compel nonsignatory heirs
Death Act, and Dancy's beneficiaries are bringing an to abide by arbitration agreements often do so because
entirely derivative claim. Their wrongful death action is under their law a wrongful death cause of action is wholly
not in the same category as a loss of consortium claim derivative of and dependent on the underlying personal
for purposes of derivative status analysis. We decline injury claim.”). Our holding is consistent with those in the
their invitation to circumvent the clear language of the majority of states that have statutes similar to the Texas
Wrongful Death Act. statute and have considered the issue.
In addition, other states have resolved this issue based on Some Texas courts of appeals have held that wrongful
whether the wrongful death action is an independent or death beneficiaries are not bound by a decedent's
derivative cause of action under state law. See Cleveland agreement to arbitrate. See In re Kepka, 178 S.W.3d 279,
v. Mann, 942 So.2d 108, 118–19 (Miss.2006) (beneficiaries 288 (Tex.App.-Houston [1st Dist.] 2005, orig. proceeding
bound by decedent's arbitration agreement because [mand. dismissed] ); Gomez v. Zardenetta, No. 04–97–
under Mississippi Wrongful Death Act, beneficiaries may 0019–CV, 1998 WL 19858, at *7 (Tex.App.-San Antonio
bring suit only if decedent would have been entitled Jan.21, 1998, no pet.) (not designated for publication). To
to bring action immediately before death); Briarcliff the extent the holdings of courts of appeals conflict with
Nursing Home, Inc. v. Turcotte, 894 So.2d 661, 665 our decision, we disapprove of them.
(Ala.2004) (administrator of estate bringing wrongful
death claim bound because administrator stands in
legal shoes of decedent); Ballard v. Sw. Detroit *647
III. The Indemnity Clause
Hosp., 119 Mich.App. 814, 327 N.W.2d 370, 372 (1982)
(administrator bringing wrongful death action bound [14] The Labor Code provides that an employee's cause
by arbitration agreement because wrongful death is of action against a non-subscriber employer to recover
a derivative cause of action under Michigan law); damages for personal injuries or death sustained in the
but see Bybee v. Abdulla, 189 P.3d 40, 43 (Utah course and scope of employment
2008) (beneficiaries not bound because wrongful death
is an independent cause of action under Utah law); may not be waived by an employee
Finney v. Nat'l Healthcare Corp., 193 S.W.3d 393, 395 before the employee's injury or
(Mo.Ct.App.2006) (beneficiary not bound because under death. Any agreement by an
Missouri law the wrongful death act creates a new cause employee to waive [such] a cause
of action belonging to the beneficiaries). Other states, of action ... before the employee's

injury or death is void and We recently considered the first type of challenge in
unenforceable. In re Poly–America, L.P., 262 S.W.3d 337 (Tex.2008).
There, Johnny Luna and his employer, Poly–America,
TEX. LAB.CODE § 406.033(e). The beneficiaries entered into a five-page-long arbitration agreement.
challenge the validity of the entire agreement on the Id. at 345, 360. After Luna was fired, he sued for
basis that the indemnification clause in paragraph three retaliatory discharge and sought a declaratory judgment
is in substance a pre-injury waiver that violates Labor that the arbitration agreement was unenforceable because
Code section 406.033(e). They, however, specify that their it contained provisions that violated public policy and
challenge to the agreement's validity “is not dependent on were unconscionable. Id. at 345. One of his arguments
or directed solely to the arbitration provision.” Instead, was that provisions prohibiting the arbitrator from
they argue that the contract as a whole, including its awarding punitive damages or ordering reinstatement
arbitration clause, is rendered invalid by the allegedly violated Labor Code provisions authorizing such relief.
illegal indemnity clause because the clause is not severable. Id. at 352. We determined that those provisions were
unconscionable and void, but they were severable and
[15] There are two types of challenges to an arbitration did not invalidate the rest of the agreement to arbitrate.
provision: (1) a specific challenge to the validity of Id. at 359–60. We stated that “where a particular waiver
the arbitration agreement or clause, and (2) a broader of substantive remedies or other provision of a contract
challenge to the entire contract, either on a ground that is unconscionable—independent of the agreement to
directly affects the entire agreement, or on the ground arbitrate—it will be unenforceable even though included
that one of *648 the contract's provisions is illegal in an agreement to arbitrate.” Id. at 349. But that
and renders the whole contract invalid. Buckeye Check statement must be read in context of the case as it was
Cashing, Inc. v. Cardegna, 546 U.S. 440, 444, 126 S.Ct. presented to us. We were considering only provisions
1204, 163 L.Ed.2d 1038 (2006). A court may determine that were part of the arbitration agreement. There was
the first type of challenge, but a challenge to the validity no challenge to an invalid or illegal provision outside
of the contract as a whole, and not specifically to the of the arbitration agreement because the entire contract
arbitration clause, must go to the arbitrator. Id. at 448– at issue was an arbitration agreement. Because we were
49, 126 S.Ct. 1204; see Prima Paint, 388 U.S. at 403– considering the various challenged provisions only as they
04, 87 S.Ct. 1801 (claim of fraud in the inducement of were part of the arbitration agreement itself, the Court
arbitration clause itself may be adjudicated by court, but could properly adjudicate Luna's challenge. Buckeye, 546
court may not consider claim of fraud in the inducement U.S. at 444, 126 S.Ct. 1204; Prima Paint, 388 U.S. at 409,
of the contract generally); Forest Oil Corp. v. McAllen, 87 S.Ct. 1801. At oral argument in this case, Labatt urged
268 S.W.3d 51, 56 (Tex.2008) (“[T]he party opposing the Court to similarly sever the indemnity clause if we
arbitration must show that the fraud relates to the found it violated Labor Code section 406.033(e). But as
arbitration clause specifically, not to the broader contract we explain below, we do not reach the issue of whether
in which it appears.”); Perry Homes v. Cull, 258 S.W.3d the indemnity clause is void because it is a question for the
580, 589 (Tex.2008) (“[A]rbitrators generally must decide arbitrator.
defenses that apply to the whole contract, while courts
decide defenses relating solely to the arbitration clause.”); The case now before us presents a challenge of the second
In re Merrill Lynch, 235 S.W.3d at 190 & n. 12 (noting type that we refer to above: a broad challenge to the
that a defense relating to the parties' entire contract rather entire contract on the ground that one of the contract's
than the arbitration clause alone is a question for the provisions is illegal and renders the whole contract invalid,
arbitrators); In re FirstMerit Bank, 52 S.W.3d at 756 but not specifically challenging the arbitration clause. The
(noting that the defenses of unconscionability, duress, Supreme Court addressed a similar challenge in *649
fraudulent inducement, and revocation must specifically Buckeye, 546 U.S. 440, 126 S.Ct. 1204, 163 L.Ed.2d
relate to the arbitration part of a contract and not the 1038. There, Buckeye Check Cashing operated a deferred
contract as a whole if they are to defeat arbitration, and deposit service by which its customers obtained cash
that validity of an arbitration provision is a separate issue in exchange for the customer's check in the amount
from validity of the whole contract). received plus a finance charge. Id. at 442, 126 S.Ct.
1204. For each transaction, Buckeye's customers signed

a “Deferred Deposit and Disclosure Agreement,” which Because of our disposition of the case, we do not address
Labatt's alternative argument that the FAA preempts
included an arbitration clause. Id. Buckeye customers
Labor Code section 406.033(e) to the extent the state
brought a class action suit in Florida state court. Id. at
statute would prevent or restrict enforcement of the
443, 126 S.Ct. 1204. They alleged the finance charges
arbitration provision. See In re Bison Bldg. Materials,
in the agreement violated Florida lending and consumer
Ltd., Nos. 01–07–00003–CV, 01–07–00029–CV, 2008 WL
protection laws. Id. Buckeye moved to compel arbitration,
2548568, at *8 (Tex.App.-Houston [1st Dist.] June 26,
but the plaintiffs argued the contract as a whole, including
2008, orig. proceeding) (mem.op.); In re Border Steel,
the arbitration clause, was rendered invalid by the
Inc., 229 S.W.3d 825, 831–32 (Tex.App.-El Paso 2007,
usurious finance charges. Id. The trial court denied the
orig. proceeding); In re R & R Pers. Specialists of Tyler,
motion to compel, holding that the court rather than an
Inc., 146 S.W.3d 699, 703–04 (Tex.App.-Tyler 2004, orig.
arbitrator should resolve the claim that a contract is void
proceeding).
and illegal. Id. The Florida Supreme Court affirmed, but
the United States Supreme Court reversed. Id. at 449, 126
S.Ct. 1204. The United States Supreme Court held that
“regardless of whether the challenge is brought in federal IV. Conclusion
or state court, a challenge to the validity of the contract
as a whole, and not specifically to the arbitration clause, If Dancy had sued Labatt for his own injuries immediately
must go to the arbitrator.” Id. prior to his death, he would have been compelled to
arbitrate his claims pursuant to his agreement. His
Like the plaintiffs in Buckeye, the beneficiaries in this beneficiaries, therefore, must arbitrate as their right to
case challenge the contract on the ground that an illegal maintain a wrongful death action is entirely derivative of
clause renders the whole contract void. The beneficiaries Dancy's rights. The trial court clearly abused its discretion
challenge the arbitration clause only in the sense that by refusing to compel arbitration.
they also challenge all parts of the agreement because the
parts comprise the whole. But, unless a challenge is to the We conditionally grant Labatt's petition for writ of
arbitration clause or arbitration agreement itself, as it was mandamus. The trial court is directed to enter an order
in In re Poly–America, the question of a contract's validity compelling arbitration of the beneficiaries' claims. We are
is for the arbitrator and not the courts. Accordingly, the confident the trial court will comply, and the writ will issue
beneficiaries' challenge to the validity of the agreement only if it fails to do so.
must be determined by the arbitrator, and we do not
address it. Buckeye, 546 U.S. at 445–46, 126 S.Ct. 1204;
All Citations
In re Merrill Lynch, 235 S.W.3d at 190 & n. 12; In re
FirstMerit Bank, 52 S.W.3d at 756, 758. 279 S.W.3d 640, 28 IER Cases 1268, 52 Tex. Sup. Ct. J.
352
Footnotes
1 Dancy's parents would not have been entitled to recover lost consortium damages had he survived his injuries. See
Roberts v. Williamson, 111 S.W.3d 113, 119 (Tex.2003).

In re Rubiola, 334 S.W.3d 220 (2011)
54 Tex. Sup. Ct. J. 654
Civil proceedings other than actions

A party denied the right to arbitrate pursuant
KeyCite Yellow Flag - Negative Treatment
to an agreement subject to the Federal
Declined to Extend by Osornia v. AmeriMex Motor & Controls, Inc.,
Tex.App.-Hous. (14 Dist.), March 29, 2012 Arbitration Agreement (FAA) does not have
334 S.W.3d 220 an adequate remedy by appeal and is entitled
Supreme Court of Texas. to mandamus relief to correct a clear abuse of
discretion. 9 U.S.C.A. § 4.
In re Joseph Charles RUBIOLA et al., Relators.
No. 09–0309.
|
Argued Sept. 16, 2010.
Validity
|
Decided March 11, 2011.
Synopsis Agreement
Background: Vendors of home petitioned for writ of A party seeking to compel arbitration under
mandamus seeking to compel arbitration of underlying the Federal Arbitration Act (FAA) must
claims by purchasers regarding repair of the home establish that there is a valid arbitration
based on arbitration agreement signed by purchasers and clause, and that the claims in dispute fall
mortgagee during financing. within that agreement's scope. 9 U.S.C.A. § 2.
Holdings: The Supreme Court, Medina, J., held that:

[1] purchasers granted vendors right to enforce arbitration What law governs
agreement, and Under the Federal Arbitration Act (FAA),
ordinary principles of state contract law
[2] claims fell within arbitration agreement. determine whether there is a valid agreement
to arbitrate. 9 U.S.C.A. § 2.
Writ conditionally granted. 26 Cases that cite this headnote

West Headnotes (11) Persons affected or bound
An obligation to arbitrate not only attaches
to one who has personally signed the written
arbitration agreement but may also bind a
What law governs
non-signatory under principles of contract
Parties may expressly agree to arbitrate under
law and agency.
the Federal Arbitration Agreement (FAA). 9
U.S.C.A. § 2. 8 Cases that cite this headnote

[2] Mandamus
Generally, parties must sign arbitration
Modification or vacation of judgment or
agreements before being bound by them.
order
Mandamus

In re Rubiola, 334 S.W.3d 220 (2011)
54 Tex. Sup. Ct. J. 654
When deciding whether claims fall within an

18 Cases that cite this headnote arbitration agreement, courts employ a strong
presumption in favor of arbitration.
Although arbitration agreements apply to
nonsignatories only in rare circumstances, the [11] Alternative Dispute Resolution
question of who is actually bound by an Disputes and Matters Arbitrable Under
arbitration agreement is ultimately a function Agreement
of the intent of the parties, as expressed in the To determine whether a claim falls within
terms of the agreement. the scope of the arbitration agreement, courts
must focus on the factual allegations of the
7 Cases that cite this headnote complaint, rather than the legal causes of
action asserted.
Persons entitled to enforce
Purchasers and mortgagee, who were parties
to arbitration agreement concerning financing
for sale of home, granted vendors right
to enforce arbitration agreement, where
agreement expressly provided that certain *221 Bernard Lee Shub, The Law Office of Ben Shub,
non-signatories were parties to the agreement, Elizabeth Conry Davidson, San Antonio TX, for Joseph
including all parties that were part of the Charles Rubiola.
transaction.
*222 Bryan A. Woods, Law Office of Bryan A. Woods,
7 Cases that cite this headnote San Antonio TX, for Real Party in Interest Brian Salmon.
Opinion
Building contracts disputes Justice MEDINA delivered the opinion of the Court.
Claims by purchasers against vendors and
listing agent regarding repairs of home at In this original mandamus proceeding, Relators seek
issue fell within arbitration agreement in to compel arbitration under an arbitration agreement
financing agreement between purchasers and they did not sign. The real parties in interest, who
mortgagee, where listing agent and vendors are signatories to the arbitration agreement, object
were non-signatory parties to arbitration to arbitration and contend that Relators cannot
agreement, agreement broadly covered all compel arbitration because Relators are not parties to
controversies, including real estate sales the arbitration agreement. The trial court apparently
contract and complaint regarding sale, and agreed because it denied Relators' motion to compel
sales contract stated that it could be amended arbitration. The underlying arbitration agreement,
by later writing and arbitration agreement at however, designated certain non-signatories as parties to
issue was executed one month later. the agreement.
5 Cases that cite this headnote We must decide whether the parties who actually agree
to arbitrate may also grant third parties the right to
enforce their arbitration agreement and, if so, whether
the signatories here intended to grant such rights to
Evidence
these Relators. We conclude that parties to an arbitration
agreement may grant non-signatories the right to compel

In re Rubiola, 334 S.W.3d 220 (2011)
54 Tex. Sup. Ct. J. 654
arbitration and that the Relators here were granted that is contained, unless all of the parties
right. The trial court therefore erred in denying the motion expressly agree in writing.
to compel arbitration, and we conditionally grant the writ.
The agreement further defined “parties” to include:
Rubiola Mortgage Company, and

I each and all persons and entities
signing this agreement or any
The underlying case concerns the sale and financing of other agreements between or
a home. Brian and Christina Salmon agreed to purchase among any of the parties as
the home from Greg Rubiola and his wife Catherine. The part of this transaction. “The
transaction was handled by J.C. Rubiola, Greg's brother, parties” shall also include individual
who served as the listing broker for the property. The partners, affiliates, *223 officers,
Salmons and Rubiolas signed a standard form Texas real directors, employees, agents, and/
estate sales contract, which did not contain an arbitration or representatives of any party to
clause. such documents, and shall include
any other owner and holder of this
Greg and J.C. Rubiola operate a number of real estate agreement.
related businesses in San Antonio. The Rubiola brothers
buy and sell real estate through Rubiola Management, J.C. Rubiola signed the agreement on behalf of Rubiola
L.L.C., which is the general partner of Rubiola Realty, Mortgage Company, and the Salmons signed a form
Ltd. and Rubiola Properties, Ltd. Greg and J.C. are acknowledging J.C.'s dual role as a real estate agent and
also president and vice-president, respectively, of Rubiola mortgage broker. The sale closed, and the Salmons moved
Mortgage Company, a corporation the brothers use to into their new home.
obtain financing for real estate buyers. The Rubiola
brothers' business interests are operated at the same Several months later, the Salmons sued the Rubiolas
location under the name Rubiola Mortgage and Realty, and other entities and individuals involved in repairing
which they advertise as a one-stop shop for customers' real the home (collectively referred to as the Rubiolas). 1
estate needs: offering the ability to buy, sell, build, finance, The Salmons alleged that J.C. Rubiola, acting as
and manage real estate through a single company. both the listing agent and a principal involved in
the home's construction and repair, made a series of
After agreeing to purchase Greg Rubiola's home, the misrepresentations that induced the Salmons to purchase
Salmons applied for mortgage financing with Rubiola the home. They also alleged violations of the Deceptive
Mortgage Company, using J.C. Rubiola as their mortgage Trade Practices Act and negligent supervision of repairs
broker and loan officer. As part of the loan process, made to the home. The Salmons sought either to rescind
the Salmons executed an arbitration agreement with the the sale or to collect damages. The Rubiolas answered and
mortgage company. This agreement provided that: moved to compel arbitration, relying on the arbitration
agreement signed by the Salmons and Rubiola Mortgage
Arbitrable disputes include any
Company during financing.
and all controversies or claims
between the parties of whatever
The trial court denied the Rubiolas' motion to compel,
type or manner, including without
causing the Rubiolas to seek mandamus relief in the
limitation, all past, present and/
court of appeals. The court of appeals also refused to
or future credit facilities and/
compel arbitration, and the Rubiolas filed the present
or agreements involving the
mandamus proceeding, seeking again to enforce the
parties. This arbitration provision
underlying arbitration agreement as a non-signatory.
shall survive any termination,
amendment, or expiration of the
agreement in which this agreement
II

In re Rubiola, 334 S.W.3d 220 (2011)
54 Tex. Sup. Ct. J. 654
[1] The Federal Arbitration Act (FAA) generally governs the existence of a valid arbitration clause between specific
arbitration provisions in contracts involving interstate parties and is therefore a gateway matter for the court
commerce. See 9 U.S.C. § 2; see also In re L & L Kempwood to decide. In re Weekley Homes, L.P., 180 S.W.3d 127,
Assocs., L.P., 9 S.W.3d 125, 127 (Tex.1999) (per curiam). 130 (Tex.2005); Sherer v. Green Tree Servicing LLC, 548
Parties may also expressly agree to arbitrate under the F.3d 379, 381 (5th Cir.2008). Under the FAA, ordinary
FAA. In re AdvancePCS Health L.P., 172 S.W.3d 603, principles of state contract law determine whether there
605–06 & n. 3 (Tex.2005) (per curiam). The arbitration is a valid agreement to arbitrate. In re Kellogg Brown
agreement here expressly provides for arbitration under & Root, Inc., 166 S.W.3d at 738 (citing First Options
the FAA, and although the Salmons oppose arbitration, of Chi., Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct.
generally, they do not contest the application of the FAA. 1920, 131 L.Ed.2d 985 (1995)). An obligation to arbitrate
not only attaches to one who has personally signed
[2] Under Section 4 of the FAA, “[a] party aggrieved the written arbitration agreement but may also bind
by the alleged failure, neglect, or refusal of another to a non-signatory under principles of contract law and
arbitrate under a written agreement for arbitration may agency. Id. at 738. Generally, however, parties must sign
petition ... for an order directing that such arbitration arbitration agreements before being bound by them. See
proceed in the manner provided for in such agreement.” 9 Grigson v. Creative Artists Agency, L.L.C., 210 F.3d
U.S.C. § 4; see In re Halliburton Co., 80 S.W.3d 566, 573 524, 528 (5th Cir.2000) (noting that “arbitration is a
(Tex.2002). “A party denied the right to arbitrate pursuant matter of contract and cannot, in general, be required
to an agreement subject to the FAA does not have an for a matter involving an arbitration agreement non-
adequate remedy by appeal and is entitled to mandamus signatory”). Although “[a]rbitration agreements apply to
relief to correct a clear abuse of discretion.” In re Labatt nonsignatories only in rare circumstances [,]” the question
Food Serv., L.P., 279 S.W.3d 640, 642–43 (Tex.2009). of “[w]ho is actually bound by an arbitration agreement
is [ultimately] a function of the intent of the parties,
as expressed in the terms of the agreement.” Bridas
S.A.P.I.C. v. Gov't of Turkmenistan, 345 F.3d 347, 355,
III
358 (5th Cir.2003). Here the question is not whether a
[3] A party seeking to compel arbitration under the FAA non-signatory may be compelled to arbitrate but rather
must establish that (1) there is a valid arbitration clause, whether a non-signatory may compel arbitration.
and (2) the claims in dispute fall within that agreement's
scope. In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, [8] The Salmons argue that because none of the Rubiolas
737 (Tex.2005). The Rubiolas contend that the arbitration signed the arbitration agreement, except J.C., who signed
agreement, executed during financing, is broad enough only as the representative of Rubiola Mortgage Company,
to cover all of the Salmon's claims against them. The that none of them are entitled to compel the Salmons
Salmons argue, however, that the arbitration agreement to arbitrate. The Salmons thus equate signing with being
extends only to disputes under the financing agreement, as a party to the agreement. The arbitration agreement,
opposed to the real estate *224 sales agreement, and that however, expressly provides that certain non-signatories
its breadth cannot be used by non-signatories to compel are to be parties to the agreement. The agreement defines
arbitration. This disagreement raises two issues: do the parties to include “Rubiola Mortgage Company, and
Rubiolas, as non-signatories to the arbitration agreement, each and all persons and entities that sign this agreement
have authority to compel the Salmons to arbitrate, and, if or any other agreements between or among any of
so, does the arbitration clause cover the Salmons' claims. the parties as part of this transaction.” Parties further
The first issue questions the validity of the arbitration include “individual partners, affiliates, officers, directors,
clause, while the second questions the clause's scope. employees, agents, and/or representatives of any party to
such documents.”
The Rubiolas argue, and we agree, that the arbitration

A agreement's broad definition of parties, at a minimum,
[4] [5] [6] [7] Whether a non-signatory can compelmade J.C. and Greg Rubiola parties to the arbitration
arbitration pursuant to an arbitration clause questions agreement. 2 Rubiola Mortgage Company signed the

In re Rubiola, 334 S.W.3d 220 (2011)
54 Tex. Sup. Ct. J. 654
arbitration agreement, and the Rubiola brothers are dispute at issue’ ”). The Rubiolas advance three arguments
clearly officers and representatives of the mortgage for why the arbitration clause covers the Salmons' claims:
company *225 and thus non-signatory parties to the (1) the language of the clause covers the claims, (2) J.C.'s
arbitration agreement under the agreement's terms. alleged actions occurred while he was acting under both
Because the arbitration agreement expressly provides the mortgage and real estate contracts, so his alleged
that certain non-signatories are considered parties, we actions were factually intertwined with the mortgage
conclude that such parties may compel arbitration under agreement, and (3) the two instruments should be read
the agreement. See Sherer, 548 F.3d at 382 (noting that together because they were executed contemporaneously
trial court's application of equitable estoppel to determine as part of the same transaction and because the mortgage
whether non-signatory might compel arbitration, was agreement was essential to the overall deal. The Salmons
unnecessary because the terms of the Loan Agreement argue, on the other hand, that the arbitration clause
clearly identify when a party might be compelled to does not cover their claims because those claims relate
arbitrate with a non-signatory); Bridas, 345 F.3d at 356 only to J.C.'s role as the listing agent to the real estate
(noting that ordinary principles of contract and agency contract. The Salmons further deny that their alleged
law may be called upon to bind a non-signatory to facts intertwine with the mortgage agreement, or that the
an agreement whose terms have not clearly done so); contracts should be construed together because they were
see also Carolyn Lamm, Defining The Party—Who is a signed by different parties at different times and without
Proper Party in an International Arbitration Before the reference to each other.
American Arbitration Association and Other International
Institutions, 34 GEO. WASH. INT'L L.REV.. 711, 720 [11] To determine whether a claim falls within the scope
(2003) (noting that courts prohibit enforcement by non- of the agreement, courts must “focus on the factual
signatories “where (1) the contract does not expressly allegations of the complaint, rather than the legal causes of
grant third parties the ability to participate in the action asserted.” Marshall, 909 S.W.2d at 900. The factual
arbitration; (2) the parties have not contemplated the idea; allegations in the Salmons' complaint center around a
and (3) non-signatory involvement would constitute an variety of alleged misrepresentations that J.C. Rubiola
invasion of the consensual nature of arbitration.”). But made in his capacity as the listing agent to the real
even though the Rubiolas are identified as non-signatories estate *226 transaction. J.C. allegedly promised that
who may compel arbitration, there remains the question certain repairs would be made to the Salmons' satisfaction
whether the Salmons' underlying claims fall within the after closing. When they were not and other serious
arbitration agreement's scope. problems materialized after closing, J.C. allegedly made
more promises to fix the problems or to repurchase the
home if the repairs were not satisfactory.
B
The underlying arbitration agreement defines arbitrable
[9] [10] When deciding whether claims fall within disputes to include “any and all controversies between
an arbitration agreement, courts employ a strong the parties of whatever type or manner, including without
presumption in favor of arbitration. Cantella & Co., limitation, all past, present and/or future credit facilities
Inc. v. Goodwin, 924 S.W.2d 943, 944 (Tex.1996) (per and/or agreements involving the parties.” The Rubiola
curiam) (holding that “[f]ederal and state law strongly brothers were, as we have already concluded, non-
favor arbitration,” and that “a presumption exists in favor signatory parties to the arbitration agreement, which
of agreements to arbitrate under the FAA”); Prudential broadly covers all controversies between the parties and
Sec. Inc. v. Marshall, 909 S.W.2d 896, 899 (Tex.1995) all past, present or future agreements involving the parties.
(holding that under the FAA “any doubts as to whether This language indicates that the arbitration agreement was
claims fall within the scope of the agreement must be not limited to the financing part of the transaction but
resolved in favor of arbitration,” and that “[t]he policy in rather extended to the real estate sales contract and the
favor of enforcing arbitration agreements is so compelling Salmons complaints regarding that sale.
that a court should not deny arbitration ‘unless it can be
said with positive assurance that an arbitration clause is The Salmons argue, however, that including the real
not susceptible of an interpretation which would cover the estate sales contract as part of the transaction subject

In re Rubiola, 334 S.W.3d 220 (2011)
54 Tex. Sup. Ct. J. 654
to arbitration is contrary to the terms of that contract. enforce arbitration as though they signed the agreement
themselves. We further conclude that the underlying
The real estate contract stated that it constituted the
arbitration agreement in this case identified the Rubiolas
entire agreement between the parties and further provided
as parties to the agreement and that they accordingly
that the parties could enforce it in court. The contract,
had the right to compel arbitration. Finally, we conclude
however, also states that it could be amended by a later
that the trial court's order denying arbitration is an abuse
writing. In the arbitration agreement, executed a month
of discretion for which we conditionally grant Relators'
later as part of the process for obtaining financing, the
request for mandamus relief. TEX.R.APP. P. 52.8(c). The
Salmons agreed to arbitrate all controversies between the
writ will issue only if the trial court fails to enforce the
parties and all past agreements involving the parties.
arbitration agreement.
***
All Citations
We conclude that signatories to an arbitration agreement
may identify other parties in their agreement who may 334 S.W.3d 220, 54 Tex. Sup. Ct. J. 654
Footnotes
1 J.C. Rubiola, Gregory Rubiola, Catherine Rubiola, JGL–Design Build, L.L.C., Michael Cortez individually and d/b/a The
Heights Design and Construction are defendants in the underlying suit and Relators in this Court.
2 J.C. and Greg Rubiola are the President and Vice President of Rubiola Mortgage Company. JGL Design Builders L.L.C.
is a Texas limited liability corporation, owned and managed by J.C. and Greg Rubiola. Michael Cortez individually and
d/b/a the Heights Design and Construction was the original contractor hired by the Rubiolas to remediate the mold and
water damage at the property.

In re Weekley Homes, L.P., 180 S.W.3d 127 (2005)
Federal Arbitration Act (FAA). 9 U.S.C.A. §

1 et seq.
Distinguished by Rocha v. Marks Transport, Inc., Tex.App.-Hous. (1 17 Cases that cite this headnote
Dist.), December 13, 2016
180 S.W.3d 127
Supreme Court of Texas. [3] Alternative Dispute Resolution
Existence and validity of agreement
In re WEEKLEY HOMES, L.P. Under the Federal Arbitration Act (FAA),
absent unmistakable evidence that the parties
No. 04–0119.
intended the contrary, the courts, rather than
|
arbitrators, must decide gateway matters such
Argued Nov. 30, 2004.
as whether a valid arbitration agreement
|
exists and whether an arbitration agreement is
Decided Oct. 28, 2005.
binding on a nonparty. 9 U.S.C.A. § 1 et seq.
Synopsis
Background: House purchaser's adult child brought
personal injury action against builder to recover for
asthma allegedly caused by dust from house repairs. [4] Alternative Dispute Resolution
Purchaser and trust that owned the house also sued. What law governs
The 192nd District Court, Merrill Hartman, J., refused Texas procedural rules govern gateway
to compel arbitration of personal injury action. Builder matters such as whether a valid arbitration
petitioned for writ of mandamus. agreement exists and an arbitration agreement
is binding on a nonparty. 9 U.S.C.A. § 1 et seq.

[Holding:] The Supreme Court, Brister, J., held as a matter
of first impression that arbitration clause was binding on
child, even though she was not party to contract. [5] Alternative Dispute Resolution
Evidence
Party moving to compel arbitration bears
Writ conditionally granted. burden to show a valid agreement to arbitrate.
West Headnotes (19)

What law governs
Generally, under the Federal Arbitration Act
(FAA), state law governs whether a litigant
Nonparties may be bound to an arbitration agreed to arbitrate, and federal law governs
clause when the rules of law or equity would the scope of an arbitration clause. 9 U.S.C.A.
bind them to the contract generally. § 1 et seq.
[2] Mandamus [7] Alternative Dispute Resolution

Civil proceedings other than actions What law governs
Mandamus relief is proper to enforce State law applies to whether a nonparty must
arbitration agreements governed by the arbitrate pursuant to agreement governed by

the Federal Arbitration Act (FAA), but courts Contractors

will endeavor to keep state law as consistent as A contractor performing repairs has an
possible with federal law. 9 U.S.C.A. § 1 et seq. independent duty under tort law not to injure
bystanders by its activities or by premises
conditions it leaves behind.

Agreement [11] Alternative Dispute Resolution
Under Texas and federal law, whether a Persons affected or bound
claim seeks a direct benefit from a contract A nonparty to a contract with an arbitration
containing an arbitration clause and must clause may seek or obtain direct benefits from
be arbitrated turns on the substance of the a contract by means other than a lawsuit, and,
claim, not artful pleading; thus, claims must therefore, may be bound by the arbitration
be brought on the contract and arbitrated if clause.
liability arises solely from the contract or must
be determined by reference to it, but claims 23 Cases that cite this headnote
can be brought in tort and in court if liability
arises from general obligations imposed by
law.
64 Cases that cite this headnote In some cases, a nonparty may be compelled
to arbitrate if it deliberately seeks and obtains
substantial benefits from the contract itself.
Persons affected or bound 14 Cases that cite this headnote
Arbitration clause in house purchaser's
contract with builder was binding on
[13] Estoppel
purchaser's adult child, even though she was
Future events; promissory estoppel
nonparty or nonsignatory to the contract,
When a promisor induces substantial action
and the clause required arbitration of
or forbearance by another, “promissory
her personal injury action to recover for
estoppel” prevents any denial of that
asthma allegedly caused by dust from house
promise if injustice can be avoided only by
repairs; the child resided in the house,
enforcement.
directed construction of many features,
repeatedly demanded extensive repairs, 22 Cases that cite this headnote
personally requested and received financial
reimbursement for expenses, conducted
settlement negotiations with builder, obtained [14] Estoppel
substantial and direct benefits from the Future events; promissory estoppel
contract, and could not equitably object to Promissory estoppel does not create liability
the arbitration clause, and she was beneficiary where none otherwise exists, but prevents a
and trustee of trust that owned the house and party from insisting upon his strict legal rights
would benefit from suit by trust and purchaser when it would be unjust to allow him to
on contract. enforce them.
[10] Negligence [15] Trusts

Capacity of trustee to sue and be sued in contract, it cannot later turn its back on the
general portions of the contract, such as an arbitration
Trusts clause, that it finds distasteful.
Parties
A suit involving a trust generally must be
brought by or against the trustee and can be
binding on the beneficiaries whether they join
it or not.
*128 Raul A. Gonzalez, Susan Kidwell, Locke Liddell &
Sapp, LLP, Austin, and N. Terry Adams, Beirne Maynard
[16] Alternative Dispute Resolution & Parsons, L.L.P., Houston, for relator.
James Craig Orr Jr. and Spencer P. Browne, Heygood Orr
& Reyes, L.L.P., Irving, for real party in interest.
Persons entitled to enforce
Direct-benefits estoppel against a nonparty Opinion
avoiding arbitration clause requires a
nonparty's colorable claim to the benefits of *129 Justice BRISTER delivered the opinion of the
the contract; a meddlesome stranger cannot Court.
compel arbitration by merely pleading a claim
We are asked to decide whether Weekley Homes,
that quotes someone else's contract.
L.P., a party to a contract containing an arbitration
23 Cases that cite this headnote clause, can compel arbitration of a personal injury claim
brought by Patricia Von Bargen, a nonparty. We have
previously compelled arbitration by nonparties to an
[17] Alternative Dispute Resolution arbitration agreement when they brought suit “based on a
contract,” 1 which Von Bargen purports to avoid here.
Direct-benefits estoppel against a nonparty
avoiding arbitration clause does not create [1] But as both state and federal courts have recognized,
liability for noncontracting parties that does nonparties may be bound to an arbitration clause when
not otherwise exist. the rules of law or equity would bind them to the contract
generally. Because we find those rules applicable here, we
conditionally grant mandamus relief.

I. Background
Direct-benefits estoppel against a nonparty
avoiding arbitration clause after receiving In the summer of 2000, Vernon Forsting contracted with
direct benefits from contract does not apply Weekley for construction of a 4,000 square foot home at
when the benefits alleged are insubstantial or a purchase price of $240,000. At the time, Forsting was
indirect. a seventy-eight year-old widower with an assortment of
health problems. His intention in purchasing such a large
home was to live with his daughter, Von Bargen (his only
child) and her husband and three sons.
Persons affected or bound Von Bargen and her husband negotiated directly with
When a nonparty consistently and knowingly Weekley on many issues before and after construction—
insists that others treat it as a party to the paying a $1,000 deposit, selecting the floor plan, signing a

letter of intent as “purchasers,” and making custom design court concluded the FAA applied, and granted the motion
choices. as to all claims by Forsting and the Trust. But the trial
court refused to compel arbitration of Von Bargen's claim
But only Forsting executed the various financing and because she did not sign the Purchase Agreement.
closing documents on the home, including the Real
Estate Purchase Agreement that contained the following [2] Mandamus relief is proper to enforce arbitration
arbitration clause: agreements governed by the FAA. 3 After the Fifth
Court of Appeals denied Weekley's request for such relief,
Any claim, dispute or cause of action
Weekley filed a similar request in this Court.
between Purchaser and Seller ...,
whether sounding in contract, tort,
or otherwise, shall be resolved by
binding arbitration.... Such claims, II. Governing Law
disputes or causes of action include,
but are not limited to, those [3] Neither party challenges the trial court's conclusion
arising out of or relating to ... the that the FAA governs the arbitration clause here. 4
design, construction, preparation, Under the FAA, absent unmistakable evidence that the
maintenance or repair of the parties intended the contrary, it is the courts rather than
Property. arbitrators that must decide “gateway matters” such as
whether a valid arbitration agreement exists. 5 Whether
Shortly after closing, Forsting transferred the home to the an arbitration agreement is binding on a nonparty is one
Forsting Family Trust, a revocable trust established ten of those gateway matters. 6
years earlier whose sole beneficiary was Von Bargen. At
his deposition, Forsting testified that the only reason he [4] [5] Texas courts apply Texas procedural rules
signed the Purchase Agreement individually rather than
in making that determination. 7 Those rules call for
as trustee was because he “forgot to put [the home] in
the trust.” Forsting and Von Bargen served as the only determination by summary proceedings, 8 with the
trustees of the Trust, the purpose of which was to transfer burden on the moving party to show a valid agreement to
Forsting's property to Von Bargen after his death. arbitrate. 9
According to the plaintiffs' pleadings, numerous problems [6] [7] But as we recently noted, it is not entirely clear
arose with the home after completion. When the family what substantive law governs whether a nonparty must
moved out of the house briefly so Weekley could arbitrate. 10 Generally under the FAA, state law governs
perform some of those repairs, it was Von Bargen
whether a litigant agreed to arbitrate, 11 and federal law
who requested and received reimbursement. Indeed, Von
Bargen admitted handling “almost ... all matters related to governs the scope of an arbitration clause. 12 Whether
the house, the problems and the warranty work and even *131 a nonparty must arbitrate can involve aspects of
the negotiations.” either or both. Pending an answer from the United States
Supreme Court, 13 we apply state law while endeavoring
Unsatisfied with the home and Weekley's efforts to to keep it as consistent as possible with federal law. 14
repair it, Forsting, Von Bargen, and the Trust filed
suit against Weekley in December 2002. Forsting and
the Trust asserted claims for negligence, breach of
contract, statutory violations, and breach of warranty. III. Estoppel and Nonsignatories
Von Bargen sued only for personal injuries, alleging
Texas law has long recognized that nonparties may be
Weekley's negligent repairs caused her to develop asthma.
bound to a contract under various legal principles. 15
Weekley moved to compel arbitration of all claims under Although we have never considered these principles in
the context of arbitration, we recently noted that contract
the Federal Arbitration *130 Act (FAA). 2 The trial
and agency law may bind a nonparty to an arbitration

agreement. 16 Indeed, if Texas law would bind a nonparty waived under the election-of-remedies doctrine. 26 Given
to a contract generally, the FAA would appear to preempt these options, it is not clear at this point that nonparties
an exception for arbitration clauses alone. 17 will always choose to forfeit potentially viable contract
claims solely to avoid arbitration.
In the one case in which we have compelled nonparties
to arbitrate, In re FirstMerit Bank, N.A., 52 S.W.3d 749 [9] [10] In this case, Von Bargen purports to make no
(Tex. 2001) we stated that “a litigant who sues based on a claim on the Weekley contract, claiming only that she
developed asthma from dust created by Weekley's repairs
contract subjects him or herself to the contract's terms.” 18
of the home. While Weekley's duty to perform those
Because the nonparties there asserted claims identical to
repairs arose from the Purchase Agreement, a contractor
the signatories' contract claims, we held all had to be
performing repairs has an independent duty under Texas
arbitrated. 19
tort law not to injure bystanders by its activities, 27 or by
We did not describe in FirstMerit what it means to sue premises conditions it leaves behind. 28 There is nothing
“based on a contract.” Von Bargen asserts a narrow in the sparse record here to suggest Von Bargen's claim is
interpretation that would apply only to explicit contract different from what any bystander might assert, or what
claims, and thus not to hers for personal injury; Weekley she might assert if the contractor were not Weekley.
argues for a broad application to any claim that “arises
from or relates to” the contract involved. [11] [12] But a nonparty may seek or obtain direct
benefits from a contract by means other than a lawsuit. In
We recently adopted an approach between these two some cases, a nonparty may be compelled to arbitrate if
extremes, holding that a nonparty may be compelled it deliberately seeks and obtains substantial benefits from
to arbitrate “if it seeks, through the claim, to derive a the contract itself. 29 The analysis here focuses on the
direct benefit from the contract containing the arbitration *133 nonparty's conduct during the performance of the
provisions.” 20 As we noted, this rule is consistent with contract. 30 Thus, for example, a firm that uses a trade
federal law of “direct benefits estoppel.” 21 name pursuant to an agreement containing an arbitration
clause cannot later avoid arbitration by claiming to have
[8] Under both Texas and federal law, whether a claim been a nonparty. 31 Nor can nonsignatories who received
seeks a direct benefit from a contract containing an lower insurance rates and the ability to sail under the
arbitration *132 clause turns on the substance of the French flag due to a contract avoid the arbitration clause
claim, not artful pleading. 22 Claims must be brought on in that contract. 32
the contract (and arbitrated) if liability arises solely from
the contract or must be determined by reference to it. 23 [13] [14] This Court has never addressed such an
On the other hand, claims can be brought in tort (and in estoppel claim in the arbitration context. 33 But we have
court) if liability arises from general obligations imposed long recognized in other contexts the defensive theory
by law. 24 of promissory estoppel. 34 When a promisor induces
substantial action or forbearance by another, promissory
We question Weekley's conclusion that this rule will estoppel prevents any denial of that promise if injustice
inevitably drive claimants to plead only noncontractual can be avoided only by enforcement. 35 Promissory
claims to avoid arbitration. Nonparties face a choice when estoppel does not create liability where none otherwise
they may plead in either contract or tort, but pleading
exists, 36 but “prevents a party from insisting upon his
the former invokes an arbitration clause broad enough
strict legal rights when it would be unjust to allow him to
to cover both (as most do). If they pursue a claim “on
the contract,” then they must pursue all claims—tort and enforce them.” 37
contract—in arbitration. 25 Conversely, if they choose not

Here, Von Bargen has not merely resided in the home.
to sue “on the contract,” they may pursue the tort claims
Claiming the authority of the Purchase Agreement, she
in court, but the contract claims will thereby likely be
directed how Weekley should construct many of its

features, repeatedly demanded extensive repairs to “our grant either a right to sue for breach. 42 Nor do we
understand the doctrine to apply when the benefits
home,” 38 personally requested and received financial
alleged are insubstantial or indirect. But once Von Bargen
reimbursement for expenses “I incurred” while those
deliberately sought substantial and direct benefits from
repairs were made, and conducted settlement negotiations
the contract, and Weekley agreed to comply, equity
with Weekley (apparently never consummated) about
prevents her from avoiding the arbitration clause that was
moving the family to a new home. Having obtained
part of that agreement.
these substantial actions from Weekley by demanding
compliance with provisions of the contract, Von Bargen
We recognize that direct-benefits estoppel has yet to be
cannot equitably object to the arbitration clause attached
endorsed by the United States Supreme Court, and that
to them.
its application and boundaries are not entirely clear. 43
[15] In addition to these benefits, Forsting and the Trust For example, while federal courts often state the test as
have sued Weekley on claims which are explicitly based whether a nonsignatory has “embraced the contract,” 44
on the contract. Under Texas law, a suit involving a trust the *135 metaphor gives little guidance in deciding what
generally must be brought by or against the trustee, and particular conduct embraces or merely shakes hands with
can be binding on the beneficiaries whether they join it it. Indeed, the equitable nature of the doctrine may render
or *134 not. 39 Although Von Bargen did not purport firm standards inappropriate, requiring trial courts to
to sue as either trustee or beneficiary, she was both, and exercise some discretion based on the facts of each case. 45
any recovery will inure to her direct benefit as the sole
beneficiary and equitable titleholder of the home. 40 As [19] But we agree with the federal courts that when
one Texas court has noted, if a trustee's agreement to a nonparty consistently 46 and knowingly 47 insists that
arbitrate can be avoided by simply having the beneficiaries others treat it as a party, it cannot later “turn[ ] its back on
bring suit, “the strong state policy favoring arbitration the portions of the contract, such as an arbitration clause,
would be effectively thwarted.” 41 that it finds distasteful.” 48 A nonparty cannot both have
his contract and defeat it too.
[16] While we based our decision in FirstMerit Bank on
the nonparties' contract-based claims, more was involved While Von Bargen never based her personal injury claim
in that case than the format of the pleadings. Direct- on the contract, her prior exercise of other contractual
benefits estoppel requires a colorable claim to the benefits; rights and her equitable entitlement to other contractual
a meddlesome stranger cannot compel arbitration by benefits prevents her from avoiding the arbitration clause
merely pleading a claim that quotes someone else's here. Accordingly, the trial court abused its discretion in
contract. The nonparties in FirstMerit Bank were the failing to compel arbitration. We conditionally grant the
daughter and son-in-law of the signatories, the actual writ of mandamus and order the trial court to vacate that
occupants of the mobile home, and (according to the part of its order denying Weekley's motion, and to enter a
briefs) the future owners to whom the signatories planned new order compelling arbitration of Von Bargen's claim.
to transfer title. It is hard to see what direct benefits they We are confident the trial court will comply, and our writ
expected from that contract that Von Bargen did not will issue only if it does not.
expect from this one.
[17] [18] Like the equitable doctrine of promissory

Justice WILLETT did not participate in the decision.
estoppel, we do not understand direct-benefits estoppel
to create liability for noncontracting parties that does All Citations
not otherwise exist. As Von Bargen and Weekley
had no contract between them, estoppel alone cannot 180 S.W.3d 127
Footnotes
1 In re FirstMerit Bank, N.A., 52 S.W.3d 749, 755 (Tex.2001).

2 See 9 U.S.C. §§ 1–16.

3 In re Oakwood Mobile Homes, Inc., 987 S.W.2d 571, 573 n.2 (Tex.1999) (per curiam); EZ Pawn Corp. v. Mancias, 934
S.W.2d 87–88 (Tex.1996) (per curiam).
4 Although Von Bargen asserts that her personal injury claim cannot be arbitrated under the Texas Arbitration Act as it
was not signed by an attorney, see TEX. CIV. PRAC. & REM. CODE § 171.002((a)(3), (C), she does not challenge the
trial court's conclusion that the FAA governs here. The FAA not only contains no such limitation, but also preempts any
state requirements that apply only to arbitration clauses. Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 686–87, 116
S.Ct. 1652, 134 L.Ed.2d 902 (1996).
5 Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444, 452, 123 S.Ct. 2402, 156 L.Ed.2d 414 (2003); PacifiCare Health Sys.,
Inc. v. Book, 538 U.S. 401, 407, 123 S.Ct. 1531, 155 L.Ed.2d 578 n.2 (2003).
6 John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 546–47, 84 S.Ct. 909, 11 L.Ed.2d 898 (1964).
7 Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 268 (Tex.1992).
8 Id. at 269.
9 J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex.2003).
10 In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 738–39 (Tex.2005); see also Howsam v. Dean Witter Reynolds, Inc.,
537 U.S. 79, 87, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002) (Thomas, J., concurring) (suggesting Supreme Court sometimes
looks to federal law and sometimes law chosen by parties); Wash. Mut. Fin. Group, LLC v. Bailey, 364 F.3d 260, 267 n.6
(5th Cir. 2004) (noting that whether state or federal law of arbitrability applies “is often an uncertain question”).
11 Doctor's Assocs., 517 U.S. at 686–87, 116 S.Ct. 1652; First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct.
1920, 131 L.Ed.2d 985 (1995); Perry v. Thomas, 482 U.S. 483, 492, 107 S.Ct. 2520, 96 L.Ed.2d 426, n.9 (1987). Parties
may also agree that state law governs their arbitration. Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Jr. Univ.,
489 U.S. 468, 476, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989).
12 Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983).
13 The United State Supreme Court has not answered this question, though it has applied federal substantive law to bind a
nonparty to labor-union arbitration, a field in which federal law has traditionally yielded little deference to state labor-law
principles. See John Wiley & Sons, 376 U.S. at 548, 84 S.Ct. 909 (citing Textile Workers Union of Am. v. Lincoln Mills,
353 U.S. 448, 456, 77 S.Ct. 912, 1 L.Ed.2d 972 (1957)).
14 Kellogg, 166 S.W.3d at 739.
15 See, e.g., TEX. BUS. CORP. Act art. 2.21(A)(2) (holding shareholders may be liable for corporation's contracts under
alter ego theory if they cause corporation to perpetrate actual fraud for their direct personal benefit); Stine v. Stewart,
80 S.W.3d 586, 590 (Tex.2002) (holding third-party beneficiary could enforce contract); Biggs v. U.S. Fire Ins. Co., 611
S.W.2d 624, 629 (Tex.1981) (holding agent acting within the scope of apparent authority binds the principal).
16 Kellogg, 166 S.W.3d at 738. Accordingly, it is no longer true that “the [Texas] decisions do not even mention the possibility
of additional bases for binding non-signatories to arbitration.” Fleetwood Enters., Inc. v. Gaskamp, 280 F.3d 1069, 1076
(5th Cir. 2002).
17 Doctor's Assocs., 517 U.S. at 686–87, 116 S.Ct. 1652; Allied–Bruce Terminix Cos., Inc. v. Dobson, 513 U.S. 265, 281,
115 S.Ct. 834, 130 L.Ed.2d 753 (1995) (“What States may not do is decide that a contract is fair enough to enforce all
its basic terms (price, service, credit), but not fair enough to enforce its arbitration clause. The Act makes any such state
policy unlawful, for that kind of policy would place arbitration clauses on an unequal ‘footing,’ directly contrary to the Act's
language and Congress' intent.”).
18 52 S.W.3d at 755.
19 Id. at 755–56.
20 Kellogg, 166 S.W.3d at 741.
21 Id.
22 Hughes Masonry Co., Inc. v. Greater Clark County Sch. Bldg. Corp., 659 F.2d 836, 838–39 (7th Cir. 1981); Southwestern
Bell Tel. Co. v. DeLanney, 809 S.W.2d 493, 495 (Tex.1991).
23 Int'l Paper Co. v. Schwabedissen Maschinen & Anlagen GMBH, 206 F.3d 411, 418 (4th Cir. 2000); DeWitt County Elec.
Coop., Inc. v. Parks, 1 S.W.3d 96, 105 (Tex.1999); DeLanney, 809 S.W.2d at 494.
24 See, e.g., R.J. Griffin & Co. v. Beach Club II Homeowners Ass'n, 384 F.3d 157, 163–164 (4th Cir. 2004); InterGen N.V.
v. Grina, 344 F.3d 134, 145–46 (1st Cir. 2003); Westmoreland v. Sadoux, 299 F.3d 462, 467 (5th Cir. 2002); Fleetwood
Enters., Inc. v. Gaskamp, 280 F.3d 1069, 1076–77 (5th Cir. 2002); DeLanney, 809 S.W.2d at 494; see also Formosa
Plastics Corp. USA v. Presidio Eng'rs & Contractors, Inc., 960 S.W.2d 41, 47 (Tex.1998).

25 See, e.g., Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 271 (Tex.1992) (holding DTPA claim was factually intertwined
with contract claim and thus subject to arbitration clause).
26 Bocanegra v. Aetna Life Ins. Co., 605 S.W.2d 848, 851 (Tex.1980) (holding election-of-remedies doctrine prevents pursuit
of inconsistent rights or remedies when result would be manifest injustice); cf. Medina v. Herrera, 927 S.W.2d 597, 598–
99 (Tex.1996) (holding election-of-remedies doctrine barred pursuit of both workers' compensation claim and suit against
employer for intentional act).
27 See Redinger v. Living, Inc., 689 S.W.2d 415, 417 (Tex.1985) (noting general contractor on a construction site in control
of the premises may be subject to direct liability for negligence arising from: (1) a premises defect, or (2) an activity or
instrumentality).
28 Strakos v. Gehring, 360 S.W.2d 787, 790 (Tex.1962).
29 Astra Oil Co., Inc. v. Rover Navigation, Ltd., 344 F.3d 276, 281 (2d Cir. 2003) (holding affiliate of signatories could enforce
arbitration clause as opposing party treated affiliate as part of charter contract during occurrence involved); Am. Bureau
of Shipping v. Tencara Shipyard S.P.A., 170 F.3d 349, 353 (2d Cir. 1999) (holding nonsignatories who received lower
insurance rates and ability to sail under French flag due to contract were bound by arbitration clause in it); see also Matter
of VMS Ltd. P'ship Sec. Litig., 26 F.3d 50, 52 (7th Cir. 1994) (holding wife bound by settlement agreement related to
investment services contract signed only by her husband, but under which she had accepted services as well); see also
InterGen, 344 F.3d at 146 (holding equitable estoppel inapplicable as nonsignatory never sought to derive direct benefits
from contracts during their currency).
30 E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, S.A.S., 269 F.3d 187, 200 n.7 (3d Cir.
2001).
31 Deloitte Noraudit A/S v. Deloitte Haskins & Sells, U.S., 9 F.3d 1060, 1064 (2d Cir. 1993).
32 Tencara Shipyard, 170 F.3d at 353.
33 See Kellogg, 166 S.W.3d at 741 n.9 (reserving question of whether to apply direct-benefits estoppel to benefits obtained
from contract rather than subsequent litigation).
34 See, e.g., ‘Moore’ Burger, Inc. v. Phillips Petroleum Co., 492 S.W.2d 934 (Tex.1972).
35 Trammell Crow Co. No. 60 v. Harkinson, 944 S.W.2d 631, 636 (Tex.1997).
36 Hruska v. First State Bank of Deanville, 747 S.W.2d 783, 785 (Tex.1988).
37 Wheeler v. White, 398 S.W.2d 93, 96 (Tex.1965).
38 In various lists submitted in the months after the sale, Von Bargen demanded repairs to sagging floors, buckling walls
and windows, cracking brick work, as well as replacing the front door, repainting the back door and the kitchen cabinets,
regrouting the bathrooms and entry way, replacing the fireplace screen, closing gaps at carpet seams, removing drainage
problems in the yard, and a noisy garage door.
39 See TEX. PROP. CODEE §§ 111.004(7), 115.011, 115.015; Huie v. DeShazo, 922 S.W.2d 920, 926 (Tex.1996)(holding
trusts are not legal entities); Transamerican Leasing Co. v. Three Bears, Inc., 586 S.W.2d 472, 476–77 (Tex.1979)
(holding beneficiaries were bound by judgment against trust and trustees, as some participated in trial in their capacity
as trustees, and remainder showed neither prejudice, conflict of interest, nor inadequate representation by trustees).
40 Perfect Union Lodge No. 10 v. Interfirst Bank of San Antonio, N.A., 748 S.W.2d 218, 220 (Tex.1988) (holding trust
beneficiaries hold equitable title to trust property); cf. Javitch v. First Union Sec., Inc., 315 F.3d 619, 627 (6th Cir. 2003)
(holding arbitration agreements were binding on receiver who succeeded to interests of entities that signed them); Hays &
Co. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 885 F.2d 1149, 1153–54 (3d Cir. 1989) (holding arbitration agreements
were binding on successor trustee in bankruptcy).
41 Merrill Lynch, Pierce, Fenner & Smith v. Eddings, 838 S.W.2d 874, 879 (Tex.App.-Waco 1992, writ denied).
42 See Sun Oil Co. v. Madeley, 626 S.W.2d 726, 734 (Tex.1981) (holding estoppel based on division orders could not
permanently amend underlying lease).
43 See e.g., J. Douglas Uloth & J. Hamilton Rial, III, Equitable Estoppel as a Basis for Compelling Nonsignatories to Arbitrate
—A Bride Too Far?, 21 REV. LITIG. 593 (2002).
44 See, e.g. InterGen, 344 F.3d at 145; DuPont, 269 F.3d at 200; Peltz ex rel. Peltz v. Sears, Roebuck & Co., 367 F.Supp.2d
711, 721 (E.D.Pa. 2005); In re Universal Serv. Fund Tel. Billing Practices Litig., 300 F.Supp.2d 1107, 1138 (D.Kan. 2003);
Amkor Tech., Inc. v. Alcatel Bus. Sys., 278 F.Supp.2d 519, 521–22 (E.D.Pa. 2003); Cherry Creek Card & Party Shop,
Inc. v. Hallmark Mktg. Corp., 176 F.Supp.2d 1091, 1098 (D.Colo. 2001).
45 See, e.g., Bridas S.A.P.I.C. v. Turkmenistan, 345 F.3d 347, 360 (5th Cir. 2003) (“The use of equitable estoppel is within
a district court's discretion.”); accord, Hill v. G.E. Power Sys., Inc., 282 F.3d 343, 348 (5th Cir. 2002); Grigson v. Creative
Artists Agency, L.L.C., 210 F.3d 524, 528 (5th Cir. 2000).

46 See Int'l Paper, 206 F.3d at 418 (estopping nonsignatory from denying agreement to arbitrate “when he has consistently
maintained that other provisions of the same contract should be enforced to benefit him.”) (emphasis added).
47 See Bridas, 345 F.3d at 361–62 (“Direct[-]benefits estoppel applies when a nonsignatory ‘knowingly exploits the
agreement containing the arbitration clause.’ ”) (emphasis added) (citing DuPont, 269 F.3d at 199); Tencara Shipyard, 170
F.3d at 353 (requiring nonsignatories to arbitrate pursuant to provision in contract they neither requested nor executed,
as they had duty to obtain that contract and received copies of it).
48 DuPont, 269 F.3d at 200; accord Astra Oil Co., 344 F.3d at 281.

In re Wingfield, 171 S.W.3d 374 (2005)
Mandamus
Nature of acts to be commanded
171 S.W.3d 374
Court of Appeals of Texas, Mandamus relief is appropriate if the relator
Tyler. demonstrates that the act sought to be
compelled is purely ministerial and that the
In re Raymond WINGFIELD, State relator has no other adequate legal remedy.
Counsel for Offenders and Kim Vernon,
Director, State Counsel for Offenders.
No. 12–05–00151–CV. [2] Mandamus

| Nature of acts to be commanded
July 7, 2005.
For a duty to be “ministerial,” for mandamus
Synopsis purposes, the law must clearly spell out the
Background: State Counsel for Offenders (SCFO), which duty to be performed with such certainty that
had been appointed to represent two indigent inmates nothing is left to the exercise of discretion
charged with crimes allegedly committed during escape or judgment; in other words, the act must
attempt, brought motion to withdraw as counsel for be positively commanded and so plainly
one inmate, citing likely conflict of interest. The 3rd prescribed under the law as to be free from
Judicial District Court, Houston County, Jim Parsons, doubt.
P.J., sitting in the 349th Judicial District, denied the
motion and ordered SCFO to erect a “Chinese Wall”
during dual representation. Private attorneys on county
indigent defense appointment list intervened, opposing [3] Mandamus
possible withdrawal state counsel and appointment of Nature and existence of rights to be
private attorneys. The District Court, Jim Parsons, J., protected or enforced
denied SCFO's motions to strike the intervention and The “ministerial act” requirement for
to reconsider the denial of the motion to withdraw, and mandamus relief is a requirement that the
found SCFO's Director in contempt. SCFO and Director relator have a clear right to the relief sought;
petitioned for writ of mandamus. this means that the relief sought must be
clear and undisputable, and its merits must
be beyond dispute, with nothing left to the
Holdings: The Court of Appeals, James T. Worthen, C.J., exercise of discretion or judgment.
held that:
[1] trial court had no authority to allow private attorneys

to intervene in criminal proceeding, and [4] Mandamus
Ministerial acts in general
[2] Director's request for mandamus relief was premature. For purposes of ministerial act requirement
for mandamus relief, if there is any discretion
or judicial determination attendant to the act,
Petition conditionally granted in part and denied in part.
it is not “ministerial,” nor is it a “ministerial”
act if the trial court must weigh conflicting
claims or collateral matters that require legal
West Headnotes (14) resolution.

[1] Mandamus
Remedy at Law
[5] Mandamus

Exercise of judicial powers and functions Actions in which intervention is

in general authorized
Mandamus may be used to correct judicial Trial court had no authority to allow
action that is contrary to well-settled law, private attorneys on county indigent defense
whether the law is derived from statute, rule, appointment list to intervene in criminal
or clear, binding precedent from a court of proceeding so that attorneys could oppose
superior jurisdiction. trial court's reconsideration of its denial
of motion by State Counsel for Offenders
Cases that cite this headnote (SCFO) to withdraw in part, based on
likely conflict of interest, from its appointed
[6] Mandamus dual representation of two indigent inmates
Specific acts charged with crimes allegedly committed
during escape attempt; civil procedure rule
A court's ruling on withdrawal of counsel is a
on intervention by pleading did not apply to
proper subject of mandamus.
criminal proceedings, and Code of Criminal
1 Cases that cite this headnote Procedure made no provision for a third party
to intervene in a criminal action. Vernon's
Ann.Texas Rules Civ.Proc., Rules 2, 60;
[7] Parties
Vernon's Ann.Texas C.C.P. arts. 1.02, 3.02,
Intervention
26.051(g).
The civil procedure rule on intervention
by pleading does not apply to criminal 6 Cases that cite this headnote
proceedings. Vernon's Ann.Texas Rules
Civ.Proc., Rules 2, 60.
[11] Contempt
3 Cases that cite this headnote Nature and form of remedy and
jurisdiction
An order of contempt is not appealable.
[8] Parties
Actions in which intervention is Cases that cite this headnote
authorized
The Code of Criminal Procedure makes no
[12] Mandamus
provision for a third party to intervene in a
Acts and proceedings of courts, judges,
criminal action. Vernon's Ann.Texas C.C.P.
and judicial officers
arts. 1.02, 3.02.
Generally, if the contemnor has not been
3 Cases that cite this headnote confined, she has no other adequate remedy at
law but mandamus.
[9] Amicus Curiae Cases that cite this headnote

Right to appear and act in general
A true amicus curiae is without interest in
[13] Mandamus
the proceeding in which he appears; he is a
Acts and proceedings of courts, judges,
bystander whose mission is to aid the court to
and judicial officers
act only for the personal benefit of the court.
Director of State Counsel for Offenders
2 Cases that cite this headnote (SCFO) had adequate remedy at law as to
trial court's order finding her in contempt
for failing to comply with prior order
[10] Parties
to erect “Chinese Wall” so that SCFO
could perform dual representation, without

conflict of interest, of two indigent inmates Relators Raymond Wingfield, State Counsel for
charged with crimes allegedly committed Offenders (SCFO), and Kim Vernon, SCFO Director,
during escape attempt, and thus, her request seek mandamus relief from two orders signed on
for mandamus relief was premature; Director, December 15, 2004 and April 6, 2005, respectively, by
as attorney who was officer of court, had Respondent, the Honorable Jim Parsons, presiding judge
the right, upon proper motion filed in the of the 3rd Judicial District Court of Houston County,
offended court, to be released on her own Texas, sitting in the 349th Judicial District Court of
personal recognizance pending a de novo Houston County. We conditionally grant the petition in
determination of her guilt or innocence part and deny in part.
by a judge other than the judge of the
offended court. Vernon's Ann.Texas C.C.P.
art. 26.051(g); V.T.C.A., Government Code §
BACKGROUND
21.002(d).
The underlying proceeding is a criminal case brought
against Wingfield by the State of Texas. Wingfield,
along with his codefendant, Dalton Collins, is charged
[14] Mandamus with multiple serious crimes allegedly committed during
Change of venue and transfer of causes an escape attempt from a prison unit operated by the
Once a finding of contempt has been Texas Department of Criminal Justice. On November 1,
entered against an attorney and the attorney 2004, Respondent signed an order appointing SCFO 1 to
has filed a motion for referral for de represent Wingfield *377 and Collins. Approximately
novo consideration by another judge of the two weeks later, SCFO filed a motion to withdraw as
offended court, the court has a ministerial Wingfield's counsel citing a likely conflict in representing
duty, for mandamus purposes, to make both defendants. On December 15, 2004, without a
the referral. V.T.C.A., Government Code § hearing, Respondent overruled SCFO's motion and
21.002(d). ordered SCFO to take all reasonable steps to erect
a “Chinese Wall” during its dual representation of
Cases that cite this headnote Wingfield and Collins. On February 16, 2005, at SCFO's
request, the trial court set a hearing for April 4 to permit
SCFO to re-urge its motion to withdraw.
Attorneys and Law Firms On February 18, eleven of the thirteen attorneys on
the Houston County indigent defense appointment
*376 Daniel E. Maeso, Adrian L. Young, Austin, for
list filed a plea in intervention. Intervenors alleged
relator.
that the county is to pay $250 of the fee charged
Susan Lea Hays, for respondent. by non-SCFO defense counsel appointed to represent
indigent inmate defendants and that the state comptroller
Mark D. Mullin, Melinda Mayo, Potter County Dist. “shall” pay the remainder that is properly certified.
Atty., Amarillo, Barbara Law, for real party in interest. See TEX.CODE CRIM. PROC. ANN. § 26.051(h)
(Vernon Supp.2004–05). However, Intervenors averred
Panel consisted of WORTHEN, C.J., GRIFFITH, J., and that “[d]espite certification [of the fee] ..., the comptroller
DeVASTO, J. has repeatedly refused to issue payment to court
appointed attorneys in these types of cases in the
past due to insufficient funds available.” Consequently,
OPINION Intervenors concluded, allowing SCFO to withdraw and
appointing any of the intervenors to represent Wingfield
JAMES T. WORTHEN, Chief Justice. would violate appointed counsel's rights under the United
States and Texas constitutions.

On February 21, Respondent signed an order permitting Intervenors argued that the payment system for non-
the intervention “for the limited purpose of representing SCFO counsel requires appointed counsel to undertake
Intervenors' interests at the hearing on the State Counsel representation without adequate, timely compensation
for Offenders Motion to Withdraw.” On April 4, SCFO and is therefore unconstitutional as a taking, a violation
filed a motion to strike the plea in intervention. On the of the equal protection clause, and a violation of a
same day, the court held an evidentiary hearing. defendant's right to effective counsel. At the conclusion
of the hearing, Respondent denied SCFO's motion to
At the hearing, Respondent first heard argument on reconsider his prior order denying SCFO's motion to
SCFO's motion to strike. Respondent then ruled that he withdraw. Respondent also found Director Vernon in
would “leave [Intervenors] in limited to this sole issue with contempt for her “open court admissions” that she had
regard to your withdrawal of my prior order. I view it, taken no steps to erect a Chinese Wall as required by
though, as an amicus curiae. Their participation will not Respondent's prior order. Respondent sentenced Director
in any way help or harm the substantive rights of the Vernon to three days in the Houston County Jail,
defendants involved.” probated until May 6, 2005 at 1:00 p.m., which was
the time set for Wingfield's arraignment. On April 6,
SCFO presented uncontroverted evidence that it could not Respondent signed an order incorporating his rulings
provide conflict-free representation to Wingfield. During on SCFO's motions and Director Vernon's contempt.
Director Vernon's testimony, Respondent asked what Respondent made a finding in the order that appointing
steps had been taken to comply with the Chinese Wall non-SCFO counsel to represent an indigent inmate
portion of the December 15, 2004 order. Director Vernon defendant where the anticipated reasonable fee would
informed Respondent that no steps had been taken. equal or exceed $25,000 would be an appointment without
a reasonable expectation of payment. 2 Respondent
Intervenors pointed out that payments for indigent inmate further concluded that appointment without a reasonable
defense counsel claims are limited to $25,000 per claim expectation of payment violates appointed counsel's
and to $25,000 in cumulative payments to a single
“constitutional privilege against unreasonable taking.” 3
claimant during a biennium. See TEX. GOV'T CODE
This original proceeding followed. We granted SCFO's
ANN. § 403.074(d) (Vernon 2005). If insufficient funds
motion for emergency relief pending our disposition on
are available to pay the claim, it may not be paid
the merits.
until the Legislature provides for payment. See id. §
403.074(d). Intervenors presented evidence that any claim
over $25,000 must be submitted in its entirety to the
Legislature for payment and that the attorney's fee for AVAILABILITY OF MANDAMUS
representing Wingfield could exceed $25,000. Intervenors
also presented evidence that (1) even for claims under [1] [2] Mandamus relief is appropriate if the relator
$25,000, the Legislature has not appropriated dedicated demonstrates that the act sought to be compelled is
funds; (2) the miscellaneous fund from which those claims purely “ministerial” and that the relator has no other
are paid had a balance of approximately $9 on the date adequate legal remedy. State ex rel. Rosenthal v. Poe,
of the hearing; (3) no further claims can be paid from 98 S.W.3d 194, 198 (Tex.Crim.App.2003). For a duty
the miscellaneous fund this fiscal year; (4) additional to be ministerial, the law must “clearly spell [ ] out the
funds will *378 not be available until September 2005, duty to be performed ... with such certainty that nothing
provided the Legislature makes that appropriation; and is left to the exercise of discretion or judgment.” State
(5) the comptroller had no claims pending for attorney's ex rel. Hill v. Court of Appeals for the Fifth District,
fees. Finally, Intervenors presented evidence to support 34 S.W.3d 924, 928 (Tex.Crim.App.2001) (quoting Texas
their contention that “only the very small class of rural Dep't of Corrections v. Dalehite, 623 S.W.2d 420, 424
criminal defense lawyers living in prison counties is (Tex.Crim.App.1981)). In other words, the act must be
bearing the burden of Texas'[s] failure to adequately fund “positively commanded and so plainly prescribed” under
indigent inmate defense.” the law “as to be free from doubt.” State ex rel. Hill, 34
S.W.3d at 928 (quoting Buntion v. Harmon, 827 S.W.2d
945, 949 (Tex.Crim.App.1992)).

[3] [4] [5] The “ministerial act” requirement has also good faith allegation of ineffective assistance of counsel
been described as a requirement that the relator have “a by a trial attorney provided by the board; or
clear right to the relief sought.” State ex rel. Hill, 34
S.W.3d at 928. This means that the relief sought must be (3) any conflict exists under the Texas Disciplinary
clear and undisputable. State ex rel. Rosenthal, 98 S.W.3d Rules of Professional Conduct of the State Bar of Texas
at 198. *379 Thus, its merits must be beyond dispute with that precludes representation by an attorney appointed
nothing left to the exercise of discretion or judgment. Id. If by the board.
there is any discretion or judicial determination attendant
TEX.CODE CRIM. PROC. ANN. art. 26.051(g)
to the act, it is not ministerial, nor is it a ministerial act if
(emphasis added). The plain language of the statute
the trial court must weigh conflicting claims or collateral
requires the trial court to appoint non-SCFO counsel if
matters that require legal resolution. State ex rel. Hill v.
at least one of the three criteria is met. No exceptions
Court of Appeals for the Fifth District, 67 S.W.3d 177,
are stated. Thus, the act of appointing non-SCFO counsel
181 (Tex.Crim.App.2001). Mandamus may be used to
becomes ministerial once SCFO makes the required
correct judicial action that is contrary to well-settled law,
showing.
whether the law is derived from statute, rule, or clear,
binding precedent from a court of superior jurisdiction.
In its motion to withdraw, SCFO alleged that Wingfield's
See State ex rel. Healey v. McMeans, 884 S.W.2d 772, 774
interest in the defense of the respective charges differed
(Tex.Crim.App.1994).
from the interest of his codefendant. For that reason,
SCFO alleged, its judgment in behalf of codefendant
Collins is likely to adversely affect its representation of
DENIAL OF MOTION TO WITHDRAW Wingfield, which necessitated its withdrawal from the
representation. See Almanzar v. State, 702 S.W.2d 653,
[6] Relators first argue that Respondent had a ministerial 655 (Tex.Crim.App.1986) (“We wish to stress how vital
duty to appoint a non-SCFO attorney to represent it is for a defense attorney not to become entangled
Wingfield. See TEX.CODE CRIM. PROC. ANN. art. in a web of conflicting interests between two or more
26.051(g). Relators further contend that they have no defendants.”). The December 15, 2004 order provides in
adequate remedy at law to challenge Respondent's denial pertinent part as follows:
of SCFO's motion to withdraw and, therefore, mandamus
is appropriate. Withdrawal of counsel is a proper subject 5. The creation of a “Chinese Wall” is an adequate
of mandamus. Haley v. Boles, 824 S.W.2d 796, 798 remedy at law, in lieu of withdrawal which is equally
(Tex.App.-Tyler 1992, orig. proceeding). Consequently, convenient, beneficial and effective. The creation of
we must address only whether Relator had a ministerial a “Chinese Wall” will both satisfy the professional
duty to appoint non-SCFO counsel for Wingfield. requirements of independent representation *380
and assure legal counsel for inmate defendants.
Article 26.051(g) provides as follows:
6. The Court has a duty to protect a defendant's
The court shall appoint an attorney other than an right to due process of law under both the United
attorney provided by the [Texas Board of Criminal States and Texas Constitutions. These constitutional
Justice] if the court determines for any of the following considerations override the inconvenience to State
reasons that a conflict of interest could arise from the Counsel for Offenders in the creation of a “Chinese
use of an attorney provided by the board [for an inmate Wall” to prevent the anticipated conflicts in
who is charged with an offense committed while in the representation of multiple defendants.
custody of the Texas Department of Criminal Justice]:
7. Through the creation of a “Chinese Wall” between
(1) the case involves more than one inmate and the defense counsels the preservation of the secrets and
representation of more than one inmate could impair the confidences of respective defendant clients as well
attorney's effectiveness; as the independent professional judgment of defense
counsel may be maintained.
(2) the case is appealed and the court is satisfied that
conflict of interest would prevent the presentation of a

by filing a pleading, subject to being stricken out by the

It is therefore Ordered that State Counsel for Offenders court for sufficient cause on the motion of any party. See
take all reasonable steps to create a “Chinese Wall” TEX.R. CIV. P. 60. However, Rule 60 applies to civil
to protect the confidentiality, secrets, and work cases only. See TEX.R. CIV. P. 2 (Texas Rules of Civil
product and independent professional judgment of Procedure govern the procedure in all actions of a civil
separate defense counsel within the State Counsel for nature.); see also Holloway v. State, 147 Tex.Crim. 106,
Offenders as they discharge their statutory obligation of 108, 178 S.W.2d 688, 689 (Tex.1944) (rules governing civil
representation. actions are applicable and controlling in criminal matters
These findings indicate Respondent recognized that a only when expressly made so by statute). 6
conflict could arise from SCFO's dual representation of
Wingfield and Collins and that the conflict could impair [8] Criminal proceedings are governed by the Texas
Code of Criminal Procedure. TEX.CODE CRIM. PROC.
defense counsel's effectiveness. 4 As such, the statutory
ANN. art. 1.02 (Vernon 2005). A “criminal action,” such
prerequisites for appointment of non-SCFO counsel were
as the underlying proceeding, is prosecuted in the name of
satisfied. See TEX.CRIM. PROC. ANN. art. 26.051(g)
the State of Texas against the accused and is conducted
(1). However, that is not the end of the matter.
by some person acting under the authority of the State,
in accordance with its laws. TEX.CODE CRIM. PROC.
ANN. art. 3.02 (Vernon 2005). Unlike the Rules of Civil
DENIAL OF MOTION TO STRIKE Procedure, the Code of Criminal Procedure makes no
PLEA IN INTERVENTION provision for a third party to intervene in a “criminal
action.” In his response to Relators' petition, Respondent
Respondent contends that in making his ruling, he was does not cite authority permitting intervention in a
required to balance the interest asserted by Intervenors criminal action. Intervenors rely on Rule 60, but admit
and Wingfield's right to conflict-free representation, that “there may be some question whether an intervention
which, in turn, necessitated resolution of the conflict per se is permitted in criminal matters, in the absence of
between Code of Criminal Procedure article 26.051(g) and specific authority to do so under the Code of Criminal
Government Code section 403.074. 5 Procedure.” We have been unable to locate any authority
that Rule 60 is an exception to the general rule that the
In response to Relators' mandamus petition, Respondent Texas Rules of Civil Procedure are controlling in criminal
contends that “[t]he appointment of private counsel matters only when expressly made so by statute. See
without reliable compensation raises takings and equal Holloway, 147 Tex.Crim. at 108, 178 S.W.2d at 689.
protection violations for the attorney and adequate
representation issues for the defendant.” Consequently, [9] Additionally, we note that the April 6 order includes
Respondent argues, a “constitutional conundrum” exists findings that Intervenors “had an interest in the issue
and he “made the most palatable decision possible under before the Court, sufficient for them to intervene” and
the difficult circumstances not of the judiciary's making.” that the intervention was “in the nature of an amicus
Relators, on the other hand, contend that no provision curie [sic].” A true amicus curiae is without interest in
or precedent exists in Texas criminal law for pleas in the proceeding in which he appears. Burger v. Burger,
intervention. Therefore, Relators contend, Respondent 156 Tex. 584, 298 S.W.2d 119, 120–21 (Tex.1957). He is
should have granted SCFO's motion to strike. a “bystander” whose mission is to aid the court to act
only for the personal benefit of the court. Id. Neither
[7] Intervention in civil actions has long been permitted in Respondent nor Intervenors have cited any authority
Texas. See Legg v. McNeill, 2 Tex. 428, 430–31 (Tex.1847). permitting one claiming an interest in a proceeding to
In approving the practice, the Texas Supreme Court appear in the proceeding as amicus curiae, and we have
reasoned that “[h]aving in our system but one form of been unable to locate any such authority.
action, we cannot perceive how the interest of parties not
embraced in the suit can always be protected without [10] Based upon the foregoing authority and the absence
allowing them to come in as intervenors....” Id. at 430. of contrary authority, we agree with Relators that
The current rule permits any party to intervene *381 Respondent had no discretion to deny SCFO's motion

to strike the plea in intervention. It therefore follows withdraw from representing an indigent inmate accused
of committing an offense while incarcerated. We are not
that if Respondent had no discretion to deny SCFO's
unsympathetic to the situation. However, our charge is to
motion to strike, he had no discretion to consider the
determine whether the acts Relators seek to compel are
issues raised by Intervenors. Because SCFO satisfied the
ministerial and whether Relators have an adequate legal
statutory prerequisites, Respondent had a ministerial duty
remedy. State ex rel. Rosenthal, 98 S.W.3d at 198.
to grant SCFO's motion to withdraw and appoint non-
SCFO counsel.
We have concluded that Respondent had a ministerial
duty to grant SCFO's motion to withdraw and appoint
non-SCFO counsel to represent Wingfield. Therefore,
CONTEMPT ORDER Respondent had no discretion to order the creation of a
Chinese Wall in lieu of the withdrawal mandated by article
[11] [12] [13] [14] An order of contempt is
26.051(g). We have also concluded that Respondent had
not appealable. Ex parte Gray, 649 S.W.2d 640, 642
no discretion to deny SCFO's motion to strike Intervenors'
(Tex.Crim.App.1983). Generally, if the contemnor has
plea in intervention. Moreover, Wingfield and SCFO have
not been confined, she has no other adequate remedy
no adequate remedy at law. See Haley, 824 S.W.2d at 798.
at law but mandamus. Id. However, as an officer of the
However, Director Vernon has an adequate remedy at law
court, an attorney has a right, upon proper motion filed
for challenging the contempt order.
in the offended court, *382 to be released on her own
personal recognizance pending a de novo determination
We conditionally grant the writ of mandamus as to (1)
of her guilt or innocence by a judge other than the
those portions of the April 6 order overruling SCFO's
judge of the offended court. See TEX. GOV'T CODE
motion to reconsider Respondent's denial of SCFO's
ANN. § 21.002(d) (Vernon 2004); Ex parte Waters,
motion to withdraw and overruling SCFO's motion to
499 S.W.2d 309, 310–11 (Tex.Crim.App.1973). Once a
strike Intervenors' plea in intervention and as to (2) the
finding of contempt has been entered and an attorney
portion of the December 15, 2004 order requiring the
has filed a motion for referral, the trial court has a
creation of a Chinese Wall. We are confident that on
ministerial duty to refer the contempt proceeding to the
or before fifteen days from the date of this opinion
presiding judge of the administrative judicial region in
and corresponding order, Respondent will vacate these
which the alleged contempt occurred for assignment of
provisions of the respective orders and enter an order
a judge to re-adjudicate the issues of guilt or innocence
granting SCFO's motion for reconsideration of its motion
and punishment. TEX. GOV'T ANN.CODE ANN. §
to withdraw and granting SCFO's motion to strike the
21.002(d); see Ex parte Howell, 488 S.W.2d 123, 126
plea in intervention. The writ will issue only if he does
(Tex.Crim.App.1972). Therefore, Director Vernon has an
not. Because Director Vernon has an adequate remedy at
adequate remedy at law for the contempt order, and her
law, she has not shown herself entitled to mandamus relief.
request for mandamus relief is premature. See Ex parte
Therefore, we deny the writ as to the contempt portion of
Waters, 499 S.W.2d at 311.
the April 6 order.
The stay of May 2, 2005 is lifted.

CONCLUSION
Relators' petition, the various responses, and the All Citations

supporting record identify the legal issues and resulting
dilemma in rural prison counties when SCFO, because 171 S.W.3d 374
of a potential or an actual conflict of interest, must
Footnotes
1 SCFO represents indigent inmates who are charged with offenses committed while in the custody of Texas Department
of Criminal Justice, Institutional Division. See TEX.CODE CRIM. PROC. ANN. art. 26.051(e) (Vernon 2004–05).
2 During the hearing, Respondent expressed doubt that the Legislature would approve payment of these claims.

3 On June 20, 2005, Respondent notified this Court by letter that the appropriations bill for the upcoming biennium (fiscal
years 2006–07) provides additional funding for the payment of miscellaneous claims, but the $25,000 statutory cap
remains. Respondent also reiterated his conclusion that “it is only in cases likely to hit the $25,000 statutory cap where
free world counsel does not have a reasonable expectation of payment and thus constitutional takings concerns override.”
4 In this proceeding, Respondent states that “[t]he use of dual representation by the State Counsel even with a Chinese
Wall admittedly raises legitimate conflicted representation concerns.”
5 As an aside, we perceive no conflict between the two statutes. Article 26.051(g) prescribes the circumstances under which
non-SCFO counsel must be appointed for indigent inmate offenders, and section 403.074 creates a payment system for
those appointed. The real issue, as presented by Intervenors at the evidentiary hearing and as argued by Intervenors
and Respondent in this proceeding, is the constitutionality of the payment system.
6 An exception is Texas Rule of Civil Procedure 18a relating to the recusal of judges. See Arnold v. State, 853 S.W.2d 543,
544 (Tex.Crim.App.1993) (holding that Rule 18a, formerly codified in Tex.Rev.Civ. Stat. Ann. art. 200a, § 6 but repealed
by Act of June 12, 1985, 69th Leg., R.S., ch 480, § 26(1), 1985 Gen. Laws 2048, applies in criminal cases).

J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (2003)

Declined to Follow by Soto v. State Industrial Products, Inc., 1st Cir.
(Puerto Rico), April 15, 2011
128 S.W.3d 223 [1] Alternative Dispute Resolution
Supreme Court of Texas. Arbitrability of Dispute
Party attempting to compel arbitration must
J.M. DAVIDSON, INC. first establish that dispute in question falls
v. within scope of valid arbitration agreement.
Chelsey J. WEBSTER.
No. 01–0774.
| [2] Alternative Dispute Resolution
Argued Dec. 11, 2002. Scope and Standards of Review
|
Trial court's determination of arbitration
Decided Dec. 31, 2003.
agreement's validity is legal question subject to
Synopsis de novo review.
Background: Employer filed motion to compel arbitration
of former employee's retaliatory discharge claim. The
343rd District Court, San Patricio County, Alonzo
Torres Rodriguez, J., denied motion, and employer filed [3] Alternative Dispute Resolution
interlocutory appeal. The Corpus Christi-Edinburg Court Evidence
of Appeals, Hinojosa, J., 49 S.W.3d 507, affirmed, and If trial court finds valid arbitration agreement,
employer appealed. burden shifts to party opposing arbitration
to raise affirmative defense to enforcing
arbitration.
[Holding:] The Supreme Court, Wallace B. Jefferson, J.,
held that provision of arbitration agreement, indicating
that employer reserves right to unilaterally abolish
or modify any personnel policy without prior notice, [4] Alternative Dispute Resolution
was ambiguous as to whether unilateral termination Evidence
right applied to parties' agreement to arbitrate or only Presumption favoring arbitration arises only
to personnel policies concerning at-will employment after party seeking to compel arbitration
relationship, warranting remand for determination of proves that valid arbitration agreement exists.
what parties intended by provision.

Schneider, J., dissented and filed opinion in which O'Neill, Construction
J., joined. Arbitration agreements are interpreted under
traditional contract principles.
Smith, J., dissented and filed opinion.

Formal Requisites

Employer attempting to enforce arbitration Construing Whole Contract Together

agreement must show that agreement meets all In construing written contract, court's
requisite contract elements. primary concern is to ascertain true intentions
of parties as expressed in instrument; to
achieve this objective, court must examine and
consider entire writing in effort to harmonize
[7] Labor and Employment and give effect to all provisions of contract so
Formation; Requisites and Validity that none will be rendered meaningless.
Labor and Employment
Renewal or Continuation
At-will employment does not preclude
formation of other contracts between [11] Contracts
employer and employee, so long as neither Construction as a Whole
party relies on continued employment as No single contract provision, taken alone,
consideration for contract. will be given controlling effect; rather, all
provisions must be considered with reference
11 Cases that cite this headnote to whole instrument.

Modification or Termination
Provision of arbitration agreement, indicating [12] Contracts
that employer reserves right to unilaterally Existence of Ambiguity
abolish or modify any personnel policy Contract is unambiguous if it can be given
without prior notice, was ambiguous as to definite or certain legal meaning.
whether unilateral termination right applied
to parties' agreement to arbitrate or only 94 Cases that cite this headnote
to personnel policies concerning at-will
employment relationship, warranting remand [13] Contracts
for determination of what parties intended Existence of Ambiguity
by provision; additional personnel policy
Contracts
language was not included in paragraph
Ambiguity in General
that contained such provision, but was
If contract is subject to two or more
only included in subsequent paragraph that
reasonable interpretations after applying
discussed unrelated unemployment issues.
pertinent rules of construction, contract is
56 Cases that cite this headnote ambiguous, creating fact issue on parties'
intent.
[9] Contracts 128 Cases that cite this headnote

Ambiguity in General
Deciding whether contract is ambiguous is
question of law for court.
*225 Myra K. Morris, Corpus Christi, Chester J.
[10] Contracts Makowski, Nathan Wesely, Houston, Royston Rayxor
Language of Contract Vickery & Williams, for petitioner.
Contracts Richard Daniel Nielsen, Corpus Christi, for respondent.

as the “Company”), for itself and all of its officers,

Opinion directors, agents and employees, all of which mutually
agree and contract that any and all claims, disputes
Justice JEFFERSON delivered the opinion of the Court,
or controversies, whether based on the Construction
joined by Chief Justice PHILLIPS, Justice HECHT,
[sic], Statutes, Code(s), Ordinances, Rules, Orders
Justice OWEN, Justice WAINWRIGHT, and Justice
Regulations, and/or common law of he [sic] United
BRISTER.
States and/or of any State, and/or all subdivisions, of
This is an interlocutory appeal of a trial court's order either, and/or asserted on the basis of contract, quasi-
denying an employer's motion to compel arbitration under contract, personal injury, tort, offenses, quasi-offenses
the company's alternative dispute resolution policy. We or otherwise, or arising out of, or in any way relating
recently held that arbitration agreements between an to this application for employment, or any other
employer and an at-will employee are enforceable when application for employment that I may have previously
there is an agreement that is valid under traditional submitted, or may submit in the future, or the
contract principles. In re Halliburton Co., 80 S.W.3d 566, Company's decision to hire or not to hire me; including
573 (Tex.2002). Here, we consider whether an arbitration the arbitrability of any claim, dispute or controversy
agreement between an employer and an employee is shall be exclusively and finally settled by binding
enforceable if the employer reserves the unilateral right arbitration administered by, Conducted [sic] under
to modify or terminate personnel policies without notice. the Arbitration Rules of, and before the Arbitrator(s)
The trial court denied the employer's motion to compel of *226 an Arbitration Tribunal of the National
arbitration, and the court of appeals affirmed. 49 S.W.3d Association for Dispute Resolution, Inc., pursuant to
507. the provisions of the Federal Arbitration Act and/or
any applicable Alternative Dispute Resolutions Act,
We conclude that the arbitration agreement is ambiguous whichever shall have the broadest effect, all claims
because it is not possible to determine from the document of any rights to the contrary, including any right to
itself whether the unilateral termination right applies to trail [sic] by jury, being hereby expressly waived. The
the parties' agreement to arbitrate, or only to “personnel Arbitration Tribunal shall be the sole and existence [sic]
policies” concerning the at-will employment relationship. of its jurisdiction over all parties and issues. Judgment
Accordingly, we reverse the court of appeals' judgment upon any award may be entered in any Court—State or
and remand to the trial court for further proceedings Federal—having jurisdiction.
consistent with this opinion.
I hereby certify that all of the information and
statements made or furnished on this application
are true and correct and I hereby grant the
I “Company” permission to verify such information and
statements. I understand that any false statement or
omission on this application may be considered as
Background
sufficient cause for rejection of this application, or
J.M. Davidson, Inc. hired Chelsey Webster as a mechanic for dismissal, if such false statement or omission is
in December 1997. Soon after, Davidson asked Webster discovered subsequent to my employment. I further
to sign a one-page document as a condition of his at- understand that the “Company” may perform a pre-
will employment. Webster signed the document, which employment investigation to determine my suitability
provided: for employment and I authorize the “Company” to have
access to any and all records concerning my education
J.M. Davidson, Inc. or employment background. I hereby authorize any
person or Entity having such information to release
ALTERNATIVE DISPUTE RESOLUTION POLICY
same to the “Company”. I understand that the pre-
EMPLOYMENT APPLICATION LANGUAGE employment investigation may include contacting my
previous employers, and I hereby authorize such
I, the applicant whose signature is affixed hereto, and previous employers to release any and all information
the above listed Company, (hereinafter referred to relating to my employment to the “Company”.

I understand that if I am extended an offer of petition for writ of mandamus, held that the arbitration
employment, I will have to pass a physical examination agreement was illusory, and affirmed the trial court's
as a condition of such employment. If employed, I agree order denying Davidson's motion to compel arbitration.
to abide by and comply with all of the rules, policies 49 S.W.3d 507, 514. One justice dissented, concluding
and procedures of the “Company.” I understand that if that the arbitration agreement was enforceable because
I am employed by the “Company”, such employment both parties mutually agreed to arbitrate workplace
will be “at-will” and that the “Company” may terminate injury disputes. Id. at 519. The dissent observed that
my employment at any time and for any reason. I the reservation language—concerning the company's
understand and agree that, in the event of my separation unilateral right to modify or terminate personnel policies
from any employment with the “Company”, any and without notice—did not render Davidson's promise
all information concerning my employment history may illusory, because it was “separable” from the promise to
be furnished to any other employer with whom I seek arbitrate. Id. at 518.
employment and I hereby release and hold harmless
the “Company”, its affiliates, parents, subsidiaries, and Davidson asks us to reverse the court of appeals' judgment
successors, and its and their officers, directors, trustees, and order the trial court to stay the trial pending binding
employees and agents from and against any and all arbitration pursuant to the Texas Arbitration Act. 1 See
claims and liability for furnishing such information. TEX. CIV. PRAC. & REM. CODE § 171.098.
No supervisor or person other than the President of
the “Company”, can change or otherwise modify any
employment agreement. The “Company” reserves the
right to unilaterally abolish or modify any personnel II
policy without prior notice. I understand that this
application will be considered valid and current for a Standard of Review
period of not more than thirty (30) days.
[1] [2] [3] A party attempting to compel arbitration
In November 1998, Webster was injured at work must first establish that the dispute in question falls within
and subsequently filed a workers' compensation claim. the scope of a valid arbitration agreement. In re Oakwood
Although his condition improved temporarily, his doctor Mobile Homes, Inc., 987 S.W.2d 571, 573 (Tex.1999). If
eventually placed him on “no work” status. Shortly the other party resists arbitration, the trial court must
thereafter, Webster's employment with Davidson ceased. determine whether a valid agreement to arbitrate exists.
The parties dispute whether Webster quit or was Id.; TEX. CIV. PRAC. & REM. CODE § 171.021. The
terminated. trial court's determination of the arbitration agreement's
validity is a legal question subject to de novo review. In
Webster sued Davidson for wrongful termination under re Kellogg Brown & Root, 80 S.W.3d 611, 615 (Tex.App.-
section 451 of the Texas Labor Code, alleging he Houston [1st Dist.] 2002, orig. proceeding). If the trial
was terminated in retaliation for filing a workers' court finds a valid agreement, the burden shifts to the
compensation claim. See TEX. LAB. CODE § 451.001. party opposing arbitration to raise an affirmative defense
Davidson denied Webster's allegations and filed a to enforcing arbitration. Oakwood, 987 S.W.2d at 573.
motion to compel binding arbitration under the
company's alternative dispute resolution policy. Webster
*227 responded that the arbitration agreement was III
unenforceable because it was illusory, unconscionable,
and lacked mutuality. Following a hearing, the trial court
denied Davidson's motion without explanation. Analysis
[4] [5] [6] [7] Although we have repeatedly expressed a

Davidson then filed an interlocutory appeal seeking to
strong presumption favoring arbitration, the presumption
compel arbitration under the Texas Arbitration Act, and
arises only after the party seeking to compel arbitration
a mandamus action to compel arbitration pursuant to the
proves that a valid arbitration agreement exists. See,
Federal Arbitration Act. The court of appeals denied the
e.g., Prudential Secs., Inc. v. Marshall, 909 S.W.2d 896,

898 (Tex.1995); High Valley Homes, Inc. v. Fudge, 2003 We upheld the arbitration agreement between Halliburton
WL 1882261, at *3 (Tex.App.-Austin April 17, 2003, no and its employee. Id. at 570. We concluded that the
pet.) (memorandum opinion); see also Fleetwood Enters., employee's at-will employment status did not render
Inc. v. Gaskamp, 280 F.3d 1069, 1073 (5th Cir.2002) the agreement illusory because Halliburton did not
(federal policy favoring arbitration does not apply to rely on continued employment as consideration for
the determination of whether there is a valid agreement the agreement. Instead, mutual promises to submit all
to arbitrate; instead, ordinary contract principles are employment disputes to arbitration constituted sufficient
applied). Arbitration agreements are interpreted under consideration, because both parties were bound to the
traditional contract principles. Jenkens & Gilchrist v. promises to arbitrate. Id. at 569.
Riggs, 87 S.W.3d 198, 201 (Tex.App.-Dallas 2002, no
pet.); Pepe Int'l Dev. Co. v. Pub Brewing Co., 915 S.W.2d Halliburton's right to modify or terminate the policy did
925, 930 (Tex.App.-Houston [1st Dist.] 1996, no writ); not allow the employer to avoid its promise to arbitrate
see also First Options of Chicago, Inc. v. Kaplan, 514 because it was limited by express contract provisions. Id.
U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995) at 569–70. First, the policy stated that any changes only
(holding that, when deciding whether the parties agreed applied prospectively to unknown claims. Id. And second,
to *228 arbitrate, “courts generally ... should apply if Halliburton terminated the policy, such termination
ordinary state-law principles that govern the formation of required notice and applied to both Halliburton's and the
contracts”). Thus, an employer attempting to enforce an employees' rights. Id. Therefore, Halliburton could not
arbitration agreement must show the agreement meets all avoid its promise to arbitrate by amending or terminating
requisite contract elements. At-will employment does not the dispute resolution program. Id. Because the express
preclude formation of other contracts between employer terms of the policy provided that both the employee and
and employee, so long as neither party relies on continued Halliburton were bound to their promises to arbitrate, we
employment as consideration for the contract. See Light held the agreement was not illusory. Id. at 570. Here, we
v. Centel Cellular Co., 883 S.W.2d 642, 645 (Tex.1994) are asked to decide whether the terms of the agreement
(because at-will employer always retains the option between Davidson and Webster are distinguishable from
to discontinue employment at any time, the promise Halliburton.
of continued employment is illusory and insufficient
consideration for employee's promise not to compete). Davidson argues that its dispute resolution policy is
Here, the parties dispute whether the reciprocal promises enforceable because, like Halliburton, the agreement
to arbitrate are sufficient consideration to support includes reciprocal promises to waive the right to
enforcing the arbitration agreement. litigation and submit all employment disputes to binding
arbitration. See In re Alamo Lumber Co., 23 S.W.3d
We recently considered whether an arbitration agreement 577, 579–80 (Tex.App.-San Antonio 2000, pet. denied)
between an employer and at-will employee was supported (“Since the parties surrendered their rights to trial by
by sufficient consideration. See In re Halliburton Co., jury, these mutual promises supply valid consideration.”).
80 S.W.3d at 566. We note, however, that the court Thus, Davidson contends there is sufficient consideration
of appeals' decision and both parties' submissions to to support the arbitration agreement. On the other hand,
this Court occurred before we decided Halliburton. In Webster argues that the arbitration agreement is illusory
Halliburton, the employer notified employees of a new because the express terms of the agreement provide that
alternative dispute resolution program that required Davidson was not bound by its terms.
both the employer and the employees to submit all
employment-related disputes to binding arbitration. Id. at *229 [8] It is clear that Davidson and Webster
568. The terms included the employer's right to modify or “mutually agree[d] and contract[ed]” to submit disputes
discontinue the program, but also required the employer to arbitration. At the end of the one-page document
to give its employees notice of changes and stated that any containing their agreement, however, is the following
amendments would apply only prospectively. Id. at 569– statement: “The Company reserves the right to
70. unilaterally abolish or modify any personnel policy
without prior notice.” Our resolution of this case depends
on the relationship between those two provisions.

which contains the promise to arbitrate, but appears only

[9] [10] [11] [12] [13] In construing this agreement, in the second paragraph, which discusses these other,
we first determine whether it is possible to enforce the unrelated employment issues.
contract as written, without resort to parol evidence.
Deciding whether a contract is ambiguous is a question In their attempt to construe the agreement, the court
of law for the court. Coker v. Coker, 650 S.W.2d 391, 394 of appeals' justices could not agree on the scope of
(Tex.1983). In construing a written contract, the primary Davidson's right to terminate the agreement. Although
concern of the court is to ascertain the true intentions silent on ambiguity, the majority held that the “personnel
of the parties as expressed in the instrument. R & P policy” language permitted Davidson to terminate the
Enters. v. LaGuarta, Gavrel & Kirk, Inc., 596 S.W.2d arbitration agreement at any time. 49 S.W.3d at 514
517, 518 (Tex.1980); City of Pinehurst v. Spooner Addition (“Although Davidson agreed to submit ‘any and all
Water Co., 432 S.W.2d 515, 518 (Tex.1968). To achieve claims, disputes or controversies' arising between it and
this objective, we must examine and consider the entire appellee to arbitration, it explicitly retained the absolute
writing in an effort to harmonize and give effect to all the right to modify or terminate the policy at any time.”).
provisions of the contract so that none will be rendered Conversely, the dissent held that Davidson's unilateral
meaningless. Universal C.I.T. Credit Corp. v. Daniel, 150 right to terminate or modify personnel policies did not
Tex. 513, 243 S.W.2d 154, 158 (1951). No single provision *230 affect the parties' separate agreement to arbitrate;
taken alone will be given controlling effect; rather, all in fact, the dissent noted that “[i]n the event the employer
the provisions must be considered with reference to the exercised that right [to modify or terminate] the employee
whole instrument. Myers v. Gulf Coast Minerals Mgmt. retained the right to force arbitration on the issue.” Id. at
Corp., 361 S.W.2d 193, 196 (Tex.1962); Citizens Nat'l 518 (emphasis added). If the dissent had interpreted the
Bank v. Tex. & P. Ry. Co., 136 Tex. 333, 150 S.W.2d “personnel policy” language as applying to the arbitration
1003, 1006 (1941). A contract is unambiguous if it can be agreement itself, Webster would not have the right to
given a definite or certain legal meaning. Columbia Gas seek arbitration on the issue following termination of the
Transmission Corp. v. New Ulm Gas, Ltd., 940 S.W.2d arbitration agreement.
587, 589 (Tex.1996). On the other hand, if the contract
is subject to two or more reasonable interpretations after The proper interpretation of this language is critical. 2 In
applying the pertinent rules of construction, the contract Halliburton, we rejected the argument that the arbitration
is ambiguous, creating a fact issue on the parties' intent. Id. agreement at issue was illusory because, among other
things, it required ten days notice of any modification or
In this case, we cannot give the arbitration agreement termination and stated that any such amendment would
a definite or certain legal meaning because it is unclear apply prospectively only. 80 S.W.3d at 569–70. Thus,
whether Davidson's unrestricted right to “unilaterally we held that “Halliburton cannot avoid its promise to
abolish or modify any personnel policies” gives it the arbitrate by amending the provision or terminating it
right to terminate the arbitration agreement without altogether.” Id. at 570. The termination provision in this
notice. (Emphasis added.) Stated more succinctly, is the case does not contain similar limitations. Accordingly,
arbitration agreement a “personnel policy”? we hold that the agreement is ambiguous and must be
remanded to the trial court to determine what the parties
We cannot answer this question by reading the intended by the clause “The ‘Company’ reserves the *231
agreement's terms. The agreement is titled “Alternative right to unilaterally abolish or modify any personnel
Dispute Resolution Policy” on one line, and policy without prior notice.”
“Employment Application Language” on the next. The
document addresses several issues that refer specifically to We add a brief response to the dissents. The proper
the employment application process but have no bearing interpretation of this document has split both the court
on alternative dispute resolution. For example, Webster of appeals and this Court. Justice Smith contends the
agreed to submit to a background check and physical agreement is unambiguous and clearly compels Webster
examination. He promised to abide by company policies to arbitrate. Justice Schneider says the agreement is
and acknowledged that his employment was at-will. The unambiguous but clearly illusory. We will not reiterate
“personnel policy” language is not in the first paragraph, our thoughts on ambiguity, but believe it helpful to

respond to some of the dissents' concerns. Both dissents City of Dallas, 79 S.W.3d 657, 667 (Tex.App.-Dallas 2002,
assert that the title of the document must be considered pet. denied); Z.A.O., Inc. v. Yarbrough Drive Ctr. Joint
insofar as it references arbitration, but they omit from Venture, 50 S.W.3d 531, 540 (Tex.App.-El Paso 2001, no
consideration that portion of the title, and contents pet.); N. Cent. Oil Corp. v. Louisiana Land & Exploration
of the document, that pertain to personnel policies. Co., 22 S.W.3d 572, 576 (Tex.App.-Houston [1st Dist.]
Justice Smith determines that the document is “primarily 2000, pet. denied); Curbo v. State, 998 S.W.2d 337, 343
devoted to setting forth an arbitration policy,” even (Tex.App.-Austin 1999, no pet.).
though arbitration is discussed in only the first paragraph,
which comprises less than fifty percent of the text (and, Finally, Justice Schneider states that he is reluctant to
as Justice Schneider points out, only two of fifteen send this matter back to the trial court “because [he]
sentences). 128 S.W.3d at 240. The document is set cannot imagine what such a hearing would look like.”
out in full in this opinion, and we need not belabor 128 S.W.3d at 232. It is not necessary to speculate on the
the point. Suffice it to say that—as evidenced by the character of that proceeding: the trial court will conduct
multiple disagreements about its meaning among this an evidentiary *232 hearing to determine the parties'
Court's justices—the agreement is subject to more than intent. See Anglin, 842 S.W.2d at 269 (noting that, “if
one reasonable interpretation. Under our precedent, the the material facts necessary to determine [a motion to
document is ambiguous. Columbia, 940 S.W.2d at 589. compel arbitration] are controverted, by an opposing
affidavit or otherwise admissible evidence, the trial court
Rather than follow this precedent, however, Justice Smith must conduct an evidentiary hearing to determine the
would enforce a deeply flawed agreement that he admits is disputed material facts”); see also Armijo v. Prudential
“far from a model of precise drafting.” 128 S.W.3d at 239. Ins. Co., 72 F.3d 793, 801 (10th Cir.1995) (Jenkins, J.,
Indeed, the one-page document is rife with grammatical concurring) (if arbitration agreement is ambiguous “the
errors, misspellings, and omitted words. Webster waived issue then becomes a factual question, to be decided from
his right to “trail by jury,” even for claims “based external evidence of the parties' intent, unless only one
on the Construction of ... he United States.” He also conclusion can be drawn from the undisputed evidence”);
agreed that “[t]he Arbitration Tribunal shall be the sole Montgomery County Cmty. Coll. Dist. v. Donnell, Inc., 141
and existence of its jurisdiction over all parties and Ohio App.3d 593, 752 N.E.2d 342, 345 (2001) (holding
issues,” whatever that means. While we generally favor that “an ambiguity in the [arbitration] agreement ... must
arbitration agreements, we should not reflexively endorse be resolved by an evidentiary hearing”).
an agreement so lacking in precision that a court must first
edit the document for comprehension, and then rewrite it Because we cannot discern whether Davidson's unilateral
to ensure its enforceability. right to terminate “personnel policies” applies to the
agreement to arbitrate, we conclude that the arbitration
Justice Schneider implies that, because the parties do agreement is ambiguous. We reverse the court of appeals'
not contend the agreement is ambiguous, we may not judgment and remand this case to the trial court for
hold that it is. This is contrary to Texas law. See Sage further proceedings consistent with this opinion. TEX. R.
St. Assoc. v. Northdale Constr. Co., 863 S.W.2d 438, APP. P. 60.2(d).
444–45 (Tex.1993) (holding jury question was presented
by ambiguity in construction agreement; a court may
conclude that a contract is ambiguous even in the
Justice SCHNEIDER filed a dissenting opinion, joined by
absence of such a pleading by either party); Coker, 650
Justice O'NEILL.
S.W.2d at 393 (concluding agreement was ambiguous
even though both parties asserted property settlement Justice SMITH filed a dissenting opinion.
agreement was unambiguous and moved for summary
judgment); Acadian Geophysical Servs., Inc. v. Cameron,
Justice SCHNEIDER, joined by Justice O'NEILL,
119 S.W.3d 290, 302 (Tex.App.-Waco 2003, no pet.
dissenting.
h.); W.W. Laubach Trust/The Georgetown Corp. v. The
I respectfully dissent. The controversy in this case involves
Georgetown Corp./W.W. Laubach Trust, 80 S.W.3d 149,
a company's arbitration policy that an employee agreed to
155 (Tex.App.-Austin 2002, pet. denied); Arredondo v.
sign after beginning his employment. When the company

sought to enforce the arbitration policy, the trial court Dist.] 2003, no pet.). If Davidson had met its burden of
denied the motion to compel arbitration. A divided court proof, then the burden would have shifted to Webster to
of appeals affirmed the trial court's order. The Court says show why the arbitration agreement did not apply. Id.
that the wording in the arbitration policy is ambiguous At the Motion to Compel Arbitration hearing, the trial
and that the case should be sent back to the trial court to court properly considered the pleadings of the parties, the
hear evidence concerning the parties' intent. But I would motion to compel arbitration, and responses. See Jack B.
not be as hasty as the Court to send this matter back to the Anglin Co. Inc. v. Tipps, 842 S.W.2d 266, 269 (Tex.1992)
trial court because I cannot imagine what such a hearing (“the trial court may summarily decide whether to compel
would look like. I would, in the first instance, hold that the arbitration on the basis of affidavits, pleadings, discovery,
policy provisions are not ambiguous. Then, in the second and stipulations.”). But, the trial court heard no live
instance, I would hold the employee is entitled to complete testimony about the ADR Policy. Cf. id. (noting that
relief in this Court. The arbitration promise made by the “if the material facts necessary to determine the issue
company is illusory, and because it is, I would affirm the are controverted,” “the trial court must conduct an
court of appeals' judgment denying the motion to compel evidentiary hearing to determine the disputed material
arbitration. facts”).
After considering the evidence, the trial court denied the

motion to compel arbitration without stating a reason
FACTS
for the denial. The record must be construed in a light
Chelsey Webster (“Webster”) went to work for J.M. favorable to supporting the judgment. See Keller v. Nevel,
Davidson, Inc. (“Davidson”). A few days after beginning 699 S.W.2d 211, 212 (Tex.1985). Davidson appealed, and
employment, Webster signed the agreement that is at the the court of appeals affirmed the trial court.
heart of the controversy in this matter. The document,
prepared by Davidson, is titled “Alternative Dispute
Resolution Policy” (“ADR Policy”). 1 It is undisputed ANALYSIS
that *233 Webster was employed by Davidson at the time
he signed the agreement. In deciding the motion to compel arbitration, the trial
court should have considered two issues: 1) was there a
Approximately eleven months after commencing his valid arbitration agreement; and 2) if so, did the agreement
employment, Webster was injured on the job. Webster encompass the claim? See In re Oakwood Mobile Homes,
filed for workers' compensation benefits. Then, about one Inc., 987 S.W.2d 571, 573 (Tex.1999); Dallas Cardiology
month later, Davidson terminated Webster. Webster filed Assocs., P.A. v. Mallick, 978 S.W.2d 209, 212 (Tex.App.-
suit, alleging Davidson fired him in retaliation for filing a Texarkana 1998, pet. denied); Dalton Contractors, Inc.
workers' compensation claim. Davidson sought to enforce v. Bryan Autumn Woods, Ltd., 60 S.W.3d 351, 353
the arbitration clause contained in the ADR Policy that (Tex.App.-Houston [1st Dist.] 2001, no pet.). The first of
Webster had signed. these issues is the subject of this appeal; thus, we must
decide if the trial court was correct in concluding there was
A hearing on Davidson's Motion to Compel Arbitration no valid arbitration agreement.
was held before the trial court. During the hearing,
Davidson introduced a copy of the arbitration policy
A. Standard of Review
signed by Webster. Davidson never signed the agreement.
But, Webster has never complained about the absence of We review a trial court's decision to deny a motion
Davidson's signature. to compel arbitration under a legal sufficiency or “no
evidence” standard of review when factual findings are
Davidson had the initial burden of proof to establish in dispute. See Certain Underwriters v. Celebrity Inc., 950
the arbitration agreement's existence and to show that S.W.2d 375, 377 (Tex.App.-Tyler 1996, writ dism'd w.o.j.).
the claims asserted against it fell within the arbitration However, in this case, the only issue before us is the
agreement's scope. See Williams Indus. Inc. v. Earth Dev. trial court's legal interpretation of the arbitration clause;
Sys. Corp., 110 S.W.3d 131, 134 (Tex.App.-Houston [1st no findings of fact were made. Thus, de novo review is

appropriate. Id.; see also Nationwide of Bryan, Inc. v. Dyer, re Tenet Healthcare Ltd., 84 S.W.3d 760, 763 (Tex.App.-
969 S.W.2d 518, 520 (Tex.App.-Austin 1998, no pet.); Houston [1st Dist.] 2002, orig. proceeding) (analyzing
Dalton Contractors, Inc., 60 S.W.3d at 353. a legally binding arbitration agreement appearing in
an employee handbook containing personnel policies).
Moreover, the ADR Policy was provided by an employer
*234 B. Construction of the ADR Policy to be signed by an employee, suggesting it is a personnel
policy. It is not only reasonable to believe the arbitration
Under the guise of a de novo review of the trial court's
provision is a personnel policy of the company, it is
legal interpretation of the agreement, the Court may not
unreasonable to reach any other conclusion. The Court
create an agreement for the parties that is different from
seems to suggest that the “personnel policy” must be one
the one they entered. But, the Court attempts to do
or the other—either a policy, or an agreement. Surely a
just that. The ADR Policy expressly reserves Davidson's
reasonable interpretation is that it could be both.
right to “unilaterally abolish or modify any personnel
policy without prior notice.” The Court raises ambiguity
Webster even promises to abide by all of Davidson's
as an issue sua sponte and concludes that this unilateral
“policies” in the ADR Policy, and it is reasonable to
termination provision in the ADR Policy is ambiguous
conclude that Davidson wanted to retain the right to
because “it is not possible to determine from the document
unilaterally terminate all parts of the ADR Policy because
itself whether the unilateral termination right applies to
the policy did not specifically exempt the arbitration
the parties' agreement to arbitrate, or only to ‘personnel
agreement from the unilateral termination right.
policies' concerning the at-will employment relationship.”
128 S.W.3d at 225. But neither Webster, Davidson, the
Finally, neither Davidson nor Webster have ever argued
trial court, nor the Court of Appeals have suggested
that the unilateral termination right did not apply to the
the language quoted above is ambiguous. I would hold
arbitration agreement. The actions of both the parties
that this language regarding the unilateral termination
throughout their litigation reflect the belief that the
right unambiguously applies to the entire agreement,
arbitration policy is a personnel policy. They both came to
including the agreement to arbitrate. Although ultimately
the Motion to Compel Arbitration hearing arguing about
the contract fails for lack of consideration (see discussion
several issues, none of which ever raised the question of
below), it cannot be said that the ADR Policy is
whether the arbitration policy was a personnel policy. All
ambiguous.
of their actions throughout the litigation are consistent
with the notion that the right to unilaterally terminate
1. The ADR Policy is not ambiguous. applied to the arbitration policy.
There are several reasons why the document can be *235 Webster and Davidson do offer different
unambiguously read so that the universal termination interpretations of the unilateral termination clause.
right language applies to the entire document. First, But their differences have nothing to do with factual
the document is entitled “Alternative Dispute Resolution issues; rather, they differ in the legal significance
Policy,” which suggests that the unilateral termination of the arbitration policy. Nevertheless, the fact that
right contained within it would apply to arbitration, as the their explanations differ does not render the contract
title would be applicable to the entire document. See e.g. ambiguous. See Columbia Gas Transmission Corp. v. New
Neece v. A.A.A. Realty Co., 159 Tex. 403, 322 S.W.2d 597, Ulm Gas, Ltd., 940 S.W.2d 587, 589 (Tex.1996) (noting
606 (1959) (Calvert, J., dissenting) (recognizing that the that an ambiguity does not arise simply because parties
title of an agreement can have the legal effect of importing offer conflicting interpretations of the contract). For an
words into the contract). ambiguity to exist, both explanations must be reasonable.
Id. Conversely, a contract is ambiguous if its language
Secondly, the unilateral termination right applies to “any is subject to two or more reasonable interpretations. See
personnel policy,” and it is reasonable to conclude that Monsanto v. Boustany, 73 S.W.3d 225, 229 (Tex.2002).
an arbitration policy would fall under the category of a Here, there is only one reasonable interpretation of
personnel policy. Arbitration agreements are often a part the ADR Policy, and the Court's insistence that it is
of employee manuals or personnel policies. See e.g., In

ambiguous flies in the face of well-established rules of promises are binding on both parties, they may constitute
construction. consideration for a contract. Texas Gas Util. Co. v.
Barrett, 460 S.W.2d 409, 412 (Tex.1970); Johnson v.
Breckenridge–Stephens Title Co., 257 S.W. 223, 225
2. Finding the ADR Policy ambiguous is (Tex.Com.App.1924).
contrary to well-established rules of construction.
But, if the terms of a promise make performance
One of the basic tenets of contract interpretation is
optional, the promise is illusory and cannot constitute
the assumption that the parties intend every part of an
valid consideration. Light v. Centel Cellular Co. of
agreement to mean something. When construing a written
Texas, 883 S.W.2d 642, 645 (Tex.1994) (“When illusory
contract, we are to ascertain the intent of the parties as
promises are all that support a purported bilateral
expressed in the instrument. Nat'l Union Fire Ins. Co.
contract, there is no *236 contract.”); RESTATEMENT
of Pittsburgh, PA. v. CBI Indus. Inc., 907 S.W.2d 517,
(SECOND) OF CONTRACTS §§ 2 cmt. e; 77 cmt.
520 (Tex.1995); 718 Assocs., Ltd. v. Sunwest N.O.P., Inc.,
a. Valid consideration exists if a party reserves the
1 S.W.3d 355, 360 (Tex.App.-Waco 1999, pet. denied)
right to terminate an agreement with notice. See
(courts will enforce an “unambiguous instrument as
RESTATEMENT (SECOND) OF CONTRACTS § 77
written, and ordinarily, the writing alone will be deemed
cmt. b, illus. 5. But, a termination clause that allows a
to express the parties intentions”). Contracts are to be
party to terminate the contract at will makes performance
read as a whole, and an interpretation that gives effect to
optional, and thus, makes any promise illusory. See
every part of the agreement is favored so that no provision
Light, 883 S.W.2d at 645; see also, Tenet Healthcare Ltd.
is rendered meaningless or as surplusage. See Westwind
v. Cooper, 960 S.W.2d 386, 388–89 (Tex.App.-Houston
Exploration Inc. v. Homestate Savings Ass'n., 696 S.W.2d
[14th Dist.] 1998, pet. dism'd w.o.j.).
378, 382 (Tex.1985).
Here, the ADR Policy reserves Davidson's right to

The Court ignores these well-settled principles of contract
“unilaterally abolish or modify any personnel policy
interpretation when it concludes the agreement is
without prior notice.” Under the plain language of the
ambiguous. Davidson's right to unilaterally abolish or
contract, Davidson reserved the right to abolish or modify
modify any personnel policy without prior notice must
any personnel policy. As explained above, the unilateral
be given its plain and ordinary meaning. Thus, the
termination right would also apply to the agreement to
unilateral termination language must mean that Davidson
arbitrate all claims. By retaining the right to terminate the
can cancel or alter any personnel policy without informing
ADR Policy at any time, Davidson can avoid arbitration.
Webster. Although I ultimately conclude that the ADR
Thus, Davidson is not bound to its promise to arbitrate,
Policy is not binding because it is illusory, the agreement
and its promise to avoid litigation does not amount
is not ambiguous.
to consideration. See In re Halliburton, 80 S.W.3d 566,
570 (Tex.2002) (reciprocal promises are not sufficient
C. The ADR Policy is unenforceable because it is illusory. if one party can avoid its promise). Because there is
no consideration for the ADR Policy, the agreement is
In my view, the unilateral termination right in the ADR illusory and unenforceable.
Policy makes Davidson's performance optional as to the
entire policy, and thus, renders the ADR Policy illusory.
Thus, I would find that the agreement between Davidson 2. Davidson's attempts to create consideration fail.
and Webster fails to rise to the level of a contract as it lacks
In an attempt to create consideration where none
consideration.
exists, Davidson claims that the language regarding the
unilateral termination right complied with contractual
1. The ADR Policy does not contain consideration. mutuality requirements because, “If ... Davidson changed
the ADR policy, or abolished it altogether, the changes
Consideration is an essential element for a valid, would have applied to both parties.” However, because
enforceable contract. Federal Sign v. Texas S. Univ., 951 Davidson alone had the unilateral right to terminate or
S.W.2d 401, 408–09 (Tex.1997). If mutual, reciprocal change the agreement, the agreement is illusory. It is

irrelevant that any changes made by Davidson would Additionally, whether an employer has satisfied the
apply to both parties. Hathaway requirements is a separate inquiry from the
determination of whether the arbitration agreement is
Davidson also argues that the promise to arbitrate is enforceable under traditional contract principles. If an
not illusory because, under Halliburton, 80 S.W.3d at employer seeks to change the terms of an employment
570, it is bound to resolve any dispute according to relationship by implementing an agreement to arbitrate
the ADR plan in effect at the time the dispute arises. all disputes, the employer must show the arbitration
However, the express contract terms we relied on to find agreement, standing alone, satisfies all requisite elements
the Halliburton agreement enforceable are missing here. of a valid contract. See Light, 883 S.W.2d at 645–
The plain language of the Halliburton ADR plan required 46; Halliburton, 80 S.W.3d at 569. This showing is
the employer to provide notice before enacting any separate from the employer's duty to meet the Hathaway
modifications or terminating the plan. Davidson suggests requirements of notice and acceptance. Id.
that because the agreement we upheld in Halliburton
required notice and prospective application, the same Davidson's attempts to create consideration via an
protective language can be implied here. I disagree. alternate reading of the language of the agreement are not
reasonable. When the meaning of an agreement is plain
In Halliburton, we relied on the ADR policy's notice and unambiguous, a party's construction is immaterial.
provisions to conclude that Halliburton could not “avoid 718 Associates, Ltd., 1 S.W.3d at 360. I would find
its promise to arbitrate by amending the [policy] or the contract unenforceable because it fails for lack of
terminating it altogether.” Halliburton, 80 S.W.3d at 570. consideration and is illusory.
Here, we cannot imply the obligations that precluded
Halliburton from avoiding its promise to arbitrate.
The agreement's plain language establishes Davidson's 3. The Court incorrectly concludes that the
unhindered right to modify or terminate the agreement unilateral termination right is ambiguous.
without notice. It is not proper to imply terms that
The Court sends this case back for the trial court to
contradict the express contract language. See Haws &
consider parol evidence, finding that a fact issue exists
Garrett Gen. Contractors, Inc. v. Gorbett Bros. Welding
concerning the applicability of the language in question
Co., 480 S.W.2d 607, 609–610 (Tex.1972) (the terms of an
to the arbitration agreement. But, as discussed above,
implied contract are inferred from the circumstances).
the language unambiguously gives Davidson the right to
unilaterally terminate any part of the agreement. Thus,
Davidson further attempts to explain the unilateral
there is no fact issue to be determined by the trial court
termination language as simply acknowledging an
and there is no need for parole evidence to be taken.
employer's right to make changes to at-will employment
terms, as in Hathaway v. Gen. Mills, Inc., 711 S.W.2d 227,
229 (Tex.1986). But, the arbitration agreement's language 4. The unilateral termination right
contradicts Davidson's explanation. does not only apply prospectively.
*237 In Hathaway, we held that an employer may enforce Although I agree with Justice Smith that the contract is
changes to an at-will employment contract if the employer unambiguous and the arbitration agreement is a personnel
unequivocally provides notice of a definite change and the policy subject to Davidson's unilateral termination right, I
employee accepts the change by continuing employment. cannot agree that the right to abolish or modify personnel
Hathaway, 711 S.W.2d at 229. Here, the contract expressly policies only applies prospectively with contemporaneous
allows Davidson to effect a change in the ADR plan's notice. The ADR Policy allows Davidson to unilaterally
terms without notice. Thus, it is inconsistent to explain abolish or modify any personnel policy “without prior
the reservation language as merely restating our holding notice.” Justice Smith looks to England to determine how
in Hathaway, because the arbitration agreement's terms to interpret the phrase “without prior notice.”
contradict the Hathaway requirements.
However, applicable precedent can be found closer to
home. For example, in Shumway v. Horizon Credit Corp.,

801 S.W.2d 890 (Tex.1991), we held that the language Moreover, Justice Smith confuses the Hathaway
“without prior notice” waived the right to all notice. requirements for changes to an at-will employment
801 S.W.2d at 893–94. Similarly, in Musgrave v. HCA agreement with the requirements for a valid, enforceable
Mideast, Ltd., 856 F.2d 690 (4th Cir.1988), the court arbitration agreement. They are two separate inquiries.
interpreted a contract providing that the employer had Even assuming Justice Smith is correct that Davidson
the right to terminate an employee's service “without prior may give contemporaneous notice of a change to the
notice.” The Fourth Circuit concluded that this language terms of Webster's employment terms under Hathaway,
“states simply that [the employee] could be terminated the arbitration clause of the ADR Policy remains illusory
during the probation period without notice.” 856 F.2d and unenforceable. If contemporaneous notice to cancel
at 694. Justice Smith's interpretation that “without prior the arbitration agreement is permissible, Davidson retains
notice” means “with contemporaneous notice” is not the right to discontinue performance at any time. Under
supported—and indeed, is contradicted—by caselaw from this scenario, there is no consideration, as Davidson is
American jurisdictions. not giving up a benefit or suffering a detriment. See e.g.,
In re C & H News Co., No. 13–02–529–CV, ––– S.W.3d
Justice Smith is essentially inserting a qualifying phrase ––––, ––––, 2003 WL 131770 at *4 (Tex.App.-Corpus
into Davidson's unilateral, unqualified right to terminate. Christi 2003, orig. proceeding). Thus, the arbitration
Even *238 though the ADR Policy permits Davidson clause would still be illusory and unenforceable.
to “unilaterally abolish or modify any personnel policy
without prior notice,” Justice Smith interprets this
as requiring contemporaneous notice. The agreement D. Enforceable arbitration agreements must
contains no such limitation. bind both the employer and the employee.
There is no mystery to drafting an enforceable arbitration

Justice Smith also attempts to distinguish our holding in
agreement. Capable counsel know that limitations on
Hathaway by noting that in that case, while we required
an employer's right to terminate the agreement are
an employer making a change to an at-will employment
necessary so the agreement is not illusory. See, e.g.,
policy to provide notice, we did not specify that the notice
In re Tenet Healthcare, Ltd., 84 S.W.3d at 766–67
had to be given before the change was made. Justice
(arbitration provision was enforceable because the right
Smith contends that under our decision in Hathaway,
to terminate the agreement specifically excepted the
notice could be “either in advance of or contemporaneous
arbitration agreement); In re Kellogg Brown & Root, 80
with the policy change.” 128 S.W.3d 242. However,
S.W.3d 611, 616 (Tex.App.-Houston [1st Dist.] 2002, orig.
Justice Smith misunderstands our holding in Hathaway.
proceeding) (arbitration agreement enforceable because it
In Hathaway, we explained the employee must have
provided that it could be amended or terminated by the
knowledge of the employer's proposed modification to an
company by giving at least 10 days notice to employees
at-will employment policy to constitute effective notice;
and that such amendment would not apply to a dispute
that is, the employee must “know the nature of the
that had been initiated); In re Jebbia, 26 S.W.3d 753, 758
changes and the certainty of their imposition.” Hathaway,
(Tex.App.-Houston [14th Dist.] 2000, orig. proceeding).
711 S.W.2d at 229. Requiring the employer to prove
unequivocal notification of changes to the employment
In this agreement, however, there was no limitation
terms was based, in part, on fairness to the employee.
to Davidson's right to terminate, amend, or cancel
See id. The requirement that an employee be aware
the agreement. *239 The only consideration for the
that changes to the employment policy are certain to
agreement was continued at-will employment, which
be imposed implies that there must be prior notice. It
amounts to no consideration. Light, 883 S.W.2d at
is unreasonable to conclude contemporaneous notice of
644. Thus, the arbitration agreement is illusory and
a policy change is permissible under Hathaway. Indeed,
unenforceable.
permitting an employer to give contemporaneous notice
of changed employment terms undermines Hathaway's
concerns for fairness to an employee and stretches our
holding in Hathaway too far. CONCLUSION

I disagree with the Court's determination that the Ltd. v. Cooper, 960 S.W.2d 386, 388 (Tex.App.-Houston
arbitration agreement is ambiguous. I also believe the [14th Dist.] 1998, pet. dism'd w.o.j.). Similarly, whether a
agreement is illusory. In Halliburton, we said that contract is ambiguous is itself a question of law. Kelley–
an arbitration agreement's terms must bind both the Coppedge, Inc. v. Highlands Ins. Co., 980 S.W.2d 462,
employer and employee if the agreement relies on mutual 464 (Tex.1998). We review questions of law de novo. El
promises to arbitrate for consideration. Davidson's ADR Paso Natural Gas Co. v. Minco Oil & Gas, Inc., 8 S.W.3d
Policy lacks the protections we relied on in Halliburton 309, 312 (Tex.1999). In a de novo review, no deference
to find the promises to arbitrate mutually binding. The is accorded to the lower court decision. Quick v. City of
unilateral right to modify or terminate the agreement Austin, 7 S.W.3d 109, 116 (Tex.1998).
without notice allows Davidson to avoid its promise at
any time. Accordingly, I would hold that the arbitration The one-page contract was the only evidence presented by
agreement between Davidson and Webster fails to bind the parties in the trial court. Accordingly, the only issues
Davidson, and thus, the promise is illusory and the on appeal are the legal questions of whether the contract
agreement is unenforceable for want of consideration. I is ambiguous and illusory. I apply de novo review to both.
would affirm the court of appeals' judgment.
Justice SMITH, dissenting. II

I share the Court's view that the contract executed by
The contract states that Davidson “reserves the right
the parties is far from a model of precise drafting,
to unilaterally abolish or modify any personnel policy
but I disagree that the phrase “any personnel policy”
without prior notice.” The Court professes an inability
cannot be given a definite legal meaning. Like Justice
to decipher whether the arbitration policy ratified by the
Schneider, I believe that the arbitration policy falls within
contract is a “personnel *240 policy” and, sua sponte,
the ambit of the phrase “any personnel policy.” However,
therefore concludes that the contract is ambiguous.
I disagree with the portion of Justice Schneider's dissent
However, uncertainty or lack of clarity is not enough
that concludes the entire contract is unenforceable.
to render a contract ambiguous. Universal C.I.T. Credit
Corp. v. Daniel, 150 Tex. 513, 243 S.W.2d 154, 157
I would hold that the contractual provision allowing
(1951) (“It must be conceded that there is an absence of
Davidson to “abolish or modify any personnel policy
artistry in the grammatical construction and punctuation
without prior notice” applies to the company's alternative
of paragraph 1 of the contract, but is its meaning when
dispute resolution policy, but that it does not waive
properly read and interpreted so dubious as to subject the
Webster's right under Texas at-will employment law to
contract to the charge of ambiguity, thereby justifying the
contemporaneous notice of any change in Davidson's
court in calling into play the rule of strong construction
ADR policy. The rules of contract interpretation
against the author of an instrument? We think not.”);
counsel against construing termination clauses as being
Preston Ridge Fin. Servs. Corp. v. Tyler, 796 S.W.2d 772,
retroactively exercisable and in favor of interpreting
777 (Tex.App.-Dallas 1990, writ denied); Med. Towers,
contracts to be valid. Because the relevant provision
Ltd. v. St. Luke's Episcopal Hosp., 750 S.W.2d 820, 822
is properly construed as applying only prospectively to
(Tex.App.-Houston [14th Dist.] 1988, writ denied).
disputes arising after contemporaneous notice to Webster
of Davidson's decision to abolish or modify its ADR
Contractual provisions must be considered with reference
policy, it does not render illusory the parties' otherwise
to the entire instrument. Myers v. Gulf Coast Minerals
clearly enforceable arbitration agreement.
Mgmt. Corp., 361 S.W.2d 193, 196 (Tex.1962). The
main heading of the parties' contract reads “Alternative
Dispute Resolution Policy” and the text below purports
I to determine the relationship between Davidson and its
personnel. See E.H. Perry & Co. v. Langbehn, 113 Tex.
Whether an agreement imposes a duty on the parties to 72, 252 S.W. 472, 474–75 (1923) (title of an instrument,
arbitrate a dispute is a matter of contract interpretation like every other portion of a contract, may be consulted
and a question of law for the court. Tenet Healthcare in determining its meaning). In this context, we must give

the phrase “any personnel policy” its natural and obvious effect.). Applying the foregoing Texas case law, we must
import. See, e.g., Pagel v. Pumphrey, 204 S.W.2d 58, 64 presume that the parties in this case did not intend for
(Tex.Civ.App.-San Antonio 1947, writ ref'd n.r.e.). the phrase “without prior notice” to mean without any
notice. 2
Applying the foregoing rules of construction, it is clear
that the arbitration policy memorialized in the contract I have been unable to locate any Texas or federal case law
is a “personnel policy” and that the disputed provision specifically addressing whether the phrase “without prior
unambiguously provides that Davidson has the right to notice” should be given the same meaning as “without
abolish or modify its arbitration policy without prior
notice.” 3 However, an English appellate court concluded:
notice. I simply cannot conclude that an arbitration policy
that governs the conditions of employment for personnel
is not encompassed by the phrase “any personnel policy,” A clause providing for termination of the scheme by
particularly when that phrase appears in a contract that is the employer “without prior notice” means without
primarily devoted to setting forth an arbitration policy. notice in advance. Those words do not suggest that
notice does not have to be given to effect termination
of rights under the contract of employment. The clause
III puts the employee on warning that the scheme might not
be permanent and that the employer reserves the right
Justice Schneider asserts, and the Court implies, that to terminate it without giving advance warning, but it
if the disputed termination provision does apply to does not mean that the employer's obligations can end
Davidson's arbitration policy, the contract is illusory. without the employee being told.
Because Davidson retained the ability to unilaterally Bainbridge v. Circuit Foil (UK) Ltd. [1997], Industrial
abolish or modify its arbitration policy at any time, the Relations Law Reports (IRLR) 305 (Eng.C.A.). While
argument goes, it assumed no obligation to Webster, authority authored on this side of the Atlantic is
and therefore Davidson's promise to arbitrate does obviously preferable, an opinion issued by an English
not constitute consideration for Webster's reciprocal appellate court can surely be considered on a question
promise. 1 In my view, the provision's “without prior such as the one presented here that does not involve
notice” language does not disclaim the requirement set interpretation of a statutory or constitutional provision,
forth in Hathaway v. General Mills, Inc., 711 S.W.2d 227 but rather interpretation of three basic English words
(Tex.1986) of contemporaneous notice for modifications contained in a private employment contract.
to the at-will employment relationship. The provision Consistent with the well-established rule that each word
is properly construed as applying only prospectively to in a contract be given effect, the phrase “without prior
disputes arising after contemporaneous notice to Webster notice” contained in the parties' contract should be
of Davidson's decision to abolish or modify its ADR interpreted to mean without notice in advance rather than
policy. without any notice. Therefore, the “without prior notice”
language does not disclaim the contemporaneous notice
It is significant that the word “prior” precedes “notice” that is required by Texas common law to effect a change
in the relevant provision. We must presume that each in the terms of an at-will employment relationship. 4
word in a contract has some significance and meaning.
Gates v. Asher, 154 Tex. 538, 280 S.W.2d 247, 249 (1955). In Hathaway, we held that the party asserting a change to
For example, courts presume that words that follow one an at-will employment contract “must prove two things:
another are not intended to be redundant. See Gulf Metals (1) notice of the change; and, (2) acceptance of the
Indus., Inc. v. Chicago *241 Ins. Co., 993 S.W.2d 800, change.” 711 S.W.2d at 229. We noted that “[t]o prove
805 (Tex.App.-Austin 1999, pet. denied) (in construing notice, an employer *242 asserting a modification must
the phrase “sudden and accidental,” a temporal meaning prove that he unequivocally notified the employee of
was applied to “sudden” because “accidental” describes definite changes in employment terms.” Id. We did not
an unforeseen or unexpected event and ascribing the same indicate when the notice had to be provided, thereby
meaning to “sudden” would render the terms redundant implying it could be given either in advance of or
and violate the rule that each word in a contract be given contemporaneous with the policy change. 5

Monday through Wednesday. Far

The Hathaway requirements are applicable here because from requiring that the employer
the parties sought to modify their pre-existing at-will express an explicit intent to pay
employment relationship to include binding arbitration. $10 per hour for Monday through
The contract, including the arbitration agreement therein, Wednesday's work notwithstanding
is incident to the at-will employment relationship between the employer's freedom to reduce
Davidson and Webster and refers to this relationship wages at any time, the Third
in several places. Therefore, if Davidson abolished or Circuit held that what would have
modified its arbitration policy, this would effect a change to be preserved explicitly would
in the terms of the at-will employment relationship be an employer's right to *243
between it and Webster. apply the reduced wage retroactively
to Monday through Wednesday's
“Words of promise which by their terms make work. A contrary rule would lack
performance entirely optional with the ‘promisor’ do any basis in contract law....
not constitute a promise.” RESTATEMENT (SECOND)
OF CONTRACTS § 77 cmt. a (1981). However, “[a] Abbott v. Schnader, Harrison, Segal & Lewis, LLP, 805
limitation on the promisor's freedom of choice need not be A.2d 547, 559 (Pa.Super.Ct.2002) (quoting Amatuzio v.
stated in words. It may be an implicit term of the promise, Gandalf Sys. Corp., 994 F.Supp. 253, 266 (D.N.J.1998)).
or it may be supplied by law.” Id. cmt. d. The provision at
issue here, while disclaiming advance notice, is consistent Indeed, Justice Schneider's dissent 7 and, if its second
with Hathaway's contemporaneous notice requirement footnote is more than mere dicta, the Court's
and, as such, should not be read as an attempt to disclaim opinion, would render the entire at-will employment
this implied, default legal prerequisite for modifying the contract between Webster and Davidson illusory because
conditions of an at-will employment relationship. 6 Webster's rate of compensation and all other “personnel
policies” would be subject to unilateral, retroactive
Other courts have determined that when a contractual change by Davidson. Certainly, this is not a reasonable
termination or modification provision does not state interpretation.
whether it applies prospectively or retroactively, the
default interpretation should be prospective only, as this Because the disputed provision did not expressly authorize
avoids nullifying the intent of the parties to form an Davidson to retroactively alter the arbitration agreement,
agreement. See Barker v. Ceridian Corp., 122 F.3d 628, I would follow the rule that, unless expressly stated
638 (8th Cir.1997) (where retirement plan was silent otherwise, such provisions should be interpreted to apply
regarding whether terms could be modified retroactively, only prospectively. Consequently, Davidson would be
prospective application favored because it avoids finding perpetually bound to arbitrate any dispute that arose
promise illusory); Kemmerer v. ICI Ams., Inc., 70 F.3d 281, prior to Davidson informing Webster of a change in its
287–88 (3d Cir.1995). arbitration policy. As such, Davidson could not, after a
dispute had arisen, let alone during the final stages of
Several other courts have adopted Kemmerer's rationale: binding arbitration, implement a change in its arbitration
policy that would be applicable to that dispute.
The court's reasoning [in Kemmerer]
can be captured in a simple Finally, reading the contract as allowing Davidson to
illustration. If an employee is unilaterally abolish or modify the arbitration policy only
promised $10 per hour effective prospectively with contemporaneous notice is supported
Monday, and told that her wage by the long-standing rule that contracts should be
can be reduced at any time, and construed in favor of validity. See Wood Motor Co.,
on Wednesday her wage is cut to Inc. v. Nebel, 150 Tex. 86, 238 S.W.2d 181, 183 (1951)
$5 effective Thursday, her employer (“It is elementary that if a contract is susceptible of two
cannot refuse on pay day to give constructions, one of which would render it valid and the
her $10 per hour for her work on other void, the former will be adopted.”); Harris v. Rowe,

593 S.W.2d 303, 306 (Tex.1979); Lavaca Bay Autoworld v.

Marshall Pontiac Buick Oldsmobile, 103 S.W.3d 650, 657 IV
(Tex.App.-Corpus Christi 2003, no pet.). Since the parties
are presumed to know the law and intend their contract to By binding itself to arbitration until it provides
have legal effect, their contract will be construed in view contemporaneous notice of a new dispute resolution
of this presumption. Foard County v. Sandifer, 105 Tex. policy that will apply only prospectively, Davidson
420, 151 S.W. 523, 524 (1912); Dewhurst v. Gulf Marine has provided consideration to Webster, and the
Inst. of Tech., 55 S.W.3d 91, 97 (Tex.App.-Corpus Christi parties' contract is therefore not illusory. If the *244
2001, pet. denied). We have specifically held that contracts contract were interpreted as allowing Davidson to
should be construed in favor of mutuality. Tex. Gas Utils. retroactively revoke the arbitration agreement without
Co. v. Barrett, 460 S.W.2d 409, 412 (Tex.1970). contemporaneous notice, it would either be illusory or
unconscionable, as Davidson could decide after a dispute
Under this prospective construction, whereby Davidson arises whether it prefers to arbitrate or go to court.
is free to alter its arbitration policy after giving However, that is not this case.
contemporaneous notice only as to claims that had not
yet arisen, it is clear that the contract is not illusory. Based on the foregoing, I conclude that the contract
Once the parties' contract is read as not disclaiming is neither ambiguous nor illusory, and therefore validly
the contemporaneous notice requirement set forth in compels the parties to arbitrate their dispute. Accordingly,
Hathaway, this case becomes indistinguishable from In I respectfully dissent.
re Halliburton Co., 80 S.W.3d 566 (Tex.2002) in which
we held that a similar arbitration agreement was not
All Citations
illusory because the unilateral termination provision could
be exercised only with notice. 128 S.W.3d 223, 20 IER Cases 1315, 47 Tex. Sup. Ct. J.
196
Footnotes
1 Davidson has not filed a petition for writ of mandamus with this Court under the Federal Arbitration Act, see Jack B. Anglin
Co. v. Tipps, 842 S.W.2d 266, 272–73 (Tex.1992), and does not dispute that the Texas Arbitration Act controls.
2 We note that most courts that have considered this issue have held that, if a party retains the unilateral, unrestricted right
to terminate the arbitration agreement, it is illusory. Dumais v. Am. Golf Corp., 299 F.3d 1216, 1219 (10th Cir.2002) (“We
join other circuits in holding that an arbitration agreement allowing one party the unfettered right to alter the arbitration
agreement's existence or its scope is illusory.”); Floss v. Ryan's Family Steak Houses, Inc., 211 F.3d 306, 315–16
(6th Cir.2000) (arbitration agreement was “fatally indefinite” and illusory because employer “reserved the right to alter
applicable rules and procedures without any obligation to notify, much less receive consent from,” other parties) (citing 1
SAMUEL WILLISTON, CONTRACTS § 43, at 140 (3d ed.1957)); Hooters of Am., Inc. v. Phillips, 173 F.3d 933, 939 (4th
Cir.1999) (arbitration agreement unenforceable in part because Hooters, but not employee, could cancel agreement with
30 days notice, and Hooters reserved the right to modify the rules “without notice”; “[n]othing in the rules even prohibits
Hooters from changing the rules in the middle of an arbitration proceeding.”); Gibson v. Neighborhood Health Clinics,
121 F.3d 1126, 1133 (7th Cir.1997) (Cudahy, J., concurring) (promise to arbitrate was illusory in part because employer
retained the right to change or revoke the agreement “at any time and without notice”); Snow v. BE & K Constr. Co., 126
F.Supp.2d 5, 14–15 (D.Maine 2001) (citations omitted)(arbitration agreement illusory because employer “reserve[d] the
right to modify or discontinue [the arbitration] program at any time”; “Defendant, who crafted the language of the booklet,
was trying to ‘have its cake and eat it too.’ Defendant wished to bind its employees to the terms of the booklet, while
carving out an escape route that would enable the company to avoid the terms of the booklet if it later realized the booklet's
terms no longer served its interests.”); Trumbull v. Century Mktg. Corp., 12 F.Supp.2d 683, 686 (N.D.Ohio 1998)(no
binding arbitration agreement because “the plaintiff would be bound by all the terms of the handbook while defendant
could simply revoke any term (including the arbitration clause) whenever it desired. Without mutuality of obligation, a
contract cannot be enforced.”); Simpson v. Grimes, 849 So.2d 740, 748 (La.Ct.App.2003) (arbitration agreement lacked
mutuality, making it “unconscionable and unenforceable”: “By retaining the right to modify at will any and all provisions
of the agreement in question, Argent allows itself an escape hatch from its promise to be similarly bound to arbitrate all

disputes arising between the parties. Argent's ability to modify the specific terms of the agreement at will is not shared
by the potential customer signing the agreement.”); In re C & H News Co., No. 13–02–529–CV, ––– S.W.3d ––––,
–––– – ––––, 2003 WL 131770, *3, 2003 Tex.App. LEXIS 393, *11–*12 (Tex.App.-Corpus Christi January 16, 2003,
orig. proceeding) (employer's right to change, modify, delete, or amend the arbitration agreement “with or without prior
notification to employees” made the arbitration agreement illusory).
1 The ADR Policy Webster signed contained only two paragraphs. The first paragraph had two sentences covering thirteen
lines, and the second paragraph had thirteen sentences and nineteen lines, for a total of fifteen sentences spanning
twenty-seven lines of text. Arbitration is only discussed in two of the fifteen sentences. The body of the document occupied
approximately half of a letter size page. The ADR Policy has the company name, J.M. Davidson, Inc., at the top of the
page in an all capitals, bold face font similar to a company letterhead. The title of the agreement, also in all capital,
bold letters, is “ALTERNATIVE DISPUTE RESOLUTION POLICY.” The sub-title of the document is “EMPLOYMENT
APPLICATION LANGUAGE,” styled in all capitals under the title.
1 However, there is no evidence that Davidson ever attempted to abolish or modify the arbitration agreement or that Webster
ever harbored any doubt that he could compel arbitration for any dispute that arose, including the one before the Court.
2 Neither the Court nor Justice Schneider attributes any meaning to “prior” and both repeatedly refer to the disputed
provision as stating “without notice,” thereby, sub silentio, writing the word “prior” out of the parties' contract.
3 Justice Schneider argues that Shumway v. Horizon Credit Corp., 801 S.W.2d 890 (Tex.1991) and Musgrave v. HCA
Mideast, Ltd., 856 F.2d 690 (4th Cir.1988) are “applicable precedent.” 128 S.W.3d at 234. However, neither case is on
point. In both Shumway and Musgrave, whether the phrase “without prior notice” should be given a different meaning
from “without notice” was not at issue and, therefore, was neither addressed nor decided.
4 Another factor counseling in favor of interpreting the relevant provision as applying only prospectively without disclaiming
Texas common law requiring contemporaneous notice is the use of the word “reserves.” This word choice suggests that
Davidson is memorializing a right that is consistent with its existing legal rights. “This word [reserves] means to keep or
retain; that is to say, to keep what one already has. You do not reserve a right which you do not possess.” Baldwin v.
Bd. of Tax–Roll Corrs., 331 P.2d 412, 414 (Okla.1958).
5 Justice Schneider argues that the relevant provision “contradict [s] the Hathaway requirements.” 128 S.W.3d at 237.
However, in Hathaway we required only notice, not advance notice.
6 This case is distinguishable from the following cases cited in the Court's second footnote in which arbitration agreements
were held to be illusory because the provision at issue allowed one party to terminate the agreement at any time without
any notice. Floss v. Ryan's Family Steak Houses, Inc., 211 F.3d 306, 315–16 (6th Cir.2000) (arbitration agreement was
“fatally indefinite” and illusory because employer reserved the right to alter applicable rules and procedures without any
obligation to notify employee); Gibson v. Neighborhood Health Clinics, 121 F.3d 1126, 1133 (7th Cir.1997) (Cudahy, J.,
concurring) (promise to arbitrate was illusory because employer retained the right to change or revoke the agreement
“at any time and without notice.”).
7 For example, Justice Schneider asserts: “Davidson's right to unilaterally abolish or modify any personnel policy without
prior notice must be given its plain and ordinary meaning. Thus, the unilateral termination language must mean that
Davidson can cancel or alter any personnel policy without informing Webster.” 128 S.W.3d at 235.

Kennedy Hodges, L.L.P. v. Gobellan, 433 S.W.3d 542 (2014)
57 Tex. Sup. Ct. J. 584
433 S.W.3d 542 West Headnotes (7)

KENNEDY HODGES, L.L.P., Petitioner, [1] Alternative Dispute Resolution

v. Scope and standards of review
Ventura GOBELLAN, Jr. and Whether a party's conduct waives its right to
Paula Gobellan, Respondents. arbitrate is a question of law the appellate
court reviews de novo.
No. 13–0321.
| 5 Cases that cite this headnote
May 16, 2014.
Synopsis [2] Alternative Dispute Resolution

Background: Law firm filed suit against former firm Suing or participating in suit
clients under contingency fee agreement, after clients Alternative Dispute Resolution
retained former associate who subsequently left firm. Evidence
Law firm subsequently decided to intervene in clients' A party waives the right to arbitrate by
wrongful death suit against employer and moved to substantially invoking the judicial process to
compel arbitration of fee agreement dispute in that the other party's detriment or prejudice, and
action. The 24th District Court, Jackson County, Kemper the strong presumption against waiver renders
Stephen Williams, J. denied motion to compel arbitration this hurdle a high bar.
based on determination that it waived arbitration, and
law firm appealed. The Corpus Christi Court of Appeals, 12 Cases that cite this headnote
433 S.W.3d 579, 2013 WL 1092239, affirmed. Law firm
petitioned for review. [3] Alternative Dispute Resolution
Waiver or Estoppel
Whether a party has waived arbitration is
Holdings: The Supreme Court held that: decided on a case-by-case basis by assessing
the totality of the circumstances.
[1] law firm did not waive arbitration on claims under
contingency fee agreement by litigating claims against 2 Cases that cite this headnote
former associate for breach of employment agreement and
tort claims; [4] Alternative Dispute Resolution
[2] law firm did not waive arbitration by filing pleading
In the context of a determination as to
in suit against clients, followed by motion for no-answer
whether a party has waived the right to
default judgment; and
arbitration by substantially invoking the
judicial process, prejudice to the party
[3] law firm did not waive arbitration by intervening in
opposing arbitration is inherent unfairness in
clients' wrongful death suit against client's employer and
terms of delay, expense, or damage to a party's
by moving to compel arbitration.
legal position that occurs when the party's
opponent forces it to litigate an issue and later
Petition for review granted; judgment of Court of Appeals seeks to arbitrate that same issue.
reversed; remanded to District Court.

57 Tex. Sup. Ct. J. 584

John W. Griffin Jr., Robert Edward McKnight Jr.,
Law firm did not waive arbitration on claims
Marek, Griffin & Knaupp L.L.P., Robert P. Houston,
under contingency fee agreement against
Attorney at Law, Victoria, TX, for Respondents.
former firm clients by litigating claims against
former associate who took clients with him Opinion
when he left firm; clients were not parties in
law firm's suit against former associate for PER CURIAM.
breach of employment agreement and tort
claims, law firm did not litigate with clients, A party waives its right to arbitration by substantially
and firm's litigation with former associate did invoking the judicial process to the other party's detriment
not cause delay, expense, or damage to clients' or prejudice. Proving waiver is a high hurdle due to the
legal position. strong presumption against waiver of arbitration. This
appeal concerns whether a law firm waived its right to
1 Cases that cite this headnote arbitrate a fee dispute with former clients by litigating
with a former associate. After the associate left the firm
and took several clients with him, the firm sued the
*544 former associate—with whom it had no arbitration
agreement—over client contingency fees. The firm also
By filing pleading in suit against former sued the former clients and moved to compel that dispute
clients on claims arising out of contingency fee to arbitration pursuant to an arbitration clause in the
agreement after clients retained firm's former contingency fee agreement between the firm and the
associate who then left firm, and filing motion clients. The trial court and the court of appeals both
for no-answer default judgment, law firm did concluded that because the firm had litigated the fee
not substantially invoke judicial process, as issue with the former associate, it waived its right to
grounds for finding that law firm waived arbitrate any claims stemming from its fee agreement
arbitration of claims. with the former clients. Importantly, the firm could not
arbitrate its dispute with the former associate because it
had no arbitration agreement with him. Because the firm's
litigation with the former associate neither prejudiced
[7] Alternative Dispute Resolution the former clients nor substantially invoked the litigation
Suing or participating in suit process with them, we reverse the court of appeals'
Law firm did not waive arbitration of judgment and remand to the trial court.
claims arising out of contingency agreement
with firm clients by intervening in clients' Ventura Gobellan was driving an armored car for his
wrongful death suit against client's employer, employer when the vehicle became unstable and rolled
in which suit clients were represented by over, killing a passenger and injuring Gobellan. Gobellan
former associate who took clients with him and his wife retained Kennedy Hodges, L.L.P. to defend
when he left firm, and by moving to compel against a wrongful death suit and to bring suit against
arbitration. Gobellan's employer and other defendants (the Gobellan
Suit). The Gobellans agreed to pay Kennedy Hodges forty
1 Cases that cite this headnote percent of the gross recovery obtained after suit was filed
but before trial. Their fee agreement provided that the
Gobellans would be liable for the entire contingency fee
if they terminated Kennedy Hodges without cause and
Attorneys and Law Firms required the Gobellans and Kennedy Hodges to arbitrate
any fee dispute. Kennedy Hodges assigned associate
*543 Cory Reed, Thompson, Coe, Cousins & Irons, attorney Canonero Brown to the case.
Kevin F. Risley, Zandra Elayne Foley, Thompson Coe
Cousins & Irons LLP, Houston, TX, for Petitioner.

57 Tex. Sup. Ct. J. 584
Brown subsequently left Kennedy Hodges and assured on a case-by-case basis by assessing the totality of the
Gobellan “he would work out a fee splitting arrangement circumstances. Id. We have considered such factors as
with Kennedy Hodges and that [they] would not be (1) when the movant knew of the arbitration clause; (2)
affected.” The Gobellans retained Brown to represent how much discovery was conducted; (3) who initiated the
them. Kennedy Hodges sued Brown to recover discovery; (4) whether the discovery related to the merits
contingency fees for former clients he took with him (the rather than arbitrability or standing; (5) how much of the
Brown Suit). The Gobellans were not a party to that suit. discovery would be useful in arbitration; and (6) whether
Kennedy Hodges later settled with Brown for a portion of the movant sought judgment on the merits. Id. at 591–
all contingency fees collected from former firm clients who 92. Further, the substantial invocation of the litigation
retained Brown, including the Gobellans. process must also have prejudiced the opposing party. Id.
at 593. In this context, prejudice is “inherent unfairness
In the Gobellan Suit, Gobellan's employer and the in terms of delay, expense, or damage to a party's legal
Gobellans submitted their dispute to arbitration. The position that occurs when the party's opponent forces it
Gobellans obtained an award that was confirmed in a to litigate an issue and later seeks to arbitrate that same
final judgment, which Gobellan's employer satisfied by issue.” Id. at 597.
paying $470,000. Kennedy Hodges sued the Gobellans
in a separate proceeding, and moved for a no-answer Two cases in particular illuminate how we apply this
default judgment. But after conferring with the Gobellans, standard. First, in Cull, the Culls substantially invoked the
Kennedy Hodges pursued its claim in the Gobellan Suit litigation process by initially resisting the opposing party's
by intervening and moving to compel arbitration. The motion to compel arbitration, filing motions to compel
trial court denied the motion, and the court of appeals discovery, conducting extensive discovery about every
affirmed, concluding that Kennedy Hodges substantially aspect of the merits, and waiting until shortly before trial
invoked the litigation process as to the Gobellan fee based to request arbitration. Id. at 595–97. There, we specifically
on the discovery it conducted in the Brown Suit. 433 emphasized the extreme delay the Culls caused, which we
S.W.3d 579, 585. The court also found the Gobellans noted undercuts one of the prime benefits of arbitration:
established prejudice because Kennedy Hodges attempted an expedient and cost-effective dispute resolution process.
to “have it both ways” by switching between litigation Id. at 596. Additionally, our statement that waiver occurs
and arbitration. Id. at 585. As we explain below, the court when a party substantially invokes litigation with “the
of appeals' decision conflicts with our decision in Perry other party[ ]” indicates the party claiming waiver was the
Homes v. Cull, 258 S.W.3d 580 (Tex.2008), on a question other party in the litigation. Id. at 590.
of law material to the disposition of the case, which
confers jurisdiction on this Court over this interlocutory More relevant to our inquiry here, we held in In re
appeal, TEX. CIV. PRAC. & REM.CODE § 171.098(a) Service Corp. International that a party who litigated one
(1); TEX. GOV'T CODE §§ 22.001(a)(2), 22.225(c). claim with an opponent did not substantially invoke the
litigation process for a related yet distinct claim against
The Gobellans argue Kennedy Hodges's litigation in the another party with whom it had an arbitration agreement.
Brown Suit substantially invoked the litigation process 85 S.W.3d 171, 175 (Tex.2002).
against them. Kennedy Hodges counters that the Brown
Suit contained tort and contract claims not involving the [5] Here, Kennedy Hodges's litigation with Brown
Gobellans as parties. We agree with Kennedy Hodges. in the Brown Suit did not substantially invoke the
litigation process with the Gobellans, who were not
*545 [1] [2] [3] [4] Because the parties do not disputeparties to the Brown Suit. The Brown Suit involved
the facts, whether Kennedy Hodges's conduct waived its alleged breaches of Brown's employment agreement with
right to arbitrate is a question of law we review de novo. Kennedy Hodges as well as tort claims. And there was
Cull, 258 S.W.3d at 598 & n. 102. A party waives the right no arbitration agreement between Kennedy Hodges and
to arbitrate “by substantially invoking the judicial process Brown. By contrast, the Gobellan Suit involved an alleged
to the other party's detriment or prejudice.” Id. at 589– breach of the Gobellans' contingency fee agreement with
90. The strong presumption against waiver of arbitration Kennedy Hodges, which contains an arbitration clause.
renders this hurdle a high bar. Id. at 590. We decide waiver By litigating with Brown, Kennedy Hodges did not

57 Tex. Sup. Ct. J. 584
litigate with the Gobellans. Our holding in Service Corp. Gobellan Suit and moved to compel their dispute to
arbitration. The firm conducted no discovery. In sum, we
International, compels this conclusion. Id. Additionally,
conclude Kennedy Hodges did not substantially invoke
Kennedy Hodges's litigation with Brown did not prejudice
the litigation process with the Gobellans by intervening
the Gobellans as it did not cause delay, expense, or
and moving to compel arbitration. See Vesta, 192 S.W.3d
damage to the Gobellans' legal position. See Cull, 258
at 763–64.
S.W.3d at 597.
To conclude, Kennedy Hodges's litigation conduct

[6] [7] Likewise, we cannot agree that Kennedy
involved suing a third party with whom it had no
Hodges substantially invoked the litigation process with
arbitration agreement and filing limited pleadings against
its pleadings against the Gobellans. Kennedy Hodges
the Gobellans. Such activity did not substantially invoke
filed pleadings against the Gobellans in two suits. First,
the litigation process against the Gobellans or prejudice
Kennedy Hodges initiated litigation against the Gobellans
them. Thus, Kennedy Hodges did not waive its right
in a separate proceeding in Harris County and filed
to arbitrate its dispute with the Gobellans. Accordingly,
a motion for a no-answer default judgment. But these
without hearing oral argument, TEX.R.APP. P. 59.1, we
pleadings alone do not rise to the level required to show
grant the petition for review, reverse the court of appeals'
waiver. See, e.g., id. at 592 (assessing whether a party
judgment, and remand to the trial court to grant Kennedy
*546 moved for judgment on the merits); In re Vesta Ins.
Hodges's motion to compel arbitration.
Grp., Inc., 192 S.W.3d 759, 763–64 (Tex.2006) (holding
that seeking initial discovery, taking four depositions,
and moving for dismissal did not substantially invoke All Citations
the litigation process). Second, after conferring with the
Gobellans, Kennedy Hodges intervened in the existing 433 S.W.3d 542, 57 Tex. Sup. Ct. J. 584

McReynolds v. Elston, 222 S.W.3d 731 (2007)

Declined to Follow by Delfingen US-Texas, L.P. v. Valenzuela,
Tex.App.-El Paso, February 6, 2013
Court of Appeals of Texas, Review
Houston (14th Dist.). Alternative Dispute Resolution
Decisions reviewable; finality
L. Bland McREYNOLDS and Mandamus
Judith Bauman, Appellants Civil proceedings other than actions
v.
Mandamus
Lanelle ELSTON, Appellee. Jurisdiction and authority
In re L. Bland McReynolds
Court of Appeals had interlocutory rather
and Judith Bauman, Relators. than mandamus jurisdiction to consider
denial of former husband's motion to
Nos. 14–06–00974–CV, 14–06–00980–CV.
stay arbitration which former wife initiated
|
under partnership agreement and to compel
March 27, 2007.
arbitration under settlement agreement, as
Synopsis trial court order denied former husband his
Background: Former husband brought motion to compel alleged right to arbitration, where former
arbitration pursuant to settlement agreement with former husband sought not simply to change
wife regarding their partnership and to stay other arbitrators, but rather to enforce his express
arbitration which former wife initiated pursuant to contractual right of arbitration under the
partnership agreement. The 129th District Court, Harris settlement agreement, motion to compel that
County, Samuel Grant Dorfman, J., denied the motion, arbitration constituted the predominant relief
and former husband appealed. sought in former husband's motion, and trial
court's order was titled as a denial of the
motion to compel arbitration. V.T.C.A., Civil
Practice & Remedies Code § 171.098(a)(1).
Holdings: The Court of Appeals, Leslie B. Yates, J., held
that: 6 Cases that cite this headnote
[1] Court of Appeals had interlocutory rather than

mandamus jurisdiction;
Interlocutory and Intermediate Decisions
[2] former wife's claims fell under settlement agreement's Court of Appeals has jurisdiction to consider
arbitration clause rather than partnership agreement's appeals of interlocutory orders only if a
arbitration clause; statute explicitly so provides.

[3] former husband did not substantially invoked
arbitration under partnership agreement; and
[4] any act by former husband in invoking arbitration Validity
under partnership agreement did not result in prejudice to Alternative Dispute Resolution
former wife. Disputes and Matters Arbitrable Under
Agreement
Reversed and remanded. Under Texas Arbitration Act (TAA), a party

moving to compel arbitration must establish

(1) the existence of a valid, enforceable

arbitration agreement and (2) that the Cases that cite this headnote
claims asserted fall within the scope of
that agreement. V.T.C.A., Civil Practice & [8] Alternative Dispute Resolution
Remedies Code § 171.001 et seq. Disputes and Matters Arbitrable Under
Agreement
Former wife's claims against former
husband regarding the acquisition, sale,
[4] Alternative Dispute Resolution and distribution of partnership assets fell
Evidence under settlement agreement's arbitration
If the movant for arbitration establishes clause rather than partnership agreement's
that an arbitration agreement governs the arbitration clause; language of settlement
dispute, the burden then shifts to the party agreement, which expressly stated that
opposing arbitration to establish a defense transfers were intended to “effect” the
to the arbitration agreement. V.T.C.A., Civil liquidation and dissolution of the partnership
Practice & Remedies Code § 171.001 et seq. and which broadly released claims “relating
to” the partnership and “all other matters
5 Cases that cite this headnote relating to assets or liabilities” of the
partnership and former husband and wife,
[5] Alternative Dispute Resolution indicated that it superseded the partnership
Modification or termination agreement, and settlement agreement's
arbitration clause itself contained sweeping
A party may revoke an agreement to arbitrate
language which purported to cover claims
only on a ground that exists at law or in equity
arising under that agreement or “any matter
for the revocation of a contract. V.T.C.A.,
relating hereto.”
Civil Practice & Remedies Code § 171.001.

Right to Enforcement and Defenses in
General On review of whether a claim falls within
the scope of an arbitration agreement,
If the trial court concludes the movant for
the appellate court focuses on the factual
arbitration has met its burden and the party
allegations of the complaint rather than the
opposing arbitration has failed to prove its
legal causes of action asserted.
defenses, the trial court has no discretion but
to compel arbitration. 6 Cases that cite this headnote
Evidence
Existence and validity of agreement The burden lies with the party opposing
arbitration to show that the claims fall outside
Issue of whether former husband fraudulently
the scope of the arbitration agreement.
induced former wife to enter entire settlement
agreement, which contained arbitration 6 Cases that cite this headnote
clause, was an issue for the arbitrators rather
than the court.
Arbitration favored; public policy

Alternative Dispute Resolution Whether a party has waived its right to

Construction in favor of arbitration arbitrate presents a question of law reviewed
There is a presumption favoring arbitration, de novo.
which generally requires that the court resolve
doubts as to the scope of the agreements in
favor of coverage.
1 Cases that cite this headnote Waiver or Estoppel
Waiver of an arbitration right must be
[12] Alternative Dispute Resolution intentional.
A court should not deny arbitration unless
it can be said with positive assurance that
an arbitration clause is not susceptible of an [17] Alternative Dispute Resolution
interpretation that would cover the dispute at Suing or participating in suit
issue. Merely taking part in litigation is not enough
to waive a right to arbitration unless a party
has (1) substantially invoked the judicial
process (2) to its opponent's prejudice.
Disputes and Matters Arbitrable Under 1 Cases that cite this headnote
Agreement
The presumption of arbitrability is [18] Alternative Dispute Resolution
particularly applicable where the clause is Evidence
broad; that is, it provides for arbitration of Because of the strong federal and state policies
“any dispute arising between the parties,” favoring arbitration, a presumption exists
or “any controversy or claim arising out of against the waiver of a contractual right to
or relating to the contract thereof,” or “any arbitration.
controversy concerning the interpretation,
performance or application of the contract.” Cases that cite this headnote

Former husband did not substantially invoke
arbitration under partnership agreement and
The presumption of arbitrability is not thus did not waive right to arbitration under
without limits and cannot serve to stretch a settlement agreement, even though former
contractual clause beyond the scope intended husband filed motion to stay after panel
by the parties or authorize an arbitrator heard his objections to the arbitration, filed a
to disregard or modify the plain and counterclaim and paid the filing fee, requested
unambiguous provisions of the agreement. documents from the arbitration association
and complied with their order to produce
documents, allowed arbitration association
to pre-screen arbitrators and objected to
[15] Alternative Dispute Resolution arbitrators chosen for the panel, participated
Scope and standards of review in a conference call to discuss the appointment
of the panel, scheduling, discovery, and
other parameters of the arbitration, and

requested the panel for a factual and legal Any act by former husband in invoking
determination of whether the partnership arbitration under partnership agreement with
agreement's arbitration clause controlled, former wife did not result in prejudice to
where former husband's acts were generally former wife, and thus husband did not
of a defensive nature, and former husband waive right to arbitration under settlement
expressly took each action subject to his agreement with former wife, despite her
objections to arbitration. allegations that she had to fight in two
forums; former wife initiated the arbitration,
1 Cases that cite this headnote former husband timely filed and repeatedly
stood on objections, requesting discovery only
[20] Alternative Dispute Resolution to support his objections and submitting to
Suing or participating in suit discovery only over objection, and there was
no suggestion that the discovery and costs
To substantially invoke the judicial process
incurred would not inure to the benefit of the
and waive a right to arbitration, a party must
arbitration under the settlement agreement.
make a specific and deliberate act after suit has
been filed that is inconsistent with its right to Cases that cite this headnote
arbitrate.

Waiver or Estoppel
[21] Alternative Dispute Resolution Loss of time alone does not constitute
Waiver or Estoppel sufficient prejudice to establish waiver of a
right to arbitration.
A party does not demonstrate an intent to
waive arbitration by consistently and timely Cases that cite this headnote
seeking to invoke its contractual right to
arbitration.
Cases that cite this headnote Waiver or Estoppel
Generalized complaints about delay and
[22] Alternative Dispute Resolution expense, absent explanation and evidentiary
Suing or participating in suit support, will not establish prejudice necessary
to find a waiver of a right to arbitration.
Purely defensive measures do not
substantially invoke the judicial process in a Cases that cite this headnote
manner that waives a right to arbitration.

Waiver or Estoppel *734 Kevin Dubose and John H. Boswell, Houston, for
Delay alone generally does not establish appellants.
waiver of a right to arbitration.
Alex Jerome Brown, Emilio F. Deayala, and Marc E.
Cases that cite this headnote Grossberg, Houston, for appellees.
*735 Panel consists of Justices YATES, ANDERSON,

[24] Alternative Dispute Resolution and HUDSON.

settled by arbitration in accordance

with the Commercial Arbitration
OPINION Rules of the American Arbitration
Association.
LESLIE B. YATES, Justice.
The partnership terminated on December 31, 1998
In this consolidated interlocutory appeal and mandamus
and subsequently entered liquidation. At some point
proceeding, appellants L. Bland McReynolds and Judith
thereafter, a dispute arose, and Elston initiated arbitration
Bauman challenge the trial court's order denying their
against McReynolds pursuant to the Partnership
motion to compel arbitration. We deny the petition for
Agreement, alleging he “improperly liquidat[ed]
writ of mandamus and reverse and remand the trial court's
Partnership assets and treat[ed] them as his sole property.”
order under our interlocutory appellate jurisdiction.
As a result of this arbitration, on August 18, 1999, the
parties entered into a “Settlement Agreement and Full
and Complete Joint and Mutual Release” (“Settlement
BACKGROUND Agreement”) to “settle[ ] the issues relating to the
various claims made or that could have been made.”
This proceeding arises from a dispute over competing The Settlement Agreement is multifaceted and contains
arbitration agreements. On March 1, 1997, McReynolds numerous provisions relating to the partnership and
and Elston executed an agreement incident to their divorce
liquidation of the assets. First, the agreement specifically
creating a limited partnership (“Partnership Agreement”) outlines how each partnership asset should be liquidated
whose “sole intent and purpose” was to “liquidate all of and contains residual language stating that Elston
the partnership assets ... and distribute the proceeds.” The “quitclaims to McReynolds all other assets of and
partnership assets listed in the agreement consist of the interests in Partnership assets not disposed of herein.”
parties' community property and include, among other To this end, the agreement states that “[t]he transfers
things, a large tract of real property (the “242 Tract”). contemplated by the settlement are intended to effect
The agreement names McReynolds as general partner and the liquidation and dissolution of the Partnership by
grants him authority to control the partnership assets and, distribution of all its assets and the payment or
upon dissolution, to liquidate and sell or distribute the assumption of all its liabilities.” Second, the agreement
assets; however, it does not expressly itemize transactions releases “all ... claims [by McReynolds and/or Elston]
that will effect liquidation of the assets. The agreement relating to ... the Partnership and any and all other matters
names Elston as a limited partner and gives her various relating to assets or liabilities of McReynolds, Elston,
rights to the assets. The agreement also contains the
or the Partnership.” 1 *736 Finally, the Settlement
following arbitration clause:
Agreement contains an arbitration clause of its own:
If a dispute among the Partners
arises out of or relates to
In the event of any dispute under this Settlement
this Partnership, or the breach
Agreement or any matter relating hereto ... the parties
of this Agreement, and if the
agree to submit each dispute to Daniel Goldberg, for
dispute cannot be settled through
binding disposition.... If the parties cannot agree on
direct discussions, the parties agree
the rules and procedures for the arbitration then the
to first endeavor to settle the
AAA Rules for Commercial Disputes shall apply.... If
dispute in an amicable manner by
Dan Goldberg is unable to act as the arbitrator and the
mediation under the Commercial
parties cannot agree on the selection of an arbitrator[,]
Mediation Rules of the American
the arbitrator shall be selected pursuant to the AAA
Arbitration Association, before
Rules.
resorting to arbitration. Thereafter,
Some years later, a further dispute arose between Elston
any unresolved controversy or
and McReynolds. On October 5, 2005, pursuant to the
claim arising out of or relating
Partnership Agreement's arbitration clause, Elston filed
to this Partnership or breach
a claim with the American Arbitration Association (the
of this Agreement, shall be

“AAA Arbitration”) against McReynolds and his current dismissal of the AAA Arbitration, absent an explanation
wife, Judith Bauman (collectively “McReynolds”), from Elston's attorneys regarding why the Partnership
asserting breach of fiduciary duty, breach of contract, Agreement controlled. On May 15, 2006, Boswell again
and fraud. Elston contended that in November 1997, informed the case manager that the AAA Arbitration
McReynolds and his business associate purchased for was improper under the Settlement Agreement and
themselves a 68–acre tract of real property for timber, warned that McReynolds would seek injunctive relief
which was surrounded by the partnership's 242 Tract against Elston if the matter could not be resolved.
and thus landlocked. Elston alleged McReynolds engaged Thereafter, on June 28, 2006, the AAA panel conducted
in the following improper conduct in connection with a “preliminary hearing and initial case management
the purchase: (1) failing to disclose this “partnership conference,” which set dates for both the hearing
opportunity” during the term of the partnership and on McReynolds's objections and the final evidentiary
“potentially” improperly using partnership funds to hearing for Elston's claim. Pursuant to the objections,
acquire the tract, (2) inducing her into executing the neither McReynolds nor Boswell participated in this
Settlement Agreement by denying ownership of any other conference. Rather, on the same day, because of the
property in his deposition for the arbitration resulting AAA's “failure to acknowledge the clear terms of the
in the agreement, (3) in the years after the settlement, Settlement Agreement,” McReynolds filed a declaratory
overcharging her for her share of the partnership expenses judgment action in district court requesting the court to
on the 242 Tract by failing to segregate amounts for the stay the AAA Arbitration and compel Elston to engage in
68–acre tract, and (4) failing to disclose his interest in the arbitration under the Settlement Agreement.
68–acre tract until after he executed a contract with her
for the sale of a larger partnership tract containing the 68– The AAA panel then heard McReynolds's objections
acre tract. on July 28, 2006 and subsequently overruled them.
Thereafter, on September 28, 2006, McReynolds filed
Thereafter, on October 23 or 24, 2005, McReynolds a motion to compel the Goldberg Arbitration pursuant
filed objections to the AAA Arbitration, and, subject to the Settlement Agreement and to dismiss or stay
to the objections, an answer and counterclaims. the AAA Arbitration in district court. He maintained
McReynolds objected (1) that the acquisition of the that he “repeatedly requested that [Elston] submit to
68–acre tract fell outside the scope of the Partnership contractual arbitration in accordance with [the Settlement
Agreement's arbitration clause, requesting “a factual and Agreement], but she has refused.” After a hearing, the
legal determination whether the purported Arbitration court denied the motion on October 24, 2006. 2
Agreement is binding on the parties to this claim,” (2)
to the “involvement” of the AAA, alleging that Elston's McReynolds now challenges the court's denial of his
current husband, an attorney of record in the claim, motion to compel the Goldberg Arbitration and stay
had close ties to the designated three-arbitrator panel the AAA Arbitration, seeking relief through a petition
and other AAA employees, and (3) to the use of a for writ of mandamus, or, alternatively, an interlocutory
three-arbitrator panel instead of a single arbitrator. appeal.
McReynolds's counterclaims included causes of action for
libel, slander, breach of contract, and intentional infliction
of emotional “trauma.”
ANALYSIS
The record reflects that over the next eight months,
I. Mandamus vs. Interlocutory Appeal
McReynolds, through his attorney, John H. Boswell,
[1] We initially address whether we should review
reasserted his objections in correspondence to the case
the interlocutory order denying McReynolds's motion
manager handling the AAA Arbitration. On March
29, 2006, Boswell explained that Elston improperly under our interlocutory 3 or mandamus jurisdiction. The
brought the arbitration before an AAA panel under parties agree that the facts of this case are atypical,
the Partnership Agreement rather than before Daniel if not unique—a party simultaneously seeks to compel
Goldberg under the Settlement Agreement *737 arbitration under one agreement and stay arbitration
(the “Goldberg Arbitration”). Boswell thus sought initiated under another agreement. McReynolds claims
we have interlocutory jurisdiction over denial of the

“motion to compel” relief because the Texas Arbitration 511, 515 (Tex.App.-Houston [1st Dist.] 2002, no pet.). The
Act (“TAA”) expressly grants interlocutory jurisdiction record indicates McReynolds sought not simply to change
over denials of applications to compel arbitration. See arbitrators, but rather to enforce his express contractual
TEX. CIV. PRAC. & REM. CODE ANN. § 171.098(a) right of arbitration under the Settlement Agreement,
(1) (Vernon 2005). McReynolds further contends that, including arbitration before Daniel Goldberg. The motion
because the TAA requires orders compelling arbitration to compel the Goldberg Arbitration constitutes the
to include a stay of other proceedings subject to predominant relief sought in McReynolds's motion, which
the arbitration, we have by extension interlocutory is evidenced by the trial court's order entitled “ORDER
jurisdiction to review a denial of the “motion to stay” DENYING PLAINTIFFS' MOTION TO COMPEL
relief. See *738 id. § 171.021(c) (Vernon 2005). Elston ARBITRATION.” As such, although the trial court's
counters that, because McReynolds's motion sought to order allowed the AAA Arbitration to continue, it denied
stay pending arbitration and compel arbitration before McReynolds's potential contractual right to arbitration
a different arbitrator, the court's order did not deny under the Settlement Agreement.
the “right to arbitration” but merely allowed pending
arbitration to continue. Therefore, Elston reasons, the Moreover, in relation to McReynolds's request to compel
trial court's order does not squarely fall under either the Goldberg Arbitration, he asked the court to stay
TAA section 171.098(a)(1) or section 171.098(a)(2), a related proceeding involving arbitrable issues—the
which provides for appeals from grants of applications AAA Arbitration. Parties moving to compel arbitration
to stay arbitration made under 171.023 section. See often simultaneously request the trial court to stay
id. § 171.098(a)(2) (Vernon 2005). As to mandamus, related proceedings—albeit typically the court's own
McReynolds concedes that he believes his challenge to the litigation proceedings—and thereafter appeal from an
trial court's order is appropriate for interlocutory appeal order denying such relief under Section 171.098. See
but has filed the mandamus proceeding “in an abundance Williams Indus., Inc. v. Earth Dev. Sys. Corp., 110 S.W.3d
of caution.” 131, 133 (Tex.App.-Houston [1st Dist.] 2003, no pet.)
(noting that section 171.098(a)(1) authorizes interlocutory
[2] We will first discuss our interlocutory jurisdiction. appeal from denial of application to compel arbitration
We have jurisdiction to consider appeals of interlocutory and to stay proceedings); see, e.g.,Southwind Group, Inc.
orders only if a statute explicitly so provides. See Stary v. Landwehr, 188 S.W.3d 730, 735–36 (Tex.App.-Eastland
v. DeBord, 967 S.W.2d 352, 352–53 (Tex.1998). The TAA 2006, orig. proceeding); Teal Constr. Co./ Hillside Villas
explicitly provides that a party may file an interlocutory Ltd. v. Darren Casey Interests, Inc., 46 S.W.3d 417, 419
appeal from the denial of an application to compel & n. 1 (Tex.App.-Austin 2001, pet. denied). Accordingly,
arbitration brought under section 171.021. See TEX. under these circumstances, we hold that section 171.098(a)
CIV. PRAC. & REM. CODE ANN. § 171.098(a)(1). (1) of the TAA *739 grants us jurisdiction to review the
Under section 171.021, the court must, upon granting an trial court's denial of McReynolds's motion to compel the
application to compel arbitration, stay “any proceeding Goldberg Arbitration and stay the AAA Arbitration.
subject to Section 171.025.” See id. § 171.021(c). Section
171.025 requires the court to stay a “proceeding that Because we have jurisdiction to hear the interlocutory
involves an issue subject to arbitration,” and such stay appeal under the TAA, and an adequate remedy by appeal
“applies only to the issue subject to arbitration if that issue therefore exists, we accordingly deny McReynolds's
is severable from the remainder of the proceeding.” See id. petition for writ of mandamus. See TMI, Inc. v. Brooks,
§ 171.025 (Vernon 2005). No.14–05–00604–CV, 2007 WL 43814, at *8 (Tex.App.-
Houston [14th Dist.] Jan. 9, 2007, orig. proceeding).
We disagree with Elston's contentions that the trial court's
order did not deny McReynolds the “right to arbitration”
and that an appeal from the denial of his motion does not II. Motion to Compel the Goldberg Arbitration
fall under section 171.098(a)(1) of the TAA. The substance [3] [4] [5] [6] We now turn to the merits of the
and function of the order viewed in the context of the appeal to determine whether the trial court erred in
record controls our interlocutory jurisdiction. See Walker denying McReynolds's motion to compel the Goldberg
Sand, Inc. v. Baytown Asphalt Materials, Ltd., 95 S.W.3d Arbitration and stay the AAA Arbitration. Under the
TAA, a party moving to compel arbitration must establish

(1) the existence of a valid, enforceable arbitration Partnership Agreement, not the Settlement Agreement,
agreement and (2) that the claims asserted fall within the and thus the Partnership Agreement's arbitration clause
scope of that agreement. Valero Energy Corp. v. Teco applies. Alternatively, Elston argues that her claims
Pipeline Co., 2 S.W.3d 576, 581 (Tex.App.-Houston [14th relate to the breach of a duty under the Partnership
Dist.] 1999, no pet.). If the movant establishes that an Agreement “to enhance Partnership Assets or otherwise
arbitration agreement governs the dispute, the burden protect or enhance the business of the Partnership,”
then shifts to the party opposing arbitration to establish a which claims accrued after the parties executed the
defense to the arbitration agreement. See In re Oakwood Settlement Agreement when McReynolds diluted the
Mobile Homes, Inc., 987 S.W.2d 571, 573 (Tex.1999) (orig. value of the 242 Tract by selling it along with the 68–
proceeding). A party may revoke the agreement only on acre tract. Elston reasons that, since the 68–acre tract
a ground that exists at law or in equity for the revocation did not constitute a partnership asset and the Settlement
of a contract. TEX. CIV. PRAC. & REM. CODE ANN. Agreement's arbitration clause applies only to claims
§ 171.001 (Vernon 2005). If the trial court concludes related to partnership assets, her claims do not fall under
the movant has met its burden and the party opposing this provision.
arbitration has failed to prove its defenses, the trial court
has no discretion but to compel arbitration. See Brooks, [9] [10] [11] [12] [13] [14] Determining whether a
2007 WL 43814, at *3. claim falls within the scope of an arbitration agreement
involves the trial court's legal interpretation of the
In reviewing a denial of a motion to compel arbitration, agreement, and we review such interpretations de novo.
we review factual conclusions under a legal sufficiency or See Ikon Office Solutions, Inc. v. Eifert, 2 S.W.3d 688,
“no evidence” standard and legal conclusions de novo. See 694 (Tex.App.-Houston [14th Dist.] 1999, no pet.) (orig.
Valero, 2 S.W.3d at 581. When the legal interpretation of proceeding). In our review, we focus on the factual
the arbitration clause, and no fact issue is before the court, allegations of the complaint rather than the legal causes
de novo review is appropriate. See id. at 582. of action asserted. Prudential Sec. Inc. v. Marshall,
909 S.W.2d 896, 900 (Tex.1995) (orig. proceeding).
[7] The parties do not dispute the existence of the The burden lies with the party opposing arbitration
Settlement Agreement's arbitration clause. 4 They instead to show that the claims fall outside the scope of the
disagree over whether Elston's claims fall within the scope arbitration agreement. Id. There is a presumption favoring
of this clause and whether McReynolds waived his right arbitration, which generally requires that we resolve
to compel the Goldberg Arbitration and stay the AAA doubts as to the scope of the agreements in favor
Arbitration. We address each issue in turn. of coverage. See Valero, 2 S.W.3d at 590. Thus, a
court should not deny arbitration unless it can be said
with positive assurance that an arbitration clause is not
A. Scope of the Settlement susceptible of an interpretation that would cover the
Agreement's Arbitration Clause dispute at issue. Williams Indus., Inc., 110 S.W.3d at
[8] McReynolds contends that Elston's claims fall under 137. “The presumption of arbitrability is particularly
the scope of the Settlement Agreement's arbitration applicable where the clause is broad; that is, it provides
clause because the clause purports to cover “any for arbitration of ‘any dispute arising between the parties,’
dispute under this Settlement Agreement or any matter or ‘any controversy or claim arising out of or relating
relating hereto,” which language courts have interpreted to the contract thereof,’ or ‘any controversy concerning
broadly. McReynolds further maintains the Settlement the interpretation, performance or application of the
*740 Agreement, because it provides “final closure of contract.’ ” Babcock & Wilcox Co. v. PMAC, Ltd., 863
the Partnership” and contains broad release language, S.W.2d 225, 230 (Tex.App.-Houston [14th Dist.] 1993,
superseded the Partnership Agreement either entirely writ denied). However, the presumption is not without
or to the extent the arbitration clauses conflict. Thus, limits and cannot serve to stretch a contractual clause
he concludes the arbitration clause in the Settlement beyond the scope intended by the parties or authorize
Agreement controls. Elston responds that, because the an arbitrator to disregard or modify the plain and
dispute turns on whether the 68–acre tract constitutes unambiguous provisions of the agreement. Id.
a partnership asset, the arbitrator(s) must interpret the

We conclude that Elston, in contending that her claims USA Corp. v. Leroy, 105 S.W.3d 190, 195–96 (Tex.App.-
fall under the Partnership Agreement's arbitration clause, Houston [14th Dist.] 2003, orig. proceeding); see also
failed to meet her burden to show that her claims Pennzoil Exploration & Prod. Co. v. Ramco Energy
fall outside the scope of the Settlement Agreement's Ltd., 139 F.3d 1061, 1067 (5th Cir.1998) (noting that
arbitration clause. The totality of the language in such language is “capable of expansive reach”). Each of
the Settlement Agreement reveals that it supersedes Elston's allegations involve, either directly or indirectly,
the Partnership Agreement, at least to the extent the the acquisition, sale, and distribution of partnership
two agreements conflict. For example, the Partnership assets, which clearly relate to, touch upon, and are
Agreement generally discusses the liquidation and factually intertwined with the Settlement Agreement's
distribution of partnership assets, while the Settlement subject matter. See Marshall, 909 S.W.2d at 900; Dewey
Agreement specifically outlines how each asset should v. Wegner, 138 S.W.3d 591, 602–03 (Tex. App.-Houston
be liquidated and includes a broad residual clause [14th Dist.] 2004, no pet.). As such, given the breadth
covering all other partnership assets not expressly of the Settlement Agreement and its arbitration clause,
addressed. Indeed, the Settlement Agreement expressly and the strong presumption in favor of arbitration, we
states that the transfers are intended to “effect” the cannot say with positive assurance that such clause is not
liquidation and dissolution of the Partnership, which susceptible of an interpretation covering Elston's claims.
was the “sole intent and purpose” of the Partnership
Agreement. Moreover, the Settlement Agreement broadly
releases claims *741 “relating to” the Partnership and B. Waiver
“all other matters relating to assets or liabilities of [15] [16] [17] [18] Elston further contends
McReynolds, Elston, or the Partnership.” Accordingly, McReynolds waived his right to stay the pending
to the extent the Settlement Agreement's arbitration arbitration by “participating in the arbitration for a year
clause conflicts with the Partnership Agreement's clause before filing the motion [to stay the AAA arbitration].”
—by requiring arbitration before Daniel Goldberg—the McReynolds counters that he expressly took each
Settlement Agreement controls. See Transcore Holdings, action in the AAA Arbitration “subject to” his original
Inc. v. Rayner, 104 S.W.3d 317, 322–23 (Tex.App.-Dallas objections, which he filed less than twenty days after
2003, pet. denied) (orig. proceeding) (holding that parties Elston initiated the proceeding. Whether a party has
did not intend to be bound by arbitration agreement in waived its right to arbitrate presents a question of law that
prior agreement, given that later agreement contained we review de novo. Sedillo v. Campbell, 5 S.W.3d 824, 826
broad release of “any and all claims” and provision (Tex.App.-Houston [14th Dist.] 1999, orig. proceeding).
requiring parties to bring any action “arising out of, Waiver of an arbitration right must be intentional. EZ
or relating to” later agreement in court); Courage Co., Pawn Corp. v. Mancias, 934 S.W.2d 87, 89 (Tex.1996)
L.L.C. v. Chemshare Corp., 93 S.W.3d 323, 333 (Tex.App.- (orig. proceeding). Merely taking part in litigation is not
Houston [14th Dist.] 2002, no pet.) (holding that when enough unless a party has (1) substantially invoked the
later contract deals with same subject matter as initial judicial process (2) to its opponent's prejudice. In re Vesta
contract made by same parties, but does not specify Ins. Group, Inc., 192 S.W.3d 759, 763 (Tex.2006) (orig.
whether or to what extent it is intended to operate proceeding). 5 Because *742 of the strong federal and
in discharge or substitution, both contracts must be state policies favoring arbitration, a presumption exists
interpreted together, and, to extent they are inconsistent, against the waiver of a contractual right to arbitration. See
later one prevails). Marshall, 909 S.W.2d at 898.
Furthermore, the Settlement Agreement's arbitration

clause itself contains sweeping language encompassing 1. Substantial Invocation of the AAA Arbitration
Elston's claims, as the agreement purports to cover [19] Elston claims the following actions establish that
claims arising under that agreement or “any matter McReynolds substantially invoked the AAA Arbitration:
relating hereto.” Courts have interpreted such language to (1) waiting an “inordinate” amount of time to file
require only that a claim “touch upon” or be “factually the motion to stay the AAA Arbitration, which
intertwined” with matters covered by the arbitration McReynolds filed after the AAA panel heard his
agreement. See Marshall, 909 S.W.2d at 900; AutoNation objections to the arbitration, (2) filing a counterclaim
and paying the filing fee, (3) requesting documents from

the AAA and complying with AAA panel's order to responsive pleading containing claims on merits because
produce documents, (4) allowing the AAA to pre-screen claims on merits were brought subject to court's ruling
arbitrators and objecting to arbitrators chosen for the on jurisdictional objections). Further, the documents
panel, (5) participating in a conference call to discuss McReynolds requested pertained to Elston's husband's
the appointment of the panel, scheduling, discovery, and potential conflict *743 with the AAA panel, indicating
other parameters of the arbitration, and (6) requesting that such request was defensive and made in support of
the AAA panel for a factual and legal determination of his objections. Also, even if McReynolds complied with
whether the Partnership Agreement's arbitration clause the panel's order to produce documents relating to the 68–
controlled. acre tract, which is unclear from the record, engaging in
minimal discovery does not alone establish waiver. See In
[20] [21] [22] [23] To substantially invoke the judicialre D. Wilson Constr. Co., 196 S.W.3d 774, 783 (Tex.2006)
process, a party must make a specific and deliberate act (orig. proceeding); In re Vesta Ins. Group, Inc., 192
after suit has been filed that is inconsistent with its right to S.W.3d at 763. In addition, to the extent Elston suggests
arbitrate. Sedillo, 5 S.W.3d at 827. Thus, a party does not McReynolds's objections to the arbitrators amounted to
demonstrate an intent to waive arbitration by consistently participating in the selection of arbitrators, such actions
and timely seeking to invoke its contractual right to were made in the context of his objections and request
arbitration. See Marshall, 909 S.W.2d at 898. Similarly, that the AAA panel dismiss the arbitration; thus, they
purely defensive measures do not substantially invoke the were defensive in nature. Cf. Bergquist Co. v. Sunroc
judicial process. See Transwestern Pipeline Co. v. Horizon Corp., 777 F.Supp. 1236, 1251 (E.D.Pa.1991) (finding
Oil & Gas Co., 809 S.W.2d 589, 593 (Tex.App.-Dallas party did not waive objections to arbitration proceeding
1991, writ dism'd w.o.j.) (citing filing of general denial to by participating in selection of arbitrators under express
preclude default judgment and filing of protective order protest that matter was not subject to arbitration).
in response to discovery request as examples of defensive Accordingly, we cannot say that McReynolds's actions in
measures); see also In re Serv. Corp. Int'l, 85 S.W.3d 171, the AAA Arbitration were inconsistent with his right to
174 (Tex.2002) (orig. proceeding) (holding that objecting arbitrate under the Settlement Agreement.
to trial setting showed intent to avoid rather than to
judicial process). Delay alone generally does not establish
waiver. In re Vesta Ins. Group, Inc., 192 S.W.3d at 763. 2. Prejudice to Elston
[24] [25] [26] Finally, we note that even if McReynolds
We disagree that McReynolds's actions substantially substantially invoked the AAA Arbitration, Elston has
invoked the AAA Arbitration. Elston asserts that not shown prejudice sufficient to establish waiver. 6
McReynolds waited nearly a year from the time she Elston claims she has suffered prejudice due to
filed the AAA Arbitration to file a motion to stay McReynolds's delay in filing the motion to stay the AAA
that proceeding and only after the panel had ruled Arbitration and “simply by having to fight McReynolds
on his objections. Notwithstanding that McReynolds in two forums.” Loss of time alone does not constitute
filed a declaratory judgment seeking a stay of the sufficient prejudice to establish waiver. See In re BP Am.
arbitration before the hearing on his objections, courts Prod. Co., 97 S.W.3d 366, 372 (Tex.App.-Houston [14th
have held that delays in asserting contractual rights to Dist.] 2003, orig. proceeding). Moreover, generalized
arbitration far longer than one year do not constitute complaints about delay and expense, absent explanation
waiver. See id. (holding that litigating in court for two and evidentiary support, will not establish prejudice. See
years did not amount to waiver). Moreover, the record id.; Williams Indus., Inc., 110 S.W.3d at 139.
is replete with correspondence and other documents
supporting McReynolds's position that he took each Furthermore, the cases on which Elston relies are
action expressly subject to his objections or in an distinguishable. See Cent. Nat'l Ins. Co. of Omaha v.
otherwise defensive posturing. McReynolds expressly Lerner, 856 S.W.2d 492, 495 (Tex.App.-Houston [1st
filed his answer and counterclaims “subject [to]” the Dist.] 1993, orig. proceeding); Marble Slab Creamery,
objections in the same pleading. See Courage Co., L.L.C., Inc. v. Wesic, Inc., 823 S.W.2d 436, 438–39 (Tex.App.-
93 S.W.3d at 337 (finding no waiver where party made Houston [14th Dist.] 1992, no writ). Those cases involve
jurisdictional objections and sought dismissal in same parties who filed claims or counterclaims and conducted

extensive pretrial discovery unavailable in arbitration, already conducted would not be useful in arbitration);
Transwestern Pipeline Co., 809 S.W.2d at 593 (in finding
causing the opposing parties to incur significant discovery
no prejudice, noting that nothing in record showed that
costs and attorney's fees. See Lerner, 856 S.W.2d at
litigation expenses would not have been incurred during
495; Wesic, 823 S.W.2d at 438. Here, McReynolds did
arbitration or would not have provided benefit to party
not initiate the AAA Arbitration and thereafter make
opposing arbitration in resolving dispute in arbitration).
extensive discovery requests. Rather, Elston initiated the
AAA Arbitration, and McReynolds timely filed and
repeatedly stood on objections, requesting discovery only
to support his objections and submitting to discovery only CONCLUSION
over objection. Therefore, any costs Elston has incurred
are “self-inflicted” in the sense that she incurred them We conclude the trial court erred in denying McReynolds's
not in response to McReynolds's actions but, rather, motion to compel the Goldberg Arbitration and stay
largely in her prosecution of the AAA Arbitration over the AAA Arbitration. Elston's claims fall under the
McReynolds's repeated objections. See In re Vesta Ins. scope of the Settlement Agreement's arbitration provision
Group, Inc., 192 S.W.3d at 763 (finding no prejudice because of the broad nature of the clause and the
where party sent far more discovery requests than Settlement Agreement. McReynolds did not waive his
received); Transwestern Pipeline Co., 809 S.W.2d at 593 right to the Goldberg Arbitration because he did not
(finding no prejudice where party voluntarily incurred and substantially invoke the AAA Arbitration to Elston's
assumed liability for legal fees in deciding to initiate and prejudice. Therefore, we sustain McReynolds's issues, and
prosecute lawsuit). Moreover, Elston does not suggest we reverse and remand the trial court's interlocutory order
that the discovery and *744 costs incurred in the AAA for proceedings consistent with this opinion.
Arbitration would not inure to the benefit of the Goldberg
Arbitration. See In re Vesta Ins. Group, Inc., 192 S.W.3d
All Citations
at 763 (in finding no prejudice, noting that party opposing
arbitration made no allegation that pretrial discovery 222 S.W.3d 731
Footnotes
1 The Settlement Agreement also contains the following release language:
Elston ... does hereby RELEASE, ACQUIT AND FOREVER DISCHARGE [McReynolds] and the Partnership of and
from any and all claims, demands, causes of action, damages, loss, or expense, of whatsoever kind or character,
in tort or in contract, under the statutes, constitutions, or the common law, state or federal, including, but not limited
to, causes of action that may be created or recognized after this date by court decision, statute or regulation, which
have been or could have been asserted as one of Elston's Claims, whether known or unknown, existing as of the
date of execution hereof and not including Claims arising out of this Settlement Agreement.
2 McReynolds then filed an emergency motion for temporary relief with this court, seeking a stay of the AAA Arbitration set
for November 7, 2006. We granted his motion on November 3, 2006, pending our final resolution of this proceeding.
3 Neither arbitration agreement specifies whether the Texas Arbitration Act or the Federal Arbitration Act governs; however,
the parties agree that because neither agreement invokes interstate commerce, the federal act does not apply. See In re
Educ. Mgmt. Corp., 14 S.W.3d 418, 422 (Tex.App.-Houston [14th Dist.] 2000, orig. proceeding) (holding that question of
whether transaction affects interstate commerce, and thus whether federal act governs, is one of fact where arbitration
agreement is silent as to application of federal or Texas act). Therefore, we address whether we have interlocutory
jurisdiction only under the Texas Arbitration Act.
4 Elston makes passing reference to her “fraud in the inducement” claim in her briefing on the scope of the Settlement
Agreement's arbitration clause. She appears to refer to her claim that McReynolds fraudulently induced her into signing
the Settlement Agreement by both failing to disclose and affirmatively denying his ownership of other property, namely
the 68–acre tract. We construe this as an argument that McReynolds's alleged fraud induced her to enter the entire
agreement, not the arbitration clause itself. Accordingly, we conclude that the arbitrators, not this court, should properly
decide this issue. See In re FirstMerit Bank, N.A., 52 S.W.3d 749, 756 (Tex.2001) (orig. proceeding); Dewey v. Wegner,
138 S.W.3d 591, 602 (Tex.App.-Houston [14th Dist.] 2004, no pet.). Therefore, to the extent she attempts to challenge the

existence of the Settlement Agreement's arbitration clause by attacking the validity of the entire agreement, we overrule
her contention.
5 We recognize that both state and federal waiver cases typically involve an allegation that a party waived its contractual
right to arbitration by substantially invoking the “judicial” process in parallel litigation. Nevertheless, we find such cases
applicable in this unusual but analogous context, involving an allegation that a party waived its contractual right to
arbitration by substantially invoking the arbitration process in a parallel or competing arbitration. Cf. Bergquist Co.
v. Sunroc Corp., 777 F.Supp. 1236, 1251 (E.D.Pa.1991) (holding that party challenging arbitration award for lack of
agreement to arbitrate did not agree to arbitrate or waive its objection to arbitration proceeding by participating in initial
phases of arbitration process because party “had no other choice”).
6 We acknowledge that this and other courts have held that, although waiver is a question of law, the predicate element
of prejudice is a question of fact, and courts differ over which standard of review to apply to this question. See Williams
Indus., Inc., 110 S.W.3d at 136 & n. 8. Because these issues do not affect our conclusion, we need not address them.
See generally id. at 136.

Mendelsohn v A & D Catering Corp., 119 Misc.2d 581 (1983)
464 N.Y.S.2d 331
Bressler, Lipsitz & Rothenberg (William R. Kutner of

counsel), for petitioners. Vann & Borenstein (Abraham
119 Misc.2d 581, 464 N.Y.S.2d 331
Borenstein of counsel), for respondent.
Jacob Mendelsohn et al., Petitioners,
OPINION OF THE COURT
v.
A & D Catering Corporation, Respondent Vincent Pizzuto, J.
Supreme Court, Special Term, Kings County Motions numbered 28, 87, 108 and 109 of the March 18,
2226/83, 3916 1983 calendar are consolidated for the purposes of this
May 24, 1983 decision. In brief these motions seek the following types
of relief:
CITE TITLE AS: Mendelsohn v A & D Catering Corp.
(1) motion number 28 is brought by petitioners, Jacob
HEADNOTES Mendelsohn and Mordchai Z. Greenfield, pursuant to
CPLR 7503 (subd [b]) seeking to permanently stay the
Arbitration arbitration demanded by respondent;
Violation of Statute
Waiver of Right to Arbitrate (2) motion number 87 is brought by the respondent, A & D
Catering Corporation, for an order staying the petitioners
from proceeding with a landlord and tenant action in the
([1]) The fact that the agreement between the parties in
Civil Court, Kings County (index No. 40911/83) pending
connection with the purchase and operation of a catering
the outcome of the arbitration between these parties;
business whereby the parties agreed that respondent,
the purchaser of the business, would utilize the liquor
(3) motion number 108 is brought by the respondent for
license issued to the entity that formerly operated the
an order seeking to punish petitioners for contempt for
business is in violation of the law and against public policy
*582 failing to abide by the order of Hon. Frank Pino,
(Alcoholic Beverage Control Law, § 111) does not render
dated March 8, 1983 which enjoined the petitioners from
the broad arbitration clauses contained in the lease and
proceeding with the landlord and tenant proceeding in the
management agreements void so as to bar arbitration of
Civil Court, Kings County, under index No. 40911/83;
the other disputes that have arisen between the parties
as a result of petitioners' refusal to maintain the liquor
(4) motion number 109 is brought by the respondent
license since respondent is no longer seeking to impose
for an order directing the law firm of Regosin, Edward,
any obligation upon petitioners to procure a liquor license
Stone & Feder to turn over to respondent's attorneys all
and, in any event, any violation of the Alcoholic Beverage
files relating to the matters in controversy between the
Control Law, although technically a “criminal violation”,
petitioners and respondents.
does not rise to the level of a pervasive scheme of
legislation which would oust an arbitrator from exercising
jurisdiction on public policy grounds; respondent did not BACKGROUND
waive its right to arbitration by commencing a prior Sometime prior to February 1, 1976 respondent purchased
action for specific performance with respect to petitioners' a catering business known as the Aperion Manor from
obligations to maintain the liquor license and resorting Joseph and Moshe Pruzansky, the then landlords of 813
to discovery proceedings by serving a notice to admit Kings Highway, Brooklyn, New York, and the principals
since respondent's actions were precipitated solely by the of W & L Caterers, Inc. In connection with this purchase,
nonpayment proceeding commenced against it and only numerous documents were executed between the parties,
manifested an intention to maintain the status quo rather including a lease for a 10-year term. Article 30 of said lease
than forsake its rights under arbitration. provides as follows:
“30.1 The Lessee shall make application on or before

APPEARANCES OF COUNSEL February 1, 1976 to the State Liquor Authority for a

464 N.Y.S.2d 331
license to serve liquor at the demised premises and will On January 17, 1983 petitioners served a notice of
diligently prosecute such application by furnishing and termination of tenancy upon the respondent alleging
filing all information and all documents required by such violation of subdivision 7-a of section 3, section 64, section
authority. 67 (subd 1, par [b]), subdivision 3 of section 110 and
section 111 of the Alcoholic Beverage Control Law. That
“30.2 Pending approval or disapproval of this lease by the same date, respondent replied by demanding arbitration
State Liquor Authority and the issuance or denial of an pursuant to the terms of the lease and management
appropriate liquor license to the Lessee, the Lessee shall agreement. On February 28, 1983 petitioners commenced
operate a catering establishment at the demised premises a holdover proceeding in the Civil Court, Kings County,
but shall in no manner or form serve liquor at the demised under index No. 40911/83. This proceeding was stayed
premises. In the event that any customer requests liquor to pursuant to the temporary restraining order of Hon.
be served at an affair then such request shall be submitted Justice Pino on March 8, 1983. Finally, on March 14,
to W & L Caterers, Inc. and independent arrangements 1983, respondent served petitioners with a notice to admit
shall be made between the customer and W & L Caterers, pursuant to CPLR 408 and 3123.
Inc., or the customer may bring in his own liquor, at the
customer's option.
ARBITRATION
“30.3 In the event that the State Liquor Authority does The threshold issue to be decided by this court is whether
not approve an appropriate liquor license to the Lessee or not the dispute between these parties which arose in
then the arrangement provided for in Section 30.2 shall *584 connection with the maintenance of a liquor license
continue during the term of the lease.” *583 is amenable to arbitration. In this respect petitioners argue
that the strong public policy of this State precludes the
Additionally, article 31 of this lease provided for a broad use of a forum in arbitration where the dispute involves
arbitration clause. Finally a management agreement violations of the Alcoholic Beverage Control Law. In
which the Pruzanskys signed contemporaneously with the alternative, petitioners contend that respondent's
the lease also provided for arbitration of any disputes. institution of an action on or about December 17, 1981
Pursuant to these various agreements respondent constitutes a waiver of its rights to arbitration.
operated a catering establishment utilizing the liquor
license issued to W & L Caterers, Inc. On August 15, It is by now a settled proposition that this State favors
1978 the demised premises were sold to the petitioners who and encourages arbitration as a means of conserving the
assumed all of the obligations of the Pruzanskys. time and resources of the courts and the contracting
parties (Matter of Nationwide Gen. Ins. Co. v Investors
Subsequently, relations between the respondent and the Ins. Co. of Amer., 37 NY2d 91, 95; Matter of Maye
Pruzanskys began to sour, with the Pruzanskys refusing [Bluestein], 40 NY2d 113). In furtherance of the laudable
to sign the necessary papers for maintaining the liquor purposes served by permitting consenting parties to
license of W & L Caterers, Inc. This dispute ultimately lead submit controversies to arbitration the law has adopted
petitioners to institute a nonpayment action on December a policy of noninterference, with few exceptions, in this
9, 1981 (index No. 123260/81). Respondent countered mode of dispute resolution (Matter of Sprinzen [Nomberg],
immediately by securing a temporary restraining order on 46 NY2d 623, 629). Clearly, arbitration is a recognized
December 17, 1981, which stayed the landlord and tenant and favored means by which parties expeditiously and
proceeding. Concomitant with this relief, respondent efficiently may settle disputes which might otherwise take
commenced an action, seeking specific performance years to resolve.
against the petitioners with respect to their obligations
to maintain the liquor license. Both of these proceedings What must be untangled, however, is the nettlesome
were thereafter discontinued and the parties proceeded to question of whether the public policy of this State
arbitrate their disputes in front of a rabbinical court. On or precludes arbitration of the present dispute. In this respect
about March, 1982, that court issued a sealed arbitration the statement has been bandied about that excluded from
award. the ambit of arbitration have been questions of violations
of the criminal law (see, e.g., 8 Weinstein-Korn-Miller,
NY Civ Prac, par 7501.19; Harris v Shearson Hayden

464 N.Y.S.2d 331
Stone, 82 AD2d 87, 92). At the outset, it should be the dispute over the liquor license there remains a plethora
noted that there is no quarrel with the proposition that of unresolved issues between these parties. Accordingly,
the proprietary operation by one entity as a catering there is an element of respondent's dispute which may
establishment by utilizing the liquor license issued to properly be resolved by arbitration.
another entity would be in violation of law and against
public policy (Alcoholic Beverage Control Law, § 111; Furthermore, the alleged violation of the Alcoholic
Matter of South Shore Yacht Club v State Liq. Auth., 34 Beverage Control Law should not deprive respondent
AD2d 794; Smith v Pope, 72 AD2d 913). Respondent of its right to arbitration. Thus, in Matter of *586
has taken the position, that notwithstanding what has National Equip. Rental (American Pecco Corp.) (supra),
happened in the past, it is not presently using nor will it the purchaser of two terminal container loaders sought
attempt to utilize the liquor license of W & L Caterers, to avoid arbitration by alleging that the installation of
Inc., in the operation of its catering enterprise. It is this equipment violated applicable rules and regulations
not readily apparent, however, whether a violation of of the New York City Fire Department. In rejecting this
the Alcoholic Beverage Control Law *585 ipso facto attempt to thwart arbitration the Appellate Division, First
mandates the denial of an arbitration forum. Put another Department, declared (supra, p 135) that, “it may be
way, does the label of criminal violation so envelop the assumed that the arbitrators will not render an award
proceeding that the underlying contract of arbitration is which would require the doing of an act prohibited by law
rendered null and void? Notwithstanding the practicable or offensive to public policy. If there is such an award, the
utility of denominating a breach of statute as being court has the power to vacate it.” Generally, exceptions to
a “criminal violation” (see, e.g., Alcoholic Beverage arbitration are narrowly confined to rights and remedies
Control Law, § 130, making any violation thereof a created by State regulatory statutes, and represent a
“misdemeanor”), such labeling ought not to prevent a determination that the public interest is best served by
court from analyzing the various public policies involved maintaining access to the remedies which the Legislature
in either allowing a dispute to proceed to arbitration or has provided (Keating v Superior Ct. of Alameda County,
barring the parties from this remedy. 31 Cal 3d 584, 601-602; see, also, Kamakazi Music Corp.
v Robbins Music Corp., 684 F2d 228, 231). In these
Consequently, it is for the courts to decide, as a threshold exceptional cases arbitration is forbidden not because
question, whether the enforcement of an agreement matters of public interest are involved, but because
to arbitrate a particular matter would so contravene statutes require that the decisions be made by certain
an important public policy that arbitration should not specified authorities. Over the years, therefore, a small
proceed (Matter of Board of Educ. [Buffalo Council of number of problems have been recognized as so interlaced
Supervisors & Administrators], 52 AD2d 220, 225; Matter with strong public policy considerations that they have
of National Equip. Rental [American Pecco Corp.], 35 been placed beyond the reach of the arbitrators (Matter
AD2d 132, 135, affd 28 NY2d 639; Durst v Abrash, 22 of Associated Teachers of Huntington v Board of Educ., 33
AD2d 39, 44, affd 17 NY2d 445). Obviously, the function NY2d 229, 235).
which W & L Caterers, Inc. was required to perform under
the lease was to act as a conduit for respondent's use Consequently, such public policy exceptions to arbitration
of its liquor license. If this was the sole issue in dispute have been limited to controversies involving antitrust
between these parties, this court would properly construe law (Matter of Aimcee Wholesale Corp. [Tomar Prods.],
that purported agreement as being against public policy 21 NY2d 621; Matter of Allied Van Lines [Hollander
and invalid. On the other hand, a too rigorous application Express & Van Co.], 29 NY2d 35), liquidation of insolvent
of this prohibition would impinge upon and weaken the insurance companies (Matter of Knickerbocker Agency
broad public policy favoring arbitration. Thus, the law [Holz], 4 NY2d 245), and usurious loans (Durst v Abrash,
will not presume an agreement void as illegal or against 22 AD2d 39, supra). The area of public policies which
public policy when it is capable of a construction which preclude the arbitration forum is not easily defined.
would make it consistent with the laws and valid (Curtis However, it seems apparent that in those cases where the
v Gokey, 68 NY 300, 304; Bigelow v Benedict, 70 NY 202, public policy pendulum has swung away from arbitration
204-205; Lorillard v Clyde, 86 NY 384, 387; Shedlinsky v the guiding criteria have been the pervasiveness of the
Budweiser Brewing Co., 163 NY 437, 439). In addition to regulatory scheme rather than the label of criminal

464 N.Y.S.2d 331
violation. Accordingly, in Matter of Kingswood Mgt. Petitioners argue in the alternative that by previously
Corp. (Salzman) (272 App Div 328), the court held that resorting to litigation of this very dispute, respondent has
the Emergency Price Control Act *587 was adopted from waived its right to arbitration. In this respect petitioners
urgent reasons of public policy which the Congress did not point to the commencement by respondent of its specific
intend to turn over to private arbitrators to administer. performance action on or about December 17, 1981 as
Again in Matter of Kramer & Uchitelle (Eddington Fabrics manifesting an unequivocal intention to forego any right
Corp.) (288 NY 467) the Court of Appeals found that an to arbitration. It is well established that an arbitration
agreement to arbitrate was put to an end by the presence provision in a contract like any other provision of a
of the Office of Price Administration. Finally, in Matter contract may be waived or abandoned by the parties, and
of Goldmar Hotel Corp. (Morning-side Studios) (283 App such waiver may be evidenced by their conduct in seeking
Div 935), the Appellate Division prevented a tenant from judicial relief instead of arbitration (Esquire Inds. v East
arbitrating its obligation to make repairs to the demised Bay Textiles, 68 AD2d 845). Moreover, a party entitled
premises where violations of the Multiple Dwelling Law to demand arbitration waives that right by bringing an
existed. In this latter case, the court was obviously action involving the same claim (Matter of Spirs Trading
more concerned with the health, safety and welfare of Co. v Occidental Yarns, 73 AD2d 542). Consequently, the
the citizenry (Multiple Dwelling Law, § 2) rather than courts have held that the right to compel arbitration is
with any attendant criminal violations (Multiple Dwelling waived by taking any action in a litigation that is deemed
Law, § 304). For this reason the court stated (supra, p 935) unequivocal and a sufficient use of the judicial process so
that, “The Municipal Court will be concerned solely with as to be inconsistent with the intention to arbitrate (Jade
the question of whether there were violations which were Press v Packard, 91 Misc 2d 820). Finally, it has been
not removed in time. It will not be concerned with any held that where there has been an intention to abandon
question as to whether repairs were otherwise necessary or the right to arbitration, that right is irrevocably lost (see
required by virtue of the contract between the parties.” Zurich Ins. Co. v Evans, 89 Misc 2d 717, 720; Matter of
Young v Crescent Dev. Co., 240 NY 244, 251).
It is, of course, the function of the courts to pass upon the
legality of the provision sought to be arbitrated and the Despite the myriad number of situations whereby
courts will deny arbitration where the performance which arbitration may be waived (i.e., participating in prior
is the subject of the demand for arbitration is prohibited litigation [Van Den Bogaerde v Staub, Warmbold & Assoc.
by statute (Matter of Dairymen's League Co-op. Assn. Int., 80 AD2d 517], seeking arrears in Family Court
[Conrad], 18 AD2d 321). This is not to say however that [Salisbury v Salisbury, 83 AD2d 990]) it is nevertheless
the mere mouthing of a criminal violation will suffice essential that a court find an intention to proceed in a
to invalidate an arbitration agreement. Rather, the court judicial arena. A review of the facts herein reveals that
will weigh the public policy considerations against the such an intention was not manifested by the respondent
parties' agreement to resolve their dispute outside of when it commenced the prior action for specific
the judicial forum. Since it is alleged by the respondent performance. It is quite clear that respondents' actions
that it no longer seeks to impose any obligation upon at that time were precipitated solely by the nonpayment
W & L Caterers, Inc. to procure a liquor license, any proceeding commenced against them on December 9, 1981
violations of the Alcoholic Beverage Control Law have and limited to the extent of seeking specific performance
been rendered moot. In any event, any violation of those with respect to petitioners' obligations to maintain the
laws, although concededly a “criminal violation” (see liquor license. What respondent intended was to maintain
Alcoholic Beverage Control Law, § 130), does not rise to the status quo rather than *589 forsaking its rights under
the level of a pervasive scheme of legislation which would arbitration. Most significantly that dispute was ultimately
oust an arbitrator from exercising jurisdiction on public resolved by arbitration in a rabbinical court.
policy grounds. This type of statutory violation simply
does not fit into the small category *588 of cases that Petitioners also emphasize the fact that respondent has
have been excepted from the parameters of arbitration on resorted to discovery proceedings in the instant litigation
public policy grounds. by serving a notice to admit. All of the actions taken
together, petitioners argue, bring the respondent within
the ambit of De Sapio v Kohlmeyer (35 NY2d 402) and

464 N.Y.S.2d 331
mandate a finding that the right to arbitration has been Moreover, the action taken by the plaintiff in Preiss/
Breismeister was no different in either quality or quantity
waived. In that case plaintiff, a block trader on the
than those taken by the respondent herein. Secondly, the
stock exchange, sued his former employer for defamation
case of De Sapio v Kohlmeyer (35 NY2d 402, supra) was
(supra, p 403). Although the defendant raised arbitration
relied on by the dissent in Preiss/Breismeister. Finally, the
as an affirmative defense, it obtained a deposition of
notice to admit which was served by the respondent on
plaintiff prior to moving for a stay of the action based
March 14, 1983, albeit one of the discovery mechanisms,
on arbitration (supra, p 404). On these facts the Court
which can be indicative of an intent to waive arbitration,
of Appeals held that the actions by defendant were “a
may not be so construed under the circumstances of
sufficiently affirmative use of the judicial process so as to
this case. Although the delineation between an intent
be inconsistent with a later motion to stay” (supra, p 406).
to waive the arbitration process and efforts to maintain
the status quo can rarely be made with absolute clarity,
Notwithstanding the raison d'etre of De Sapio v Kohlmeyer
the totality of circumstances herein does not warrant
(supra), that decision is not determinative in a situation
a finding that there was a waiver. There can be little
where the party attempting to enforce arbitration rights
doubt that respondent commenced the action for specific
has resorted to the judicial forum solely for the purpose
performance in 1981 solely to protect its status as a
of maintaining the status quo. In this respect the Court
tenant in the demised premises. Furthermore, the notice to
of Appeals has recently observed that there is neither
admit does little more than seek verification of petitioners'
waiver nor an election of remedies, where, as here, plaintiff
obligations under the various contractual agreements
moves in court for protective relief in order to preserve the
between respondent and the Pruzansky brothers as well
status quo while at the same time exercising its right under
as reiterating respondent's right to arbitration. For all
the contract to demand arbitration. (Preiss/Breismeister
of these reasons, the court finds that respondent did not
Architects v Westin Hotel Co. -- Plaza Hotel Div., 56 NY2d
waive the right to arbitrate this matter.
787.) For several cogent reasons this court holds that
Preiss/Breismeister is controlling on the issue of waiver.
Accordingly, petitioners' motion to stay arbitration is
denied in all respects. Respondent's motion to stay the
In the first place, the plaintiff therein commenced an
Civil Court from proceeding with the holdover action
action seeking an injunction and declaratory relief in order
under index No. 40911/83 pending the outcome of
to recover 80 architectural drawings alleged seized by that
arbitration is granted on condition that respondents
defendant. Thereafter that plaintiff served a deposition
continue to pay any and all moneys due under the lease.
notice, followed several days later by a demand for
Such payments may be accepted by petitioners without
arbitration. At the Appellate Division, Justice Silverman
prejudice to any rights they may have to the ultimate
writing for the dissent argued that “[having] decided
possession of the premises. Finally, both the motion to
against arbitration and in favor of court action with
punish petitioners for contempt and the motion seeking
respect to some portion of the relief to which plaintiff
a turn over of files in the possession of the law firm of
deems itself entitled *590 by reason of the same matters
Regosin, Edward, Stone & Feder are denied in all respects.
'arising out of, or relating to this Agreement or the breach
*591
thereof,' plaintiff has waived the right to arbitration as
to those matters” (Preiss/Breismeister Architects v Westin
Hotel Co. -- Plaza Hotel Div., 86 AD2d 844, 847). Needless Copr. (C) 2016, Secretary of State, State of New York
to say, this argument was rejected by the Court of Appeals.

Municipal Energy Agency of Mississippi v. Big Rivers Elec. Corp., 804 F.2d 338 (1986)

Distinguished by Global Oil Tools v. Barnhill, E.D.La., October 16, 2012
804 F.2d 338
United States Court of Appeals,
Decisions reviewable; finality
Fifth Circuit.
Order granting stay pending arbitration is not
MUNICIPAL ENERGY AGENCY OF final appealable order; however, order may be
MISSISSIPPI, Plaintiff-Appellant, appealable as interlocutory order granting or
v. refusing injunction. 28 U.S.C.A. § 1292(a)(1).
BIG RIVERS ELECTRIC
CORPORATION, Defendant-Appellee.
No. 86–4479 [2] Alternative Dispute Resolution

| Scope and standards of review
Summary Calendar. District court order refusing to enjoin
| electrical company from proceeding with
Nov. 17, 1986. petition to compel arbitration was appealable;
thus, companion order staying declaratory
Municipal energy agency filed declaratory judgment
judgment action of municipal energy agency
action seeking determination that power supply
against company pending arbitration was also
agreement with electrical company had terminated.
reviewable. 28 U.S.C.A. § 1292(a)(1).
Electrical company, which had filed petition in another
district court to compel arbitration, filed motion to stay 6 Cases that cite this headnote
agency's proceeding. The United States District Court
for the Northern District of Mississippi, Neal Biggers,
J., entered order staying arbitration and refused to [3] Alternative Dispute Resolution
enjoin petition to compel arbitration, and appeal was Stay of Proceedings Pending Arbitration
taken. The Court of Appeals, Clark, Chief Judge, held District court should grant application for
that: (1) order refusing to enjoin electrical company stay pending arbitration where arbitration
from proceeding with petition to compel arbitration was clause on its face covers dispute.
appealable; thus, companion order staying declaratory
judgment action was also reviewable; (2) arbitration 3 Cases that cite this headnote
clause was broad enough to cover dispute over whether
agreement terminated; (3) language of arbitration clause [4] Alternative Dispute Resolution
that arbitration provision would survive termination Merits of controversy
of underlying agreement controlled over more general If dispute is within scope of arbitration clause,
provisions of termination clause; and (4) district court court may not delve further into merits of
did not abuse its discretion in refusing to enjoin electrical dispute.
company from proceeding with its action to compel
arbitration. 9 Cases that cite this headnote
Affirmed.
See also, 645 F.Supp. 20.
Agreement
Arbitration clause covering “any controversy,
claim, counterclaim, defense, dispute,
difference or misunderstanding arising out

of or relating to this agreement or breach District court, which had stayed declaratory
thereof” was broad enough to cover dispute judgment action brought by municipal energy
over whether agreement terminated. agency against electrical company pending
arbitration, did not abuse its discretion in
6 Cases that cite this headnote refusing to enjoin electrical company from
proceeding in another United States district
[6] Alternative Dispute Resolution court with petition to compel arbitration. 9
Severability U.S.C.A. §§ 3, 4.
Arbitration clause is separable from contract 3 Cases that cite this headnote
in which it is embedded.

Modification or termination *339 Hunt, Spell & Henson, David R. Hunt, Clarksdale,
Alternative Dispute Resolution Miss., Gerald, Brand, Watters, Cox & Hemleben, Jack
Construction W. Brand, Scott P. Hemleben, James Kenneth Harmon,
Jackson, Miss., for plaintiff-appellant.
Severability Alex A. Alston, Jr., Jackson, Miss., Holbrook, Gary,
Language in arbitration clause that Wible & Sullivan, Morton Joshua Holbrook, Lizabeth
arbitration provisions survived termination Ann Tully, Allen Woodrow Holbrook, Owensboro, Ky.,
of agreement controlled over more general for defendant-appellee.
provisions of termination clause.
Appeal from the United States District Court for the
5 Cases that cite this headnote Northern District of Mississippi.
Before CLARK, Chief Judge, GARWOOD, and HILL,

[8] Federal Courts
Circuit Judges.
Injunction Against Proceedings
District courts have discretion to enjoin filing Opinion
of related lawsuits in other United States
district courts. CLARK, Chief Judge:
8 Cases that cite this headnote The district court stayed the declaratory judgment action
of the Municipal Energy Agency of Mississippi (MEAM)
against Big Rivers Electric Corporation (Big Rivers)
[9] Alternative Dispute Resolution pending arbitration. The district court also refused to
Remedies and Proceedings for enjoin Big Rivers from proceeding in another U.S. district
Enforcement in General court with a petition to compel arbitration. MEAM
There is no requirement under Federal appeals from the orders. We affirm.
Arbitration Act that petition to compel
arbitration be made in action in which motion
to stay arbitration is made. 9 U.S.C.A. §§ 3, 4.
*340 I.
MEAM is a joint agency of the State of Mississippi formed
by several Mississippi cities to provide electric power.
[10] Alternative Dispute Resolution On June 1, 1984, MEAM entered into a Power Supply
Particular cases Agreement with Big Rivers, a Kentucky Rural Electric
Cooperative. MEAM agreed to purchase 50 megawatts

of electric power from Big Rivers from June 1, 1984, misunderstanding shall be settled by arbitration to be
through September 30, 1984, at the rate of 85 cents per conducted in accordance with the following procedure.
kilowatt per week. For power supplied from October 1, MEAM shall select one arbitrator, Big Rivers shall
1984, through September 30, 1995, the rate increased to select one arbitrator, and the two arbitrators appointed
$11.55 per kilowatt per month. by MEAM and Big Rivers respectively shall select a
third arbitrator. The arbitration shall be conducted in
Big Rivers could not supply the power directly to accordance with the rules of the American Arbitration
MEAM because the transmission systems of Big Rivers Association then in effect, and judgment upon any
and MEAM do not interconnect. Big Rivers' system award rendered by the arbitrators may, if permitted
interconnects with the system of the Tennessee Valley by law, be entered in any court having jurisdiction
Authority (TVA). MEAM's system interconnects with the thereof. This provision shall survive the termination of
system of Mississippi Power & Light Co. (MP & L), this agreement. The parties expressly agree that this
which interconnects with TVA's system. The Agreement provision shall constitute a condition precedent to the
therefore required MEAM to contract with MP & L institution of any proceedings in any court relating to
and Big Rivers to contract with TVA for transmission the subject matter thereof.
services for the ten years beginning October 1, 1985. If the
necessary transmission agreements were not reached, the MEAM and Big Rivers both entered into their respective
Power Supply Agreement would terminate. The relevant agreements before October 1, 1985, and MEAM paid the
portion of the termination provision reads as follows: higher rate for the electricity supplied by Big Rivers. In
March 1986, however, MEAM received a copy of the
SECTION 9—CONDITIONS OF TERMINATION: transmission agreement between Big Rivers and TVA and
determined that the agreement failed to satisfy the Power
This agreement shall terminate in its entirety, unless
Supply Agreement. On March 28, 1986, MEAM notified
otherwise agreed to in writing, and be without further
Big Rivers that it considered the Power Supply Agreement
force and effect without any liability of either party
terminated because the transmission agreement *341
hereto to the other (except for the obligation to
between Big Rivers and TVA allowed either party to
make payments for any power supplied prior to such
terminate the agreement on three years notice MEAM
termination for which payment has not been made) in
also stopped purchasing power from Big Rivers.
the event the parties are unable through no fault of their
own in completing on or before October 1, 1985, the
MEAM filed the present declaratory judgment action on
following:
April 2, 1986, in the United States District Court for the
1. Firm transmission services sufficient to transmit the Northern District of Mississippi. Jurisdiction was based
contracted power during the full term hereof are secured on diversity of citizenship. 28 U.S.C. § 1332. MEAM
by Big Rivers and MEAM, as follows: Big Rivers will sought a declaratory judgment that the Power Supply
obtain the required commitment for firm transmission Agreement had terminated and sought repayment of
services from the Tennessee Valley Authority and amounts it paid to Big Rivers after October 1, 1985 in
MEAM will acquire the required transmission services excess of 85 cents per kilowatt per week. On April 17,
from Mississippi Power and Light Company (MP & L). 1986, Big Rivers filed in the United States District Court
for the Western District of Kentucky a petition to compel
The Power Supply Agreement also contained the arbitration against MEAM pursuant to 9 U.S.C. § 4.
following arbitration clause: On April 18, 1986, Big Rivers filed a motion to dismiss
in the Mississippi action under Federal Rule of Civil
SECTION 4—ARBITRATION: Procedure 12(b)(6). In the alternative, Big Rivers moved
the Mississippi court to stay the proceedings pending
To the extent permitted by law applicable to MEAM
arbitration pursuant to 9 U.S.C. § 3. MEAM then sought
and in force and effect at the time there arises
to have the Mississippi district court enjoin Big Rivers
any controversy, claim, counterclaim, defense, dispute,
from proceeding in the Kentucky action by motion dated
difference or misunderstanding arising out of or relating
June 5, 1986, on the ground that the issues in the two
to this agreement or breach thereof, such controversy,
actions were the same and the Mississippi action was filed
claim, counterclaim, defense, dispute, difference or

earlier. In its June 5 motion MEAM also asked the district Gilbane, 732 F.2d 444, 445 (5th Cir.1984). MEAM
court to expedite hearing on all motions then pending. characterizes its action as a suit for breach of contract to
recover money damages, which is an action at law, Coastal
On June 6, 1986, the Mississippi district court concluded Industries, Inc. v. Automatic Steam Products Corp., 654
that “the issue of contract termination falls within the F.2d 375, 377 n. 1 (5th Cir.1981) (Unit B).
scope of the arbitration clause of the parties' contract,
and is, thus, referable to arbitration.” It granted Big [2] In this case, however, we do not need to “resort to
Rivers' motion to stay pending arbitration and denied archaic distinctions between law and equity,” Mar-Len,
MEAM's motion to enjoin Big Rivers from proceeding in 732 F.2d at 446 (Rubin, J., dissenting), because here there
the Kentucky action. MEAM appeals. is an alternative basis of appellate jurisdiction. MEAM
appeals not only the stay but also the district court's denial
of *342 its motion to enjoin Big Rivers from proceeding
in the Kentucky action. This order is appealable under
II.
28 U.S.C. § 1292(a)(1). Cf. A. & E. Plastik Pak Co. v.
[1] Big Rivers initially challenges the jurisdiction of Monsanto Co., 396 F.2d 710, 713 (9th Cir.1968) (denial
this court to hear MEAM's appeal. An order granting a of motion to enjoin arbitration is appealable); Petroleum
stay pending arbitration is not a final order, so it is not Helicopters, Inc. v. Boeing-Vertol Co., 606 F.2d 114,
appealable under 28 U.S.C. § 1291. See Jackson Brewing 114 (5th Cir.1979). Since this denial properly brings the
Co. v. Clarke, 303 F.2d 844, 845 (5th Cir.), cert. denied, order before us, we can also review the order staying the
371 U.S. 891, 83 S.Ct. 190, 9 L.Ed.2d 124 (1962). The proceedings pending arbitration. Mercury Motor Express,
order may be appealable under 28 U.S.C. § 1292(a)(1) as Inc. v. Brinke, 475 F.2d 1086, 1091 (5th Cir.1973). This
an interlocutory order granting or refusing an injunction, court has jurisdiction over this appeal.
but
only if (A) the action in which

III.
the order was made is an action
which, before the fusion of law
and equity, was by its nature an A.
action at law; and (B) the stay
was sought to permit the prior MEAM's first contention is that it is not obligated
determination of some equitable to arbitrate the dispute because the arbitration clause
defense or counterclaim. terminated along with the rest of the Power Supply
Agreement when Big Rivers failed to reach a satisfactory
Jackson Brewing Co., 303 F.2d at 845 (emphasis and agreement with TVA. MEAM argues that the contractual
footnote omitted). requirement that Big Rivers enter a long-term agreement
with TVA was a condition precedent to the “secondary”
Big Rivers' motion based on the existence of a contractual ten-year term of the contract, and contends that the
agreement to arbitrate clearly raises an equitable defense. termination clause should override the arbitration clause
Shanferoke Coal & Supply Corp. v. Westchester Service because the termination clause goes “to the heart and
Corp., 293 U.S. 449, 452, 55 S.Ct. 313, 314–15, 79 L.Ed. substance of the contract.” As a result, MEAM concludes,
583 (1935). However, the dispute here is whether MEAM's the district court erred in staying the proceeding pending
cause of action is legal or equitable. We must look behind arbitration or, in the alternative, in failing to hold an
the declaratory judgment action to determine the form evidentiary hearing on the proper construction of the
that the action would have taken if the Declaratory provisions of the contract.
Judgment Act were not in existence. See American Safety
Equipment Corp. v. J.P. Maguire & Co., 391 F.2d 821, 824 [3] [4] The issues in this case are governed by the Federal
(2d Cir.1968). Big Rivers characterizes MEAM's suit as Arbitration Act, 9 U.S.C. §§ 1–14, because the contract
seeking “damages based on a reformation of the contract between MEAM and Big Rivers obviously is “a contract
price,” and points out that contract reformation is an evidencing a transaction involving commerce.” Id. § 2. In
equitable claim, Mar-Len of Louisiana, Inc. v. Parsons- enacting the Federal Arbitration Act, Congress declared

a national policy in favor of arbitration. Southland Corp. Corp., 455 F.Supp. 211, 216–20 (S.D.N.Y.1978), is
v. Keating, 465 U.S. 1, 104 S.Ct. 852, 858, 79 L.Ed.2d 1 misplaced. Moreover, MEAM's claim that the arbitration
(1984). Congressional intent was “to move the parties to clause terminated when the rest of the contract allegedly
an arbitrable dispute out of court and into arbitration as terminated is contradicted by the express language of the
quickly and easily as possible.” Moses H. Cone Memorial arbitration clause, which provides that “[t]his provision
Hospital v. Mercury Construction Corp., 460 U.S. 1, 22, shall survive the termination of this agreement.” MEAM
103 S.Ct. 927, 940, 74 L.Ed.2d 765 (1983). As such, the does not suggest any meaning of this language other than
district court should grant a 9 U.S.C. § 3 application for the obvious. This specific provision controls the more
a stay pending arbitration when the arbitration clause on general provisions of the termination clause. See Western
its face covers a dispute. Seaboard Coast Line Railroad Oil Fields, Inc. v. Pennzoil United, Inc., 421 F.2d 387, 389
Co. v. National Rail Passenger Corp., 554 F.2d 657, 660 (5th Cir.1970).
(5th Cir.1977). If the dispute is within the scope of the
arbitration clause, the court may not delve further into the The parties contracted to arbitrate the issue of contract
merits of the dispute. City of Meridian v. Algernon Blair, termination. See Houston General Insurance Co. v. Realex
Inc., 721 F.2d 525, 528 (5th Cir.1983). Group, N.V., 776 F.2d 514, 516 (5th Cir.1985). The
district court properly stayed its own proceedings pending
[5] The language of the arbitration clause in the Power arbitration. In addition, the unambiguous language of
Supply Agreement is broad enough to cover a dispute over the arbitration clause made it unnecessary for the district
whether the Agreement terminated. The arbitration clause court to hold an evidentiary hearing. Commerce Park
covers “any controversy, claim, counterclaim, defense, v. Mardian Construction Co., 729 F.2d 334, 340–41 (5th
dispute, difference or misunderstanding arising out of or Cir.1984). 1
relating to this agreement or breach thereof.” MEAM
does not dispute the broad language of the clause. Rather,
MEAM argues that the arbitration clause was no longer
binding on the parties at the time the dispute arose. B.
MEAM's second contention is that the district court

[6] This dispute over contract termination is an arbitrable
erred in refusing to enjoin Big Rivers from proceeding
dispute under the arbitration clause in this case. An
in its Kentucky action to compel arbitration. MEAM
arbitration clause is separable from the contract in which
argues that the facts and issues involved in the Mississippi
it is embedded. Prima Paint Corp. v. Flood & Conklin
action—the circumstances surrounding the making of the
Mfg. Co., 388 U.S. 395, 402–03, 87 S.Ct. 1801, 1805–
contract and the proper interpretation of the contractual
06, 18 L.Ed.2d 1270 (1967). A federal court can only
provisions—are the same facts and issues involved in
adjudicate challenges to “the making and performance
the Kentucky action. MEAM finds support in Dupuy-
of the agreement to arbitrate,” not challenges to the
Busching General Agency, Inc. v. Ambassador Insurance
enforceability of the contract as a whole. Id. at 404, 87
Co., 524 F.2d 1275, 1277 (5th Cir.1975), in which this
S.Ct. at 1806. Thus, in Prima Paint, the United States
court considered the effect of the defendant's answer and
Supreme Court held that the district court properly stayed
counterclaim petitioning for an order directing arbitration
proceedings before it when the party seeking to avoid
as a defense to an action on the contract. Asserting that
arbitration did not allege that it was fraudulently *343
the facts and issues in the two actions are similar, MEAM
induced to enter the arbitration agreement but only
urges that the district court in the Mississippi action erred
claimed that it was fraudulently induced to execute the
by not asserting “paramount jurisdiction” over the motion
contract. Id. at 406, 87 S.Ct. at 1807.
to compel arbitration in the present proceeding. In letter
and spirit, Dupuy-Busching is distinguishable.
[7] MEAM does not deny that it was bound by the
Power Supply Agreement before that Agreement allegedly
[8] District courts have discretion to enjoin the filing
terminated. It thus necessarily concedes that it was bound
of related lawsuits in other U.S. district courts. Kerotest
by the arbitration clause as well. Because MEAM does
Mfg. Co. v. C–O–Two Fire Equipment Co., 342 U.S. 180,
not contest the making of the arbitration agreement, its
183–84, 72 S.Ct. 219, 221, 96 L.Ed. 200 (1952); Schauss v.
reliance on Pollux Marine Agencies, Inc. v. Louis Dreyfus
Metals Depository Corp., 757 F.2d 649, 654 (5th Cir.1985).

“As between federal district courts, ... the general principle had no reasonable opportunity to
is to avoid duplicative litigation.” Colorado River Water file its § 4 petition first.
Conservation District v. United States, 424 U.S. 800, 817,
96 S.Ct. 1236, 1246, 47 L.Ed.2d 483 (1976) (dictum). Id. at 21, 103 S.Ct. at 939. Similarly, in this case Big
Often the case filed first will be allowed to proceed. West Rivers had no reasonable opportunity to file its petition
Gulf Maritime Association v. ILA Deep Sea Local 24, 751 to compel arbitration before MEAM filed its declaratory
F.2d 721, 729–30 (5th Cir.1985). But we will reverse a judgment action in the district court. MEAM did not
district court's decision not to enjoin another proceeding notify Big Rivers of its intention to treat the contract as
only if the district court abused its discretion. Cowden terminated until at most five days before filing suit.
Manufacturing Co. v. Koratron Co., 422 F.2d 371, 372 (6th
Cir.), cert. denied, 398 U.S. 959, 90 S.Ct. 2173, 26 L.Ed.2d The fact that the court in Dupuy-Busching treated the
544 (1970) (finding no abuse of discretion in refusal to answer and counterclaim asserting a section 4 petition
enjoin later-filed *344 petition to compel arbitration in to compel arbitration in New Jersey as a compulsory
another U.S. district court). counterclaim does not alter our conclusion. The holding
in Dupuy-Busching was that a district court in Mississippi
[9] The district court did not abuse its discretion in could compel arbitration in New Jersey notwithstanding
refusing to enjoin Big Rivers from proceeding in the the requirement of section 4 that the hearing and
Kentucky action. No part of the language of these two proceedings under the arbitration agreement “be within
sections of the Arbitration Act indicates that a section 4 the district in which the petition for an order directing
petition to compel arbitration must be made in an action such arbitration is filed.” 524 F.2d at 1278. The
characterization of the defendant's answer *345 and
in which a section 3 motion to stay is made. 2 Indeed,
counterclaim as a compulsory counterclaim in that suit
section 4 provides that a petition to compel arbitration
was collateral to that holding. The characterization is
may be made in “any United States district court which,
not controlling here either on a procedural or substantive
save for such agreement, would have jurisdiction under
basis. Procedurally, we note that in Dupuy-Busching the
Title 28.” 9 U.S.C. § 4.
defense was presented as part of an answer, whereas in
the present case Big Rivers filed a 12(b)(6) motion to
We find further guidance in the United States Supreme
dismiss. The time for filing an answer and counterclaim
Court's discussion in Moses H. Cone Memorial Hospital
in the present suit had not arrived. In the present case
v. Mercury Construction Corp., 460 U.S. 1, 103 S.Ct.
Big Rivers never filed an answer; thus it would not be
927, 74 L.Ed.2d 765 (1983). Although Moses H. Cone
barred in a subsequent suit from raising any compulsory
involved duplicate federal and state proceedings, we find it
counterclaim. Fed.R.Civ.P. 13(a); Lawhorn v. Atlantic
equally useful in analyzing the allegedly duplicate federal
Refining Co., 299 F.2d 353, 356–57 (5th Cir.1962).
proceedings in this case. The Court makes clear in Moses
H. Cone that the section 3 stay and the section 4 order to
Substantively, the Dupuy-Busching court distinguished its
arbitrate are “parallel devices for enforcing an arbitration
holding from decisions of the Third and Ninth Circuits by
agreement.” Id. at 22, 103 S.Ct. at 940. Moreover, the
pointing out that the party invoking the jurisdiction of the
Court in Moses H. Cone rejected an argument that the
district court in the suit before it was seeking to avoid, not
state action should have been allowed to proceed because
enforce, arbitration; whereas, in the other circuit actions,
it was filed first.
the party seeking arbitration had initiated the action.
[T]his argument disregards the Therefore, Dupuy-Busching could, without conflict, hold
obvious reason for the Hospital's that the defensive actions of the party seeking to enforce
priority in filing. An indispensable arbitration did not constitute a waiver of the defendant's
element of Mercury's cause of action right to secure arbitration in another arena. Big Rivers, the
under § 4 for an arbitration order is party seeking arbitration in the instant action, did nothing
the Hospital's refusal to arbitrate.... in the litigation initiated by MEAM, the party seeking to
That refusal did not occur until less avoid arbitration, which would invoke the jurisdiction of
than a day before the Hospital filed the Mississippi court or waive Big Rivers' right to arbitrate
its state suit. Hence, Mercury simply in Kentucky.

[10] Finally MEAM appears to be arguing that because it the parties are not bound by the arbitration clause. It
would stand reason on its head to allow MEAM to dictate
filed this action in Mississippi, Big Rivers must petition to
the choice of forum for arbitration by seeking to avoid
compel arbitration in Mississippi, and that the Mississippi
arbitration. The district court did not abuse its discretion
district court erred when it did not compel the arbitration
in refusing to enjoin Big Rivers.
MEAM seeks to avoid to be held in Mississippi. MEAM
hopes its contract action established Mississippi as the
The orders appealed from are
forum for arbitration by clarifying the arbitration clause
which does not specify the forum in which arbitration is
AFFIRMED.
to be held. But MEAM's action is an attempt to avoid its
contractual obligation to arbitrate. See Southland Corp.
v. Keating, 465 U.S. 1, 104 S.Ct. 852, 856, 79 L.Ed.2d 1 All Citations
(1984). Indeed, in opposing Big Rivers' section 3 motion
to stay pending arbitration, MEAM has asserted that 804 F.2d 338
Footnotes
1 MEAM also asserts that the district court erred in failing to rule on Big Rivers' motion to dismiss. MEAM expressly
requested the district court to rule on this motion and the district court declined. Given its actions in staying the proceedings
pending arbitration, the district court did not abuse its discretion.
2 Section 3 provides:
If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration
under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that
the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application
of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of
the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.
In relevant part, section 4 provides:
A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for
arbitration may petition any United States district court which, save for such agreement, would have jurisdiction
under Title 28, in a civil action or in admiralty of the subject matter of a suit arising out of the controversy between
the parties, for an order directing that such arbitration proceed in the manner provided for in such agreement. Five
days' notice in writing of such application shall be served upon the party in default. Service thereof shall be made
in the manner provided by the Federal Rules of Civil Procedure. The court shall hear the parties, and upon being
satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, the court
shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement.
The hearing and proceedings, under such agreement, shall be within the district in which the petition for an order
directing such arbitration is filed.

Myers v. Rosenberg, Not Reported in F.Supp. (1986)
1986 WL 3329
here accepted a judicial decision in his favor on a motion

to dismiss the securities count. Unlike the defendant in
1986 WL 3329
Dickinson, defendant here has confined neither his motion
to dismiss nor his discovery to “non-arbitrable” claims.
And while the defendant may have had reservations
N.D. Illinois, Eastern Division.
concerning the arbitrability of the Securities Act claim,
Nancy MYERS, Plaintiff, he expressed no reason for postponing his request for
v. arbitration of certain pendent state claims.
Robert ROSENBERG, Defendant.
Unlike in Dickinson, here the delay pending the motion
No. 83 C 1342. to compel arbitration did not arise from “good faith
| efforts to resolve the controversy without reference to an
March 7, 1986. adjudicatory body.” Indeed there is little question that had
defendant's motion to dismiss been granted by this Court,
the defendant would not now attempt to insist upon his
MEMORANDUM OPINION AND ORDER arbitration “right”. Having actively sought adjudication
of claims including those subject to the arbitration
PARSONS, District Judge. agreement, the defendant should not now attempt to
recant from substantive arguments and discovery, and
*1 The defendant Rosenberg here presents the stand upon a boilerplate arbitration agreement. As the
interesting question of whether a defendant, after 2 Seventh Circuit concluded in Midwest Windows, supra, at
½ years of litigation, having filed an answer and a 537: the case has “gone too far with too much prejudice to
motion to dismiss, and having substantially engaged shift part of the responsibility for resolution elsewhere.”
in discovery, may thereafter seek to compel arbitration See also Barrantine v. Arkansas Best Freight System, Inc.,
of the claims all purportedly covered by a standard 450 U.S. 728, 101 S.Ct. 1427 (1981) at 744–5.
arbitration agreement. One of the claims sought to be
arbitrated alleges a violation of the Racketeer Influenced Furthermore, I cannot find that RICO claims are
and Corrupt Organizations Act (“RICO”), 18 U.S.C. § subject to arbitration agreements. While the defendant
1961 et seq.; the other claims allege a breach of fiduciary attempts to analogize civil RICO claims with the antitrust
duty owed to the plaintiff. The plaintiff's claim under the provisions of the Sherman Act, 15 U.S.C. § 1 et
Securities and Exchange Act of 1934, 15 U.S.C. § 78, has seq., the analogy is not persuasive for the purpose
already been dismissed by the Court. of determining the scope of an arbitration agreement.
RICO was enacted as part of the criminal code; not
It is well established that “a waiver of arbitration is not as a criminal provision of a civil code. Its purpose
lightly to be inferred.” See Midwest Window Systems, Inc. is to allow victims of a racketeering enterprise to act
v. Amcor Industries, Inc., 630 F.2d 535, 536 (7th Cir.1980); as true arms of the state. A plaintiff under RICO
Dickinson v. Heinold Securities, Inc., 661 F.2d 638 (1981). becomes, in essence, a civil prosecutor. The strict pleading
The court must determine whether the defaulting party requirements in this Circuit for effectively stating a
acted “inconsistently” with the arbitration right under the claim under RICO are designed to protect the innocent
totality of the circumstances. Dickinson, supra, at 641. defendant from the stigma attached to being publically
Delay alone will not constitute a waiver of arbitration labelled a criminal “racketeer”. This concern should
rights, nor are preliminary negotiations for settlement not be undermined by allowing a boilerplate arbitration
inconsistent with the right to arbitrate. agreement to circumvent this judicial protection.
However, when a party has “substantially invoked the *2 And while federal policy promotes arbitration, See: 9
litigation machinery”, waiver will be implied. E.C. Ernst, U.S.C. § 4, neither this policy not RICO itself reasonably
Inc. v. Manhattan Construction Co. of Texas, 559 F.2d contemplates the arbitration of criminal activity. As the
268 (5th Cir.1977). While the defendant here did not Supreme Court states in Mitsubishi Motors Corp. v. Soler
instigate the judicial process as the defendant did in Chrysler-Plymouth, 473 U.S. 614, 105 S.Ct. 3346 (July 2,
Midwest Window, like in Midwest Window the defendant

Myers v. Rosenberg, Not Reported in F.Supp. (1986)
1986 WL 3329
1985), “just as it is the congressional policy manifested in in which the policy towards arbitration is outweighed by
clear countervailing congressional intent and sound policy
the Federal Arbitration Act that requires courts liberally
reasons.
to construe the scope of arbitration agreements covered
by the Act, it is the congressional intention expressed in
Accordingly, the defendant's motion to compel
some other statute on which the courts must rely to identify
arbitration of the RICO count is denied, and arbitration
any category of claims as to which agreements to arbitrate
as to both counts is deemed waived.
will be held unenforceable.” Id. at 3355. (emphasis added)
Here the statutory intent to provide judicial protection to
the litigants, while not expressly stated, is clearly manifest All Citations
by RICO's placement in the criminal code and by its
legislative history. Under Mitsubishi, then, this is a case Not Reported in F.Supp., 1986 WL 3329

NCP Finance Ltd. Partnership v. Escatiola, 350 S.W.3d 152 (2011)
for violation of the Deceptive Trade

Practices Act, and violation of the Credit
350 S.W.3d 152
Services Organization Act, where the parties'
arbitration agreement expressly assigned
San Antonio.
“any dispute about the validity, effect or
NCP FINANCE LIMITED PARTNERSHIP enforceability of the prohibitions against class
and NMCapital, Inc., Appellants, proceedings” to the trial court, not the
v. arbitrator. V.T.C.A. Bus. & C., § 17.41 et seq.
Humberto ESCATIOLA, Appellee. Cases that cite this headnote
No. 04–10–00644–CV.
April 27, 2011. Disputes and Matters Arbitrable Under
Agreement
Synopsis
Lender was entitled to compel individual
Background: On behalf of a purported class, borrower
arbitration of borrower's purported class
sued credit services organization and lender for usury,
action claims for violation of the Deceptive
violation of the Deceptive Trade Practices Act, and
Trade Practices Act, and violation of the
violation of the Credit Services Organization Act. Lender
Credit Services Organization Act, where the
filed a motion to compel individual arbitration, to strike
parties' arbitration agreement committed any
borrower's request for class action certification, and to
claim, which it defined as any legal dispute
stay the litigation pending completion of arbitration.
between borrower, on the one hand, and credit
The 150th Judicial District Court, Bexar County,
services organization and/or lender, on the
Antonia Arteaga, J., denied lender's motion to compel
other hand, to the arbitrator, and the clear
individual arbitration and permitted borrower to seek
language of the parties' agreement expressly
class certification before the arbitrator. Lender appealed.
forbade class certification in arbitration.
V.T.C.A. Bus. & C., § 17.41 et seq.
Holdings: The Court of Appeals, Sandee Bryan Marion, 1 Cases that cite this headnote
J., held that:
[1] trial court was required to rule on lender's motion to

compel individual arbitration, and Attorneys and Law Firms
[2] lender was entitled to compel individual arbitration of *152 Bryan James Wick, Jeffrey Wallace Hellberg Jr.,
borrower's claims. Wick Phillips, LLC, Dallas, TX, for Appellants.
John Steven Dwyre, John Dwyre & Associates, San

Reversed and remanded. Antonio, TX, for Appellee.
Sitting: SANDEE BRYAN MARION, Justice,

REBECCA SIMMONS, Justice, STEVEN C. HILBIG,
West Headnotes (2) Justice.

OPINION
Trial court was required to rule on lender's Opinion by: SANDEE BRYAN MARION, Justice.
motion to compel individual arbitration of
borrower's purported class actions claims

In this accelerated appeal, appellants, NCP Finance

Limited Partnership and NMCapital, Inc. (collectively The arbitration agreement commits any “claim,” which
“NCP”), appeal from the trial court's order on their it defines as “any legal dispute between [Escatiola],
motion to compel individual arbitration and stay on the one hand, and ACE and/or [NCP], on the
litigation pending arbitration. We reverse and remand. other hand,” to the arbitrator. However, the arbitration
agreement also states: “[A]ny dispute about the validity,
effect or enforceability of the prohibitions against class
proceedings, private attorney general proceedings and/
*153 BACKGROUND or multiple-party proceedings ... shall be resolved by a
court and not by an arbitrator or arbitration administrator
ACE Credit Service, LLC (“ACE”) is a registered Texas
” (emphasis added). Escatiola refinanced the loan three
credit services organization, and NMCapital is an out-of-
times over the next two months, and he signed identical
state lender and a general partner of NCP Finance Limited
arbitration agreements on each occasion.
Partnership, a Texas limited partnership. On February
16, 2008, appellee, Humberto Escatiola, obtained a loan
On behalf of a purported class, Escatiola sued ACE and
from NCP through credit services provided by ACE. On
NCP for usury, violation of the Texas Deceptive Trade
that same date, Escatiola, ACE, and NCP signed a credit
Practices Act, and violation of the Texas Credit Services
services agreement, a loan agreement, a promissory note,
Organization Act. NCP filed a motion in the trial court to
and an arbitration agreement. The arbitration agreement
compel individual arbitration, to strike Escatiola's request
states:
for class action certification, and to stay the litigation
[U]pon the election of either pending completion of arbitration. The trial court's order
[Escatiola], [ACE] ..., or [NCP] ..., on the motion reads, in part: “IT IS ... ORDERED THAT
any legal dispute between [NCP's] Motion as to individual arbitration is denied and
[Escatiola], on the one hand, that the case shall proceed in arbitration and [Escatiola]
and ACE and/or [NCP], on the may seek class certification therein.” The trial court stayed
other hand, will be resolved the litigation and appointed an arbitrator.
by binding arbitration.... (1) NO
PARTY MAY PARTICIPATE On appeal, NCP argues the trial court was required to
IN A CLASS ACTION IN grant the motion as to individual arbitration because (a)
COURT OR IN CLASS– the parties' arbitration agreement specifically prohibits
WIDE ARBITRATION ...; (2) class arbitration, and (b) the United States Supreme
NO PARTY MAY ACT Court recently ruled in Stolt–Nielsen S.A. v. AnimalFeeds
AS A PRIVATE ATTORNEY International Corp. that class arbitration may not be
GENERAL IN COURT OR IN compelled absent express agreement of the parties.
AN ARBITRATION; (3) CLAIMS
BROUGHT BY OR AGAINST
[ESCATIOLA] MAY NOT BE DISCUSSION
JOINED OR CONSOLIDATED
WITH CLAIMS BROUGHT [1] Several years ago, the United States Supreme Court
BY OR AGAINST ANY held that whether an arbitration agreement forbids a class
OTHER PERSON; AND (4) action is a question for the arbitrator, not the trial court,
THE ARBITRATOR SHALL to decide. Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444,
HAVE NO AUTHORITY TO 452, 123 S.Ct. 2402, 156 L.Ed.2d 414 (2003) (plurality
CONDUCT A CLASS–WIDE opinion). In Green Tree, Lynn and Burt Bazzle (“the
ARBITRATION, PRIVATE Bazzles”) obtained a home improvement loan from Green
ATTORNEY GENERAL Tree *154 Financial Corporation (“Green Tree”). Id. at
ARBITRATION OR MULTIPLE– 447, 123 S.Ct. 2402. The Bazzles and Green Tree signed
PARTY ARBITRATION. a contract, which included this arbitration clause: “ ‘All
disputes, claims, or controversies arising from or relating

to this contract or the relationships which result from could seek class certification in arbitration. Id. The court
this contract ... shall be resolved by binding arbitration of appeals issued a writ of mandamus directing the
by one arbitrator selected by [Green Tree] with consent trial court to vacate its second order and determine
of [the Bazzles].’ ” Id. at 448, 123 S.Ct. 2402 (emphasis whether the parties' agreement permitted class arbitration.
in original). The Bazzles subsequently sued Green Tree Id. However, the Texas Supreme Court concluded the
in South Carolina state court for violation of the South decision in Green Tree was “directly on point” and held
Carolina Consumer Protection Code and asked the trial the court of appeals erred in directing the trial court
court to certify their claim as a class action. Id. at 449, to determine the class certification issue. Id. at 369–
123 S.Ct. 2402. The trial court certified a class and entered 70. According to the unanimous Texas Supreme Court,
an order compelling arbitration. Id. Affirming the trial “when the contracts at issue commit[ ] all disputes arising
court's order, the South Carolina Supreme Court held out of the agreement to the arbitrator,” the arbitrator
class arbitration was authorized because the contract was must decide class certification issues. Id. at 368.
silent on the matter. Id. at 450, 123 S.Ct. 2402.
Recently, a majority of the United States Supreme
A plurality of the United States Supreme Court vacated Court recognized Green Tree did not garner a majority
the South Carolina Supreme Court's ruling, holding on the question of whether the trial court or the
that in certain limited circumstances, courts must decide arbitrator must decide class certification questions. *155
“gateway” arbitration-related matters, “such as whether Stolt–Nielsen, ––– U.S. ––––, 130 S.Ct. 1758, 1772,
the parties have a valid arbitration agreement at all or 176 L.Ed.2d 605 (2010). However, the Stolt–Nielsen
whether a concededly binding arbitration clause applies to majority declined to resolve this unsettled question
a certain type of controversy.” Id. at 452, 123 S.Ct. 2402. because the parties' agreement expressly assigned the class
However, the Court concluded the question involved certification question to the arbitration panel. Id. Instead,
in Green Tree—whether the parties' contract forbade the Court turned to the question the Green Tree Court did
class arbitration—did not fall into that narrow exception not address—the standard to be applied when determining
because it concerned neither the validity of the arbitration whether a contract permits class arbitration. Id. The Court
clause nor the clause's applicability to the underlying held that “a party may not be compelled ... to submit
dispute. Id. According to the Court, whether the parties' to class arbitration unless there is a contractual basis for
contract forbade class arbitration was a question of what concluding that the party agreed to do so.” Id. at 1775
kind of arbitration the parties agreed to—a matter of (emphasis in original). Because the parties conceded their
contract interpretation and arbitration procedures. Id. at agreement was silent on the matter of class certification,
452–53, 123 S.Ct. 2402. Given that “[a]rbitrators are well the Court found the arbitration panel's certification of
suited to answer” questions of contract interpretation, and a class “fundamentally at war with the foundational ...
that the parties' contract contained “sweeping language principle that arbitration is a matter of consent.” Id.
concerning the scope of the questions committed to
arbitration,” the Court held the matter should be decided Here, the arbitration agreement expressly assigns “any
by the arbitrator, not the trial court. Id. at 453, 123 S.Ct. dispute about the validity, effect or enforceability of the
2402. prohibitions against class proceedings” to the trial court,
not the arbitrator. Accordingly, because the contract at
Expressly relying upon the United States Supreme Court's issue here did not commit all disputes to the arbitrator,
ruling in Green Tree, the Texas Supreme Court also held but rather expressly assigned disputes involving the class
the arbitrator, not the trial court, must rule on class action waiver provision to the trial court, the trial
certification issues. In re Wood, 140 S.W.3d 367, 368 court was required to rule on NCP's motion to compel
(Tex.2004) (per curiam). In Wood, an attorney and three individual arbitration.
of his clients signed fee agreements providing that all
disputes arising from the agreements would be submitted [2] Turning to whether the trial court's denial of NCP's
to binding arbitration. Id. When the clients sued the motion was correct in light of recent precedent, we
attorney over a fee dispute, the trial court ordered the must conclude it was not. The clear language of the
case to arbitration and signed a second order specifically parties' agreement expressly forbids class certification in
authorizing the arbitrator to decide whether the clients arbitration. Because the United States Supreme Court

recently held in Stolt–Nielsen that a party cannot be We reverse the trial court's order and remand this matter
to the trial court for proceedings consistent with this
compelled to submit to class arbitration absent its express
opinion.
consent, the trial court erred by denying NCP's motion to
compel individual arbitration and by permitting Escatiola
to seek class certification before the arbitrator. All Citations
350 S.W.3d 152

CONCLUSION

Perry Homes v. Cull, 258 S.W.3d 580 (2008)
51 Tex. Sup. Ct. J. 819
KeyCite Yellow Flag - Negative Treatment Judgment of Court of Appeals reversed, arbitration award
Distinguished by RSL Funding, LLC v. Pippins, Tex., July 1, 2016 vacated, and case remanded.
258 S.W.3d 580
Supreme Court of Texas. O'Neill, J., concurred and filed opinion.
PERRY HOMES, A Joint Venture, Home Johnson, J., concurred in part, dissented in part, and filed
Owners Multiple Equity, Inc., and Warranty opinion in which Jefferson, C.J., and Green, J., joined.
Underwriters Insurance Company, Petitioners,
v. Willett, J., concurred in part, dissented in part, and filed
Robert E. CULL and S. Jane Cull, Respondents. opinion.
No. 05–0882.
|
Argued March 20, 2007. West Headnotes (42)
|
Delivered May 2, 2008. [1] Alternative Dispute Resolution
| Suing or participating in suit
Rehearing Denied Aug. 29, 2008.
A party can not substantially invoke
Synopsis the litigation process and then switch to
Background: Homeowners moved to confirm arbitration arbitration on the eve of trial.
award against home builder and warranty companies
on faulty construction claim. The 236th District Court,
Tarrant County, Thomas Wilson Lowe III, J., granted
motion. Defendants appealed. The Fort Worth Court of [2] Alternative Dispute Resolution
Appeals, 173 S.W.3d 565, affirmed as modified to delete Evidence
duplicative interest. Defendants' petitioned for review. There is a strong presumption against waiver
of arbitration, but it is not irrebuttable.

Holdings: The Supreme Court, Brister, J., held that:
[1] order compelling arbitration could be reviewed post- [3] Courts

arbitration; Operation and effect in general
Appellate courts' denial, without comment,
[2] waiver of arbitration by litigation conduct is an issue of home builder and warranty companies'
for the courts, rather than arbitrators; petitions for mandamus relief from trial
court order compelling arbitration of
[3] waiver of arbitration by litigation conduct must be faulty construction claim did not foreclose
decided on a case-by-case basis, and courts should look to Supreme Court's review of order compelling
the totality of the circumstances; arbitration, on appeal from confirmation of
arbitration award.
[4] waiver of arbitration requires a showing of prejudice;
[5] homeowners substantially invoked the litigation
process to defendants' prejudice and, thus, waived
[4] Mandamus
arbitration; and
Remedy by Appeal or Writ of Error
[6] warranty companies also waived arbitration.

51 Tex. Sup. Ct. J. 819
Mandamus is only available when a final

appeal would be inadequate. [10] Alternative Dispute Resolution
3 Cases that cite this headnote Alternative Dispute Resolution
[5] Alternative Dispute Resolution Arbitrators generally must decide defenses
Scope and Standards of Review that apply to the whole contract, while
Trial court order compelling arbitration could courts decide defenses relating solely to the
be reviewed post-arbitration. arbitration clause; thus, arbitrators must
decide if an entire contract was fraudulently
9 Cases that cite this headnote induced, while courts must decide if an
arbitration clause was.
[6] Appeal and Error 10 Cases that cite this headnote
Parties waive nothing by foregoing
interlocutory review and awaiting a final
judgment to appeal.
Waiver of arbitration by litigation conduct
1 Cases that cite this headnote must be decided on a case-by-case basis, and
courts should look to the totality of the
circumstances.
Decisions reviewable; finality 15 Cases that cite this headnote
Courts may review an order compelling
arbitration if the order also dismisses the
underlying litigation so it is final rather than
interlocutory.
3 Cases that cite this headnote was not ruled out solely because plaintiffs,
who moved to compel arbitration, did not ask
the court to make any judicial decisions on the
merits of their faulty construction claim; while
that was a factor to consider, it was not the
Alternative Dispute Resolution only one.
Scope and Standards of Review
Courts conduct ordinary review of a trial 1 Cases that cite this headnote
court's initial referral to arbitration and
deferential review only of the arbitrator's final [13] Alternative Dispute Resolution
award. Suing or participating in suit
3 Cases that cite this headnote Waiver of arbitration by litigation conduct
involves substantial invocation of the judicial
process, not just judgment on the merits.
Waiver, laches, or estoppel 10 Cases that cite this headnote
Waiver of arbitration by litigation conduct is
an issue for the courts, rather than arbitrators. [14] Alternative Dispute Resolution

51 Tex. Sup. Ct. J. 819
Parties may file suit in order to compel turning around and seeking arbitration with
arbitration. V.T.C.A., Civil Practice & the spoils.
Remedies Code § 171.021(a).

[15] Alternative Dispute Resolution Contractual or consensual basis
Suing or participating in suit The answers to most questions regarding
While whether the party who moves to compel arbitration flow inexorably from the fact that
arbitration is the plaintiff or the defendant arbitration is simply a matter of contract
is a factor to consider in determining waiver between the parties.
of arbitration by litigation conduct, it does
not alone justify a finding of waiver or 8 Cases that cite this headnote
change the basic nature of the totality-of-the-
circumstances test. [20] Alternative Dispute Resolution
Waiver or Estoppel
Like any other contract right, arbitration can
be waived if the parties agree instead to resolve
[16] Alternative Dispute Resolution a dispute in court.
How much litigation conduct will be 6 Cases that cite this headnote
“substantial,” for purposes of rule that a party
waives arbitration by substantially invoking [21] Alternative Dispute Resolution
the judicial process to the other party's Waiver or Estoppel
prejudice, depends very much on the context;
Waiver of arbitration can be implied from a
three or four depositions may be all the
party's conduct, although that conduct must
discovery needed in one case, but purely
be unequivocal, and in close cases, the strong
preliminary in another.
presumption against waiver should govern.
[17] Estoppel
[22] Estoppel
Nature and Application of Estoppel in
Pais
Waiver is essentially unilateral in its character
Estoppel is a defensive theory barring parties
and no act of the party in whose favor it is
from asserting a claim or defense when
made is necessary to complete it.
their representations have induced action or
forbearance of a definite and substantial 1 Cases that cite this headnote
character and injustice can be avoided only by
enforcement.
[23] Estoppel
3 Cases that cite this headnote Prejudice to person setting up estoppel
Estoppel includes a prejudice requirement.
[18] Alternative Dispute Resolution Cases that cite this headnote
A party who enjoys substantial direct benefits
by gaining an advantage in the pretrial
Waiver or Estoppel
litigation process should be barred from

51 Tex. Sup. Ct. J. 819
Waiver of arbitration requires a showing of

prejudice. 33 Cases that cite this headnote

Waiver or Estoppel
[25] Alternative Dispute Resolution A party should not be allowed purposefully
Suing or participating in suit and unjustifiably to manipulate the exercise
Homeowners who filed action claiming of its arbitral rights simply to gain an unfair
faulty construction substantially invoked tactical advantage over the opposing party.
the litigation process to home builder
and warranty companies' prejudice and, 8 Cases that cite this headnote
thus, waived arbitration clause in warranty
agreement, where homeowners vigorously [30] Alternative Dispute Resolution
opposed arbitration in their pleadings and in Suing or participating in suit
open court, then requested hundreds of items
Under the Federal Arbitration Act,
of merits-based information and conducted
“prejudice” relates to inherent unfairness; that
months of discovery under the rules of court,
is, a party's attempt to have it both ways by
and finally, only four days before the trial
switching between litigation and arbitration
setting, changed their minds and decided they
to its own advantage. 9 U.S.C.A. § 1 et seq.
would prefer to arbitrate after all.

Abuse of discretion
Every abuse-of-discretion review is not
Under the totality-of-the-circumstances test,
identical because a trial judge's discretion may
discovery is not the only measure of waiver of
be applied to scores of situations and in many
arbitration by litigation conduct.
different ways.

Applicant's default, delay, or laches
The rule that one can not wait until the eve of
The totality-of-the-circumstances test for
trial to request arbitration is not limited to the
determining waiver of arbitration by litigation
evening before trial; it is a rule of proportion.
conduct presumes a multitude of potential
6 Cases that cite this headnote factors and a balancing of evidence on either
side.

For purposes of a waiver of an arbitration [33] Appeal and Error
agreement, “prejudice” refers to the inherent Power to Review
unfairness in terms of delay, expense, or
Under a proper abuse-of-discretion review,
damage to a party's legal position that occurs
waiver is a question of law for the court, and
when the party's opponent forces it to litigate
an appellate court does not defer to the trial
an issue and later seeks to arbitrate that same
court on questions of law.
issue.

51 Tex. Sup. Ct. J. 819

[34] Appeal and Error Prejudice, as required to establish waiver of

Sufficiency of Evidence in Support arbitration by litigation conduct, should be
easier to show against a party that initially
Appellate court defers to a trial court's factual
opposed arbitration than against one who
findings if they are supported by evidence.
sought it from the start.

Discovery and depositions
Arbitrators have almost unbridled discretion
A party who requests lots of discovery is not
regarding discovery.
prejudiced, as required to establish waiver of
1 Cases that cite this headnote arbitration by litigation conduct, by getting
it and taking it to arbitration in the same
way that a party who produces lots of
[36] Alternative Dispute Resolution discovery outside the stricter discovery limits
Suing or participating in suit in arbitration.
Defendants asserting that plaintiffs waived
their right to arbitration had to show 14 Cases that cite this headnote
substantial invocation of the litigation process
that prejudiced them, not precisely how much [41] Alternative Dispute Resolution
it all was. Suing or participating in suit
5 Cases that cite this headnote Warranty companies that originally
requested arbitration of homeowners' faulty
construction claim waived arbitration by
[37] Alternative Dispute Resolution extensively co-participating in months of
Trial or hearing discovery.
Referral to arbitration should be decided
summarily with the evidence limited to Cases that cite this headnote
disputed facts. V.T.C.A., Civil Practice &
Remedies Code § 171.021(b). [42] Alternative Dispute Resolution
for review
Fact that the only objection to trial
[38] Alternative Dispute Resolution court's order compelling arbitration was
Remedies and Proceedings for signed by home builder's attorneys, not
Enforcement in General co-defendant warranty companies, did not
The amount of discovery needed to show preclude warranty companies from objecting
prejudice, for purposes of rule that a party to arbitration on appeal from confirmation
waives arbitration by substantially invoking of arbitration award, where, in the motion
the judicial process to the other party's objecting to order compelling arbitration
prejudice, will vary depending on what the and at the hearing held on it, home
other circumstances are. builder's attorneys represented that they were
authorized to do so on behalf of all the
defendants; if the homeowners wanted to

51 Tex. Sup. Ct. J. 819
question home builder's attorneys' authority The Plaintiffs argue—and we agree—that sending them
to speak for the warranty companies, they back to the trial court not only deprives them of a
should have done so by sworn motion. substantial award but also wastes the time and money
spent in arbitration. But they knew of this risk when
1 Cases that cite this headnote they requested arbitration at the last minute because all
of the Defendants objected. Accordingly, we vacate the
arbitration award and remand the case to the trial court
for a prompt trial.
*584 Geoffrey H. Bracken, Gardere Wynne Sewell,

L.L.P., Houston, TX, Stacy R. Obenhaus, Gardere I. Background
Wynne Sewell LLP, Dallas, TX, Kent Hance, Hance
In 1996, Robert and Jane Cull bought a house
Scarborough Wright Woodward & Weisbart LLP,
from Perry Homes for $233,730. They also bought a
Austin, TX, Gary W. Javore, Johnson Cristopher Javore
warranty from Home Owners Multiple Equity, Inc.
& Cochran, Inc., San Antonio, TX, for Petitioners.
and Warranty Underwriters Insurance Company. The
Thomas M. Michel, Griffith, Jay, & Michel LLP, Fort warranty agreement included a broad arbitration clause
Worth, TX, Evan (Van) Lane Shaw, Law Offices of Van providing that all disputes the Culls might have against
Shaw, Dallas, TX, for Respondent. Perry Homes or the warranty companies were subject to
the Federal Arbitration Act, and would be submitted to
M. Scott Norman Jr., Texas Association of Builders, the American Arbitration *585 Association (AAA) or
Austin, TX, for Amicus Curiae. another arbitrator agreed upon by the parties. 4
Opinion
Over the next several years, the home suffered serious
Justice BRISTER delivered the opinion of the Court, structural and drainage problems. According to the Culls,
in which Justice HECHT, Justice O'NEILL, Justice the Defendants spent more effort shifting blame than
WAINWRIGHT, and Justice MEDINA joined, and repairing the home. When the Culls sued in October
in which Chief Justice JEFFERSON, Justice GREEN, 2000, the warranty companies (but not Perry Homes)
Justice JOHNSON, and Justice WILLETT joined as to immediately requested arbitration; the Culls vigorously
parts I–V. opposed it, and no one ever pressed for a ruling. At the
same time, the Culls' attorneys began seeking extensive
[1] [2] Since 1846, Texas law has provided that parties discovery from all of the Defendants.
to a dispute may choose to arbitrate rather than litigate. 1
But that choice cannot be abused; a party cannot After most of the discovery was completed and the case
substantially invoke the litigation process and then switch was set for trial, the Culls changed their minds about
2
to arbitration on the eve of trial. There is a strong litigating. Instead they asked the trial court to compel
arbitration under precisely the same clause and conditions
presumption against waiver of arbitration, 3 but it is not
to which they had originally objected. The trial judge
irrebuttable and was plainly rebutted here. The Plaintiffs
expressed reservations, saying:
vigorously opposed (indeed spurned) arbitration in their
pleadings and in open court; then they requested hundreds I really have a problem with people
of items of merits-based information and conducted who have competent counsel who
months of discovery under the rules of court; finally wait 14 months and after all this
only four days before the trial setting they changed their much effort in the courthouse has
minds and decided they would prefer to arbitrate after taken place, to come in and say
all. Having gotten what they wanted from the litigation that they have not waived that
process, they could not switch to arbitration at the last arbitration. That arbitration clause
minute like this. was there when the lawsuit was filed.

51 Tex. Sup. Ct. J. 819
subsequent appeal.” 7 Mandamus is only available when a

Nevertheless, the trial court ordered arbitration because
the Defendants had not shown any prejudice from final appeal would be inadequate; 8 if filing for mandamus
litigation conduct: precluded a final appeal, that requirement would be self-
fulfilling. Because the earlier proceedings here were denied
[A]ll I have heard from [defense without comment on the merits, they do not foreclose our
counsel] insofar as what is the review.
prejudice suffered by people you
represent is that they have [5] [6] Second, the Culls argue that an order compelling
participated in litigation activities arbitration can only be reviewed before arbitration occurs.
that may or may not have been The Culls address none of the cases in which this Court
required by the arbitrator. So and the United States Supreme Court have reviewed such
without anything further, I am going orders after arbitration. 9 Nor do they address the general
to grant the motion to abate the case rule that parties waive nothing by foregoing interlocutory
for arbitration.
review and awaiting a final judgment to appeal. 10
The order was signed December 6, 2001, four days before
the case was set for trial. The Defendants filed petitions [7] But most important, the Culls do not address
for mandamus in the court of appeals and this Court, both section 16 of the Federal Arbitration Act, which expressly
prohibits pre-arbitration appeals:
of which were denied without opinion within a few days. 5
Except as otherwise provided in
After a year in arbitration, on December 24, section 1292(b) of title 28 [providing
2002, the arbitrator awarded the Culls $800,000, for certified questions to federal
including restitution of the purchase price of their circuit courts], an appeal may not
home ($242,759), mental anguish ($200,000), exemplary be taken from an interlocutory
damages ($200,000), and attorney's fees ($110,000). The order ... directing arbitration to
Defendants moved to vacate the award, again arguing proceed under section 4 of this title
(among other things) that the case should never have been [providing for orders compelling
sent to arbitration after so much activity in court. The trial
arbitration].... 11
court overruled the objection, confirmed the award, and
added post-judgment interest duplicating that already in
the award; the court of appeals affirmed after deleting the This ban on interlocutory appeals of orders compelling
arbitration was added by Congress in 1988 to prevent
duplicative interest. 6 We granted the Defendants' petition
to consider whether the arbitration award should be set arbitration from bogging down in preliminary appeals. 12
aside because the Culls waived their right to arbitration. We have held that routine mandamus review of such
orders in state court would frustrate this federal law. 13
*587 [8] The Culls assert that post-arbitration review is

II. When Should Orders Compelling
unavailable because an arbitration award can be vacated
Arbitration Be Reviewed?
only for statutory grounds like corruption, fraud, or
[3] [4] At the outset, the Culls assert it is too late evident partiality. 14 But reviewing the trial court's initial
to review the trial court's order referring this case referral to arbitration is not the same as reviewing the
to arbitration. First, they argue the pre-arbitration arbitrator's final award; as the United States Supreme
mandamus proceedings establish the law of the case Court has held, courts conduct ordinary review of the
*586 and preclude the Defendants from raising the former and deferential review only of the latter. 15
same arguments now. We recently rejected this argument,
holding that as mandamus is a discretionary writ, “its We agree that post-arbitration review of referral may
denial, without comment on the merits, cannot deprive create (as the Culls allege) a “huge waste of the
another appellate court from considering the matter in a parties' resources.” But if review is available before

51 Tex. Sup. Ct. J. 819
arbitration, parties may also waste resources appealing for the NASD arbitrator because “the NASD arbitrators,
every referral when a quick arbitration might settle the comparatively more expert about the meaning of their
matter. Frequent pre-arbitration review would inevitably own rule, are comparatively better able to interpret and to
frustrate Congress's intent “to move the parties to an apply it.” 24 By contrast, when waiver turns on conduct in
arbitrable dispute out of court and into arbitration as court, the court is obviously in a better position to decide
quickly and easily as possible.” 16 We recognize the whether it amounts to waiver. 25 “Contracting parties
potential for waste, but that is a risk a party must take would expect the court to decide whether one party's
if it moves for arbitration after substantially invoking the
conduct before the court waived the right to arbitrate.” 26
litigation process.
*589 Third, as the Howsam Court itself stated, parties

generally intend arbitrators to decide matters that “grow
III. Do Courts or Arbitrators Decide Waiver? out of the dispute and bear on its final disposition,” while
they intend courts to decide gateway matters regarding
[9] The Culls also assert that waiver of arbitration by “whether the parties have submitted a particular dispute
litigation conduct is an issue to be decided by arbitrators
to arbitration.” 27 Waiver of a substantive claim or
rather than courts. To the contrary, this Court and the
delay beyond a limitations deadline could affect final
federal courts have held it is a question of law for the
disposition, but waiver by litigation conduct affects only
court. 17 Rather than referring such claims to arbitrators,
the gateway matter of where the case is tried. 28
we have decided them ourselves at least eight times, 18 as
does every federal circuit court. 19 [10] Finally, arbitrators generally must decide defenses
that apply to the whole contract, while courts decide
*588 The Culls argue this was all changed in 2002 by defenses relating solely to the arbitration clause. 29 Thus,
Howsam v. Dean Witter Reynolds, in which the United for example, arbitrators must decide if an entire contract
States Supreme Court said the “presumption is that the was fraudulently induced, while courts must decide if an
arbitrator should decide ‘allegation[s] of waiver, delay, or
arbitration clause was. 30 As waiver by litigation conduct
a like defense to arbitrability.’ ” 20 For several reasons, goes solely to the arbitration clause rather than the whole
we disagree that this single sentence changed the federal contract, consistency suggests it is an issue for the courts.
arbitration landscape.
Every federal circuit court that has addressed this issue
First, “waiver” and “delay” are broad terms used in since Howsam has continued to hold that substantial
many different contexts. Howsam involved the National invocation of the litigation process is a question for
Association of Securities Dealers' six-year limitations the court rather than the arbitrator—including the
period for arbitration claims, not waiver by litigation
First, 31 Third, 32 Fifth, 33 and Eighth Circuits. 34 Legal
conduct; indeed, it does not appear the United States
Supreme Court has ever addressed the latter kind of commentators appear to agree. 35 So do we.
waiver. Although the federal courts do not defer to
arbitrators when waiver is a question of litigation conduct,
they consistently do so when waiver concerns limitations IV. When Is the Litigation Process Substantially Invoked?
21
periods or waiver of particular claims or defenses. As
22 We have said on many occasions that a party waives
Howsam involved the latter rather than the former, its
an arbitration clause by substantially *590 invoking
reference to waiver must be read in that context.
the judicial process to the other party's detriment or
Second, the Howsam court specifically stated that “parties prejudice. 36 Due to the strong presumption against
to an arbitration contract would normally expect a waiver of arbitration, this hurdle is a high one. 37 To date,
forum-based decisionmaker to decide forum-specific we have never found such a waiver, holding in a series of
procedural gateway matters.” 23 Thus, the NASD's six- cases that parties did not waive arbitration by:
year limitations rule in that case was a gateway matter

51 Tex. Sup. Ct. J. 819
• filing suit; 38 • how much pretrial activity related to the merits rather
than arbitrability or jurisdiction; 51
39
• moving to dismiss a claim for lack of standing;
• how much time and expense has been incurred in
• moving to set aside a default judgment and requesting litigation; 52
40
a new trial;
• whether the movant sought or opposed arbitration
• opposing a trial setting and seeking to move the earlier in the case; 53
litigation to federal court; 41
• whether the movant filed affirmative claims or
• moving to strike an intervention and opposing dispositive motions; 54
42
discovery;
• what discovery would be unavailable in arbitration; 55
• sending 18 interrogatories and 19 requests for
production; 43 • whether activity in court would be duplicated in
arbitration; 56 and
• requesting an initial round of discovery, noticing (but
not taking) a single deposition, and agreeing to a trial • when the case was to be tried. 57
resetting; 44 or Of course, all these factors are rarely presented in a single
case. Federal courts have found waiver based on a few, or
• seeking initial discovery, taking four depositions, and
even a single one. 58
moving for dismissal based on standing. 45
These cases well illustrate the kind of conduct that falls [11] We agree waiver must be decided on a case-by-
short. But because none amounted to a waiver, they are case basis, and that courts should look to the totality of
less instructive about what conduct suffices. We have the circumstances. Like the federal courts, this Court has
stated that “allowing a party to conduct full discovery, file considered factors such as:
motions going to the merits, and seek arbitration only on
the eve of trial” would be sufficient. 46 But what if (as in • when the movant knew of the arbitration clause; 59
this case) only two out of these three are met? And how
much is “full discovery”?
*592 • how much discovery has been conducted; 60
We begin by looking to the standards imposed by
the federal courts. They decide questions of waiver by • who initiated it; 61
applying a totality-of-the-circumstances test on a case-by-
• whether it related to the merits rather than arbitrability
case basis. 47 In doing so, they *591 consider a wide
variety of factors including: or standing; 62
• how much of it would be useful in arbitration; 63 and

• whether the movant was plaintiff (who chose to file in
court) or defendant (who merely responded); 48 • whether the movant sought judgment on the merits. 64
[12] [13] Thus, we disagree with the court of appeals that
• how long the movant delayed before seeking waiver is ruled out in this case solely because the Culls “did
arbitration; 49 not ask the court to make any judicial decisions on the
merits of their case.” 65 While this is surely a factor, 66 it is
• whether the movant knew of the arbitration clause all not the only one. Waiver involves substantial invocation
along; 50 of the judicial process, not just judgment on the merits.

51 Tex. Sup. Ct. J. 819
[14] [15] We also disagree with the Defendants although that conduct must be unequivocal. 77 And in
that different standards should apply to plaintiffs and close cases, the “strong presumption against waiver”
defendants. As parties may begin arbitration without a
should govern. 78
court order, it is certainly relevant that a plaintiff chose
to file suit instead. But Texas procedure also contemplates
that parties may file suit in order to compel arbitration. 67
Thus, while the movant's status is a factor to consider, it V. Is a Showing of Prejudice Required?
does not alone justify a finding of waiver or change the
Although convinced that the Culls had substantially
basic nature of the totality-of-the-circumstances test. 68 invoked the litigation process, the trial court compelled
arbitration because the Defendants did not prove an
[16] We recognize, as we have noted before, “the arbitrator would not have allowed the same discovery.
difficulty of uniformly applying a test based on nothing “Even substantially invoking the judicial process does not
more than the totality of the circumstances.” 69 But waive a party's arbitration rights unless the opposing party
there appears to be no better test for “substantial proves that it suffered prejudice as a result.” 79 On at
invocation.” 70 As the United States Supreme Court least eight occasions, we have said prejudice is a necessary
has said about minimum contacts, tests based on requirement of waiver by litigation *594 conduct. 80
“reasonableness” are never susceptible to mechanical
application—“few answers will be written in black and [22] The Defendants ask us to reconsider this
white [;] [t]he greys are dominant *593 and even requirement. They point out that Texas law does not
among them the shades are innumerable.” 71 How much require a showing of prejudice for waiver, but only an
litigation conduct will be “substantial” depends very much intentional relinquishment of a known right. 81 Waiver “is
on the context; three or four depositions may be all the essentially unilateral in its character” and “no act of the
discovery needed in one case, 72 but purely preliminary in party in whose favor it is made is necessary to complete
another. 73 it.” 82 Thus, they argue we cannot impose a waiver rule for
arbitration contracts that does not apply to all others. 83
[17] [18] Moreover, this test is quite similar to
one we have long recognized and recently applied to We decline the Defendants' invitation based on both
arbitration—estoppel. Estoppel is a defensive theory federal and state law. The Defendants say the federal
barring parties from asserting a claim or defense when courts are split on the issue, but the split is not very wide.
their representations have induced “action or forbearance Of the twelve regional circuit courts, ten require a showing
of a definite and substantial character” and “injustice
of prejudice, 84 and the other two treat it as a factor
74
can be avoided only by enforcement.” In arbitration
to consider. 85 We have noted before the importance of
cases, we have held a nonparty who enjoys substantial
direct benefits from a contract may be estopped from keeping federal and state arbitration law consistent. 86
denying an arbitration clause in the same contract. 75 By

*595 [23] Under Texas law, waiver may not include
the same token, a party who enjoys substantial direct
a prejudice requirement, but estoppel does. In cases of
benefits by gaining an advantage in the pretrial litigation
waiver by litigation conduct, the precise question is not so
process should be barred from turning around and seeking
much when waiver occurs as when a party can no longer
arbitration with the spoils.
take it back. As noted above, Texas estoppel law does
not allow a party to withdraw a representation once the
[19] [20] [21] The answer to most questions regarding
other party takes “action or forbearance of a definite and
arbitration “flow inexorably from the fact that arbitration
substantial character.” 87 Using precisely the same terms,
is simply a matter of contract between the parties.” 76
the Restatement does not allow a party to withdraw an
Like any other contract right, arbitration can be waived
option contract when the offeree has taken substantial
if the parties agree instead to resolve a dispute in court.
Such waiver can be implied from a party's conduct, action based upon it. 88 In these contexts, prejudice is an
element of the normal contract rules.

51 Tex. Sup. Ct. J. 819
all persons they had studied under, and all reference

[24] Thus, we agree with the courts below that waiver of books or treatises in their libraries).
arbitration requires a showing of prejudice.
There is simply no question on this record that the Culls
conducted extensive discovery about every aspect of the
merits. 89
VI. Was Arbitration Waived Here?
[26] But under the totality-of-the-circumstances test,

A. Did the Culls Waive Arbitration? discovery is not the only measure of waiver. Here,
when the warranty defendants initially moved to compel
It remains only to apply these rules to this case. arbitration, the Culls filed a 79–page response opposing
it, asserting that the AAA “is incompetent, is biased, and
[25] Unquestionably, the Culls substantially invoked fails to provide fair and appropriate arbitration panels.”
the litigation process, as their conduct here far exceeds They complained of the AAA's fees, and asserted that as a
anything we have reviewed before. Before arbitration was result the “purported arbitration clause is unconscionable
ordered, the Culls did not deny taking ten depositions, and unenforceable, and this Court's enforcement of such
and the court's file (of which the trial judge took judicial would be nothing short of ridiculous and absurd.” This,
notice) included: plus their prayer asking the trial court to deny the motion
to compel arbitration “in its entirety,” belies the court of
• their initial objection to arbitration covering 79 pages;
appeals' conclusion that “the Culls merely opposed the
• the Defendants' responses to requests for disclosure; use of the AAA” rather than arbitration itself. 90 In some
federal courts, the Culls' objection alone could suffice to
• the Culls' five motions to compel, attached to
which were 76 requests for production of documents waive arbitration. 91
regarding complaints, inspections, repairs, and
settlements relating to eight other homes in the same [27] The Culls also moved for arbitration very late in
subdivision; the trial process. It is true that Perry Homes moved
to continue the trial setting when the Culls sought
• Perry Homes' two motions for protective orders arbitration, requesting about ten weeks to finish deposing
regarding six designees noticed for deposition by experts. Because the trial court ordered arbitration, no
the Culls on nine issues (including purchase and one knows whether the case would have gone to trial
preparation of the lot, design and construction of (including the unnamed court clerk cited by the dissent).
the foundation, sale of this home and others in the But in view of the written discovery and depositions
subdivision, and attempts to deal with the Culls' and already completed, the record is nevertheless clear that
other foundation complaints), with an attachment most of the discovery in the case had already been
requesting 67 categories of documents (including all completed before the Culls requested arbitration. The rule
photos, videos, correspondence, insurance policies, that one cannot wait until “the eve of trial” to request
plans, soil tests, permits, subcontractors, contracts arbitration is not limited to the evening before trial; it is a
for sale, and repairs relating to the house or the suit, rule of proportion that is implicated here. 92
all complaints about any house in the subdivision,
and Perry Homes' articles of incorporation, by-laws, Then 14 months after filing suit and shortly before the
minutes, and financials); and December 2001 trial setting, the Culls changed their minds
and requested arbitration. They justified their change of
• the Culls' notices of depositions for three of the
heart on the basis that they wanted to avoid the delays
Defendants' experts with 24 categories of documents
of an appeal. But their change unquestionably delayed
requested from each (including all documents
adjudication of the merits; instead of a trial beginning in a
relating to this case, all their articles, *596
few days or weeks, the plenary arbitration hearing did not
publications, or speeches given in their fields of
begin until late September of 2002—almost ten months
expertise, all courses or seminars they had attended,
after the Culls abandoned their trial setting. Moreover,
to the extent arbitration reduces delay, it does so by

51 Tex. Sup. Ct. J. 819
severely limiting both pretrial discovery and post-trial it enacted the FAA. 96 Indeed, one dissent cannot even
review. Having enjoyed the benefits of extensive discovery bring itself to say the Culls substantially invoked the
for 14 *597 months, the Culls could not decide only then litigation process. If the litigation conduct here is not
that they were in a hurry. enough, it is hard to imagine what would be.
[28] [29] [30] It is also unquestionably true that this [31] [32] The dissents make several mistakes in their
conduct prejudiced the Defendants. “Prejudice” has many analyses. First, they misconstrue the standard of review.
meanings, but in the context of waiver under the FAA it Every *598 abuse-of-discretion review is not identical
relates to inherent unfairness—that is, a party's attempt because “a trial judge's discretion may be applied to
to have it both ways by switching between litigation and
scores of situations and in many different ways.” 97
arbitration to its own advantage:
Reviewing a declaratory judgment fee award (where trial
[F]or purposes of a waiver of an judges have broad discretion) 98 is not the same as
arbitration agreement[,] prejudice reviewing admission of hearsay (where trial judges follow
refers to the inherent unfairness in detailed rules), 99 even though an abuse-of-discretion
terms of delay, expense, or damage
standard applies to both. 100 Moreover, a totality-of-
to a party's legal position that occurs
the-circumstances test presumes a multitude of potential
when the party's opponent forces it
factors and a balancing of evidence on either side;
to litigate an issue and later seeks to
if appellate courts must affirm every time there is
arbitrate that same issue. 93 some factor that was not negated or some evidence on
either side, then no ruling based on the totality-of-the-
Thus, “a party should not be allowed purposefully and circumstances could ever be reversed. That standard of
unjustifiably to manipulate the exercise of its arbitral review would be the same as no review at all. By applying
rights simply to gain an unfair tactical advantage over the such a standard, both dissents would allow trial judges to
opposing party.” 94 send any case to arbitration no matter what has occurred
in court.
Here, the record before the trial court showed that the
Culls objected to arbitration initially, and then insisted [33] [34] Under a proper abuse-of-discretion review,
on it after the Defendants acquiesced in litigation. They waiver is a question of law for the court, 101 and we do
got extensive discovery under one set of rules and then not defer to the trial court on questions of law. 102 We do
sought to arbitrate the case under another. They delayed defer to a trial court's factual findings if they are supported
disposition by switching to arbitration when trial was
by evidence, 103 but there was no factual dispute here
imminent and arbitration was not. They got the court to
regarding whether the Culls initially opposed arbitration,
order discovery for them and then limited their opponents'
whether they conducted extensive merits discovery, or
rights to appellate review. Such manipulation of litigation
whether they sought arbitration late in the litigation
for one party's advantage and another's detriment is
process. This leaves only the conclusion whether such
precisely the kind of inherent unfairness that constitutes
conduct constitutes prejudice, a legal question we cannot
prejudice under federal and state law.
simply abandon to the trial court. 104
*599 [35] Second, the dissents define prejudice in a

B. A Response to the Dissents
way that makes it impossible to prove. While recognizing
Although we have repeatedly said arbitration agreements that “waiver” has a special definition in the arbitration
can be waived, today's dissents would effectively hold they context, the dissents overlook that “prejudice” does too.
cannot. That would favor arbitration too much; because Instead of the inherent-unfairness standard used by the
most agreements can be waived by the parties' conduct, 95 federal courts, 105 they impose what appears to be an
arbitration contracts should not be more enforceable than irretrievable-loss standard. One dissent would go so far
other contracts. That is not what Congress intended when as to hold that no amount of discovery, no matter how
extensive, can show prejudice if the fees incurred might

51 Tex. Sup. Ct. J. 819
be compensated in the final arbitration award, even if to demand arbitration affects the
erroneously. 106
No one could ever show prejudice under burden placed upon the party
this standard, because even if a contract allowed no opposing waiver. When a timely
demand for arbitration was made,
reimbursement of discovery costs (as in this case), 107 it
the burden of proving waiver falls
is always hypothetically possible that a rogue arbitrator
even more heavily on the shoulders
might reimburse costs regardless. The same dissent would
of the party seeking to prove
find no prejudice from extensive discovery without proof
waiver. A demand for arbitration
that an arbitrator would have prohibited it. That again is
puts a party on notice that
impossible; arbitrators have almost unbridled discretion
arbitration may be forthcoming, and
regarding discovery, so no one can predict what they
therefore, affords that party the
might do in advance. Presuming (as the dissents do)
opportunity to avoid compromising
that broad discovery is generally available in arbitration
its position with respect to
simply ignores one of its most distinctive features. 108 arbitrable and nonarbitrable claims.
In contrast, where a party fails
[36] [37] Third, both dissents quibble with the to demand arbitration ... and in
Defendants' proof of prejudice because it was the meantime engages in pretrial
insufficiently detailed. 109 This confuses proof of the fact activity inconsistent with an intent
of prejudice with proof of its extent; the Defendants had to arbitrate, the party later opposing
to show substantial invocation that prejudiced them, not a motion to compel arbitration
precisely how much it all was. Referral to arbitration may more easily show that its
should be decided summarily with the evidence limited to position has been compromised, i.e.,
disputed facts; 110 as the Culls did not dispute that the prejudiced. 111
parties had conducted more than a dozen depositions and
other extensive discovery on the merits, requiring proof [40] It is these other circumstances that make this
of each one would have merely made the referral hearing
case different from In re Vesta. 112 The parties seeking
longer and more *600 expensive. The pre-arbitration
arbitration in Vesta had not opposed arbitration from the
record proved that discovery was extensive; the evidence
outset and then invoked it after getting all the discovery
demanded by the dissents would have merely showed how
much it cost. they wanted. 113 Nor was the Vesta case close to trial, as
was the case here. The parties in Vesta had taken four
[38] [39] Finally, the dissents' focus on discovery depositions (rather than 15); they had also exchanged
ignores all the other circumstances that the totality-of- standard requests for disclosure and one request for
the-circumstances test requires us to consider. Because production, but only one of those documents was in the
we must consider all the circumstances, the amount of record so there was no evidence whether this limited
discovery needed to show prejudice will vary depending on discovery related to the merits (as the extensive discovery
what the other circumstances are. As the Fifth Circuit has here clearly did). 114 And while the party opposing
held, prejudice should be easier to show against a party arbitration in Vesta allegedly incurred more than $200,000
that initially opposed arbitration than against one who in expenses, most of that was incurred in getting discovery
sought it from the start: rather than providing it; 115 a party who requests lots of
discovery is not prejudiced by getting it and taking it to
While the mere failure to assert the
arbitration in the same way that a party who produces
right to demand arbitration does
lots of discovery outside the stricter discovery limits in
not alone translate into a waiver of
that right, such failure does bear on arbitration. 116
the question of prejudice, and may,
along with other considerations, Applying the proper standard of review and the proper
require a court to conclude that definition of prejudice, we disagree with the dissents that
waiver has occurred. The failure the Defendants have failed to show prejudice here.

51 Tex. Sup. Ct. J. 819
*601 C. Did the Warranty Justice O'NEILL, concurring.

Companies Waive Arbitration? Most members of the Court agree that the Culls
substantially invoked the litigation process before
[41] Finally, the Culls argue the warranty companies requesting arbitration; the point of disagreement is
cannot object to arbitration for two reasons. whether Perry Homes adequately proved it suffered
prejudice as a result. I join the Court's opinion, but
First, the warranty companies originally requested write separately to note that I believe the proof required
arbitration (which the Culls opposed), so it could be to demonstrate prejudice in any given case should be
argued that it is unfair to hold the Culls to their original measured by the degree to which the litigation process has
position without holding the warranty companies to been invoked. In some circumstances, a party's invocation
theirs. Of course, we cannot hold both parties to their of the judicial process may be so substantial that a court
original positions as those positions were contradictory. could presume the party resisting arbitration has been
More important, while the parties' original demands prejudiced and the right to arbitration has been waived.
are relevant factors, the test is the totality of the In my view, such a presumption may easily be drawn on
circumstances. Looking to all the circumstances, it is this record.
quite clear from the parties' extensive co-participation in
months of discovery that everyone waived their right to
arbitration—whether they asserted that right early (as did
the warranty companies) or late (as did the Culls). Justice JOHNSON, joined by Chief Justice JEFFERSON
and Justice GREEN, concurring in part and dissenting in
[42] Second, the Culls argue that the only objection to part.
the trial court's order compelling arbitration was filed I disagree that the trial court abused its discretion in
by Perry Homes, not the warranty companies. It is true compelling arbitration. I concur with the disposition of
that only Perry Homes' attorneys signed the motion, part VI–C. I dissent from parts VI–A and VI–B of the
but in that motion and at the hearing held on it they Court's opinion and dissent from its judgment.
represented that they were authorized to do so on behalf
of all the Defendants. If the Culls wanted to question The parties agree that their arbitration agreement covers
their authority to speak for the warranty companies, they the dispute and that the Federal Arbitration Act (FAA)
applies. Thus, whether the Culls waived the right to
should have done so by sworn motion. 117
arbitrate is a question of law. *602 In re Oakwood Mobile
Homes, Inc., 987 S.W.2d 571, 574 (Tex.1999); In re Bruce
Terminix Co., 988 S.W.2d 702, 703–04 (Tex.1998). The
*** Court has said previously, and says again today, that
prejudice is a required element of waiver of the right to
Accordingly, we reverse the court of appeals' judgment, arbitrate cases subject to the FAA. 258 S.W.3d at 595; see
vacate the arbitration award, and remand this case to the In re Bank One, N.A., 216 S.W.3d 825, 827 (Tex.2007). The
trial court for a prompt trial. party asserting waiver has the burden to prove prejudice.
See In re FirstMerit Bank, N.A., 52 S.W.3d 749, 753–
54 (Tex.2001) (noting that if an agreement to arbitrate
Justice O'NEILL filed a concurring opinion. exists and the party opposing arbitration fails to prove
its defenses, then a trial court has no discretion and its
Justice JOHNSON filed an opinion concurring in part and only option is to compel arbitration); In re Bruce Terminix
dissenting in part, in which Chief Justice JEFFERSON Co., 988 S.W.2d at 704 (“Even substantially invoking
and Justice GREEN joined. the judicial process does not waive a party's arbitration
rights unless the opposing party proves that it suffered
Justice WILLETT filed an opinion concurring in part and
prejudice as a result.”). In the context of the issue before
dissenting in part.
us, prejudice means detriment. See In re Bank One, 216
S.W.3d at 827 (“A party waives an arbitration clause

51 Tex. Sup. Ct. J. 819
when it substantially invokes the judicial process to the existing right, benefit, or advantage held by a party; (2)
other party's detriment.”). We review a trial court's order the party's actual or constructive knowledge *603 of its
compelling arbitration for an abuse of discretion. See In existence; and (3) the party's actual intent to relinquish the
re Bruce Terminix Co., 988 S.W.2d at 705. That standard right or intentional conduct inconsistent with the right.
is in accord with the general practice of reviewing a See Tenneco Inc. v. Enter. Prods. Co., 925 S.W.2d 640,
trial court's actions for an abuse of discretion when a 643 (Tex.1996). The Culls' actions and their attorneys'
trial court has discretion to grant or deny relief based statements in court, taken as a whole, present compelling
on its factual determinations. See Bocquet v. Herring, evidence of those elements.
972 S.W.2d 19, 20–21 (Tex.1998) (noting that the abuse
of discretion standard of review as to a trial court's Waiver as that term is used in regard to arbitration
factual determinations applies when a trial court has agreements subject to the FAA, however, requires more
discretion either to grant or deny relief based on its factual than is required for general waiver—it requires proof that
determinations). The test for abuse of discretion is not the party asserting waiver as a defense to arbitration has
whether, in the opinion of the reviewing court, the trial suffered detriment. 258 S.W.3d at 589–90; In re Bank
court's ruling was proper, but whether the trial court One, 216 S.W.3d at 827. So, when the Culls finally moved
acted without reference to guiding rules and principles. to compel arbitration and proved applicability of an
See Cire v. Cummings, 134 S.W.3d 835, 838–39 (Tex.2004). arbitration agreement, Defendants unquestionably had
The trial court's ruling should be reversed only if it was the burden to raise and prove their defense of waiver,
arbitrary or unreasonable. Id. at 839. Generally, if there including prejudice, if they wanted to avoid arbitration. In
is any evidence to support the trial court's ruling then the re Bruce Terminix Co., 988 S.W.2d at 704.
court did not abuse its discretion. See In re BP Prods. N.
Am., Inc., 244 S.W.3d 840, 848 (Tex.2008) (citing Butnaru Defendants recognized that to avoid arbitration they
v. Ford Motor Co., 84 S.W.3d 198, 211 (Tex.2002)). That had to prove a defense to the arbitration agreement. As
is because it is only when the evidence is such that the part of their response to the Culls' motion to compel
trial court could have made but one decision, yet made arbitration, Defendants pled that (1) after suit was filed,
another, that we say the trial court abused its discretion. all parties conducted written and oral discovery, (2) the
Id. Our decisions affording deference to trial court rulings Culls filed several motions and obtained two hearings and
when evidence supports those rulings comport with the court rulings on discovery-related issues, and (3) a trial
standard of review utilized by the United States Fifth setting was imminent. Defendants conceded applicability
Circuit Court of Appeals in regard to whether a party of the arbitration clause, then cited authorities for and
has suffered prejudice for purposes of waiving arbitration took the position that “Plaintiffs have waived arbitration
rights subject to the FAA. The Fifth Circuit's position because they substantially invoked the judicial process to
is that trial court findings on which the legal conclusion the detriment of Defendants.” Subsequently, Defendants
of waiver is based are predicate questions of fact “which more clearly detailed the detriment they were claiming:
may not be overturned unless clearly erroneous.” Price v.
Drexel Burnham Lambert, Inc., 791 F.2d 1156, 1159 (5th In this case, the costs incurred
Cir.1986); see also Republic Ins. Co. v. Paico Receivables, by Defendants in responding to the
LLC, 383 F.3d 341, 347 (5th Cir.2004) (“[T]he district motions to compel filed by Plaintiffs
court's finding that PRLLC would suffer prejudice if would not have been incurred during
arbitration was compelled is not clearly erroneous.”). the course of arbitration. Similarly,
defendants are prejudiced by the
The waiver issue in this matter is not determined by fact that it [sic] was required to
general waiver elements, but by waiver as that term comply with the Court's orders
is used in regard to avoiding arbitration agreements on such motions to compel, when
subject to the FAA. Generally, “waiver” is the intentional such means and methods would not
relinquishment of a right actually or constructively have been available in arbitration.
known, or intentional conduct inconsistent with claiming Because of Plaintiffs' delay in
that right. See Jernigan v. Langley, 111 S.W.3d 153, seeking arbitration, coupled with
156 (Tex.2003). The elements of waiver include (1) an the resulting prejudice by Defendants
being required to respond to multiple

51 Tex. Sup. Ct. J. 819
discovery motions and comply with Court has no alternative but to order the case abated for
orders thereon, Plaintiffs cannot arbitration purposes.
now rely on the Limited Warranty
Agreement to compel arbitration. And, [counsel for Defendants], all I have heard from
you insofar as what is the prejudice suffered by
(Emphasis added). A second part of Defendants' response people you represent is that they have participated
was a motion for continuance of trial to complete in litigation activities that may or may not have
discovery. been required by the arbitrator. So without anything
further, I'm going to grant the motion to abate the
At the hearing on the Culls' motion to compel arbitration, case for arbitration. 2
the trial judge, who noted at the end of the hearing (Emphasis added).
that “I just finished [an arbitration] with the American
Arbitration Association,” admitted all the evidence Perry Homes filed a motion for reconsideration. In their
offered, and took judicial notice of the court file as motion, Perry Homes again asserted that “all parties have
requested by Defendants. After evidence was introduced conducted written and oral discovery under the Texas
at the hearing, Defendants again argued that there were Rules of Civil Procedure” but did not complain that they
two factors involved: “whether or not the parties have had been denied any discovery. Perry Homes' motion
acted inconsistently with the agreement to arbitrate and recapped the prejudice they were claiming:
then whether those actions and the actions that were taken
actually worked to the detriment or prejudice of the party Defendants have in fact been
that's opposing transference to arbitration.” prejudiced by Plaintiffs' last-minute
attempt to disclaim their election
During the hearing, the trial judge expressed considerable to file suit and instead choose
concern over the Culls' conduct. He discussed the Culls' arbitration. In this case, the costs
testimony that they had knowledge of the arbitration incurred by Defendants—including
clause before suit was filed, the extended time for attorneys' fees and man hours
which the case had been filed, and the impending trial —in attending 16 depositions,
setting. He also discussed the arbitration provision itself, 1 responding to multiple sets of
its mandatory nature, and pressed *604 the Culls' written discovery and responding
attorney about the reason for the delay in requesting to the motions to compel filed
arbitration. Finally, he asked about a provision in by Plaintiffs would not have been
the arbitration provision that provided “if any party incurred during the course of
commences litigation in violation of this Agreement, such arbitration. Similarly, Defendants
party shall reimburse the other parties to the litigation for are prejudiced by the fact that
their costs and expenses including attorney's fees incurred they were required to comply with
in seeking dismissal of such litigation.” The Culls' attorney the Court's orders on such motions
acknowledged the provision and asserted that it would be to compel, when such means and
up to the arbitrator to determine whether the Culls would methods would not have been
be responsible for such fees and costs of Defendants. available in arbitration. The amount
Defendants did not dispute the Culls' position. Then, of attorney time Perry Homes
agreeing with the assertions of the parties, the trial has invested in responding to
judge did not address whether the judicial process had Plaintiffs' discovery requests and
been substantially invoked; rather, the court concluded related motions thus far is 122
Defendants had not shown the prejudice they claimed and attorney hours and 20 paralegal
granted the Culls' motion: hours.
*605 (Emphasis added). An affidavit was attached

The question is, I think, when it deals with waiver is are setting out that the law firm representing Perry Homes
the defendants prejudiced by this delay, and if they are not had spent 122 attorney hours and 20 paralegal hours in
prejudiced or if there is not proof of prejudice, then the responding to the Culls' discovery requests and related

51 Tex. Sup. Ct. J. 819
motions. 3 The hours were not broken down and no dates, when the next setting actually would have been, much less
times, or tasks were set out. There was no specification when the case would have gone to trial if the motion for
as to time spent on actions Defendants claimed as continuance had been granted. The Court speculates that
prejudice—responding to motions to compel discovery trial would have occurred sooner than arbitration took
and complying with court orders compelling discovery place. To the extent a resetting or actual future trial date
that would not have been available in arbitration. The should be considered, however, the trial court was in the
docket sheet reflects that the trial court denied the motion, best position to determine when any new setting would
but the record contains neither a transcript from the have occurred—whether days, weeks, or months in the
hearing nor an order ruling on the motion. future—and to determine the weight to give the setting and
a potential trial date along with the other factors.
The Court agrees that the standard of review applicable
to the trial court's order compelling arbitration is abuse of *606 Further, the Court discounts evidence of a
discretion, but its holding that the Culls waived their right contractual provision in the arbitration clause requiring
to arbitrate misses the mark. In reaching its conclusion, any party that commenced litigation in violation of the
the Court says the question of prejudice is a matter of law arbitration clause to reimburse other parties' litigation
because all the relevant facts were undisputed. It seems to expenses and costs. The clause is not a model of clarity as
me that (1) there was evidence requiring the trial court to to exactly what was recoverable:
make evidentiary determinations as to prejudice, and (2)
Inasmuch as this Agreement
Defendants did not prove that they were prejudiced or that
provides for mandatory arbitration
the Culls obtained an advantage because of the litigation
of disputes, if any party commences
process.
litigation in violation of this
Agreement, such party shall
As to the evidence that the trial court was required to
reimburse the other parties to
weigh and make evidentiary determinations on, the record
the litigation for their costs and
reveals that Defendants took depositions and engaged in
expenses including attorney's fees
written discovery, as did the Culls. Yet Defendants did
incurred in seeking dismissal of such
not claim prejudice due to the Culls somehow reaping
litigation.
an unfair advantage through discovery. The trial court
could have considered the advantages accruing to all
parties by depositions and bilateral written discovery It was the trial court's goal, just as it is ours, to ascertain
and determined that no prejudice was shown because the true intent of the parties to the agreement. See J.M.
all parties were more fully prepared to proceed with Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex.2003).
dispute resolution by knowing what the testimony of The language used in the agreement is the primary
witnesses would be, and that such knowledge would evidence of that intent. See id.; National Union Fire Ins.
shorten arbitration and reduce further costs. Co. of Pittsburgh, Pa. v. CBI Indus., Inc., 907 S.W.2d 517,
520 (Tex.1995). If the contract is subject to two or more
Next, at the time of the hearing on the motion to compel reasonable interpretations after applying the pertinent
there was an imminent trial setting. But Defendants did rules of construction, the contract is ambiguous, creating
not claim they had spent time preparing to go to trial at the a fact issue on the parties' intent. See J.M. Davidson, 128
December 10 setting and that those hours would be wasted S.W.3d at 229.
unless they went to trial immediately. At the December
6 hearing on the motion to compel, the parties agreed The Court construes the clause as allowing reimbursement
the case would not be ready for trial at the December 10 for expenses and attorneys' fees incurred in seeking
setting, and the Culls' attorney stated that, according to dismissal of the lawsuit, but not for expenses and fees
the court clerk, the case probably would not be reached in preparing the suit for trial. However, the clause can
for trial. In any event, a trial setting and actually going also be read as requiring reimbursement of all litigation
to trial are different matters. Even though Defendants costs and expenses, including but not limited to attorneys'
moved for a continuance and requested the case to be fees incurred in seeking dismissal of the litigation. And
reset in two months, there is nothing in the record to show that, apparently, is how the parties interpreted the

51 Tex. Sup. Ct. J. 819
agreement. The trial court questioned the Culls' attorney requires our deferring to the trial court's findings and
about whether the Culls would be responsible for the order when the standard of review is abuse of discretion.
Defendants' attorneys' fees and costs. When the Culls'
attorney replied that it was an issue for the arbitrator, Despite evidentiary matters the trial court had before
the Defendants' attorney did not contend otherwise. See it which warrant our deferring to its implied and
Mathis v. Lockwood, 166 S.W.3d 743, 744–45 (Tex.2005); stated findings, the Court sets out factors that
Banda v. Garcia, 955 S.W.2d 270 (Tex.1997). The Culls' were uncontroverted, then concludes, without ever
attorney's representations and lack of protestation by saying exactly how, that Plaintiffs were advantaged or
Defendants' attorney is the only evidence in the hearing Defendants were prejudiced by the “inherent unfairness”
record about the parties' intent as to the language in of it all:
the clause. 4 Under the abuse of discretion standard by
Here, the record before the trial
which we review the trial court's order, the reimbursement
court showed that the Culls objected
clause and the attorneys' respective representations and
to arbitration initially, and then
silence is part of the entire record which we must consider
insisted on it after the Defendants
in determining whether the trial court followed guiding
acquiesced in litigation. They got
rules and principles. See Chrysler Corp. v. Blackmon, 841
extensive discovery under one set of
S.W.2d 844, 852 (Tex.1992); Walker v. Packer, 827 S.W.2d
rules and then sought to arbitrate
833, 839–40 (Tex.1992).
the case under another. They
delayed disposition by switching to
But even if the Court is right and the reimbursement
arbitration when trial was imminent
clause does not allow for *607 recovery of all Defendants'
and arbitration was not. They got
litigation attorney's fees, an arbitration award would not
the court to order discovery for them
be subject to being vacated if an arbitrator interpreted
and then limited their opponents'
the clause to allow recovery of all the fees. If arbitrators
rights to appellate review. Such
simply misinterpret a contractual clause such as the
manipulation of litigation for one
reimbursement clause, that type of error is not one which
party's advantage and another's
will justify setting aside an award. 5 See Wise v. Wachovia detriment is precisely the kind of
Securities, LLC, 450 F.3d 265, 269 (7th Cir.2006) (noting inherent unfairness that constitutes
that in reviewing an arbitration award under the FAA, prejudice under federal and state
“the issue for the court is not whether the contract law.
interpretation is incorrect or even wacky but whether
the arbitrators had failed to interpret the contract at 258 S.W.3d at 597. No one (but the Culls and their
all”). Under the circumstances, it was proper for the attorneys) could seriously disagree that the Culls' conduct
trial court to weigh, and the record shows it did, the smacks of inequity. But even disregarding the evidentiary
reimbursement provision and the parties' representations questions the trial court had to resolve as set out above,
in deciding that Defendants had not proved they suffered when the record is searched for evidence that Defendants
prejudice. Regardless of the trial court's interpretation suffered prejudice as Defendants *608 claimed—by
of what costs and expenses would be recoverable under incurring expenses in discovery proceedings, responding
the reimbursement provision, the mere existence of the to discovery motions, and complying with court orders on
provision and its reimbursement requirement comprise discovery when that type of activity would not be available
evidence supporting the decision to order arbitration and in arbitration—there is none. Nor is there evidence that
properly leave construction and application of the clause the Culls were unfairly advantaged. The fact of the matter
to the arbitrator. is that all parties took part in litigation discovery as part
of the process to resolve their dispute. The Court discusses
In sum, there were decisions for the trial court to make at length how the facts are undisputed, how ordering the
based upon weighing evidence, drawing inferences from it parties to arbitration resulted in “inherent unfairness”
in light of the parties' contentions, determining what the to Defendants, and that such “inherent unfairness”
evidence and inferences proved, and drawing a conclusion equates to prejudice to Defendants, or conversely, unfair
as to Defendants' claims of prejudice. That situation advantage to the Culls. However, the authorities used

51 Tex. Sup. Ct. J. 819
to support the Court's statements do not cut nearly so court. Defendants claimed prejudice because of discovery
broadly as the Court indicates. The cases cited incorporate and court hearings that would not have occurred in
elements such as delay, expense, damage to a party's legal arbitration. But contrary to the Court's conclusion that
position, or “tactical advantage” by which to measure discovery would have been limited in arbitration, the
prejudice to one party or unfairness to the other party. 258 broad arbitration clause did not preclude any particular
S.W.3d at 597 n. 94 (citing In re Tyco Int'l Ltd. Sec. Litig., type or level of discovery. It provided that arbitration
422 F.3d 41, 46 n. 5 (1st Cir.2005) (“[A] party should not would be conducted according to the arbitrator's rules so
be allowed purposefully and unjustifiably to manipulate long as they did not conflict with the FAA. Specifically,
the exercise of its arbitral rights simply to gain an unfair and by way of example, Defendants did not claim
tactical advantage over the opposing party.” (emphasis prejudice from or prove that (1) delay because of litigation
added))); Doctor's Assocs. v. Distajo, 107 F.3d 126, 134 (2d interfered with *609 their business activities, caused
Cir.1997) (“[P]rejudice as defined by our cases refers to the them loss of evidence, or interfered with their ability to
inherent unfairness—in terms of delay, expense, or damage arbitrate; (2) if an arbitrator had ordered the lawsuit
to a party's legal position—that occurs when the party's discovery pursuant to the arbitration clause, the order
opponent forces it to litigate an issue and later seeks to would have violated the arbitration clause; (3) had
arbitrate that same issue.” (emphasis added)). the litigation discovery been requested in arbitration,
Defendants would have agreed to it and conferences
The following passage embodies the substance of the with the arbitrator would not have been necessary; (4)
Court's opinion as to prejudice or unfair advantage: the litigation discovery was not useable in arbitration;
(5) Defendants had already begun trial preparations or
It is also unquestionably true that [the Cull's] conduct taken other litigation related actions that would have
prejudiced the Defendants. “Prejudice” has many been wasted effort if the case went to arbitration; or (6)
meanings, but in the context of waiver under the FAA it Defendants suffered compromise of their legal position on
relates to inherent unfairness—that is, a party's attempt the merits of the Culls' claims.
arbitration to its own advantage: There was not an offer of proof such as by expert
testimony, Defendants themselves, their attorneys or
[F]or purposes of a waiver of an arbitration
otherwise, that all, some, or any arbitrators probably
agreement[,] prejudice refers to the inherent
would not have allowed the discovery, that their
unfairness in terms of delay, expense, or damage to
agreement or a rule limited discovery in arbitration, or
a party's legal position that occurs when the party's
Defendants wasted any litigation discovery effort. And to
opponent forces it to litigate an issue and later seeks
boot, arbitrators do not come free. Disclosure conferences
to arbitrate that same issue.
in arbitration might well have cost more than discovery
Thus, “a party should not be allowed purposefully and hearings in litigation because arbitrators generally charge
unjustifiably to manipulate the exercise of its arbitral for preparing for and attending conferences while trial
rights simply to gain an unfair tactical advantage over judges do not. Nor have Defendants claimed that their
the opposing party.” attorneys would not have charged fees for arbitration
discovery activities. So the possibility exists that the
... Such manipulation of litigation for one party's disclosure process in arbitration could have ended up
advantage and another's detriment is precisely the kind costing more than litigation discovery.
of inherent unfairness that constitutes prejudice under
federal and state law. The Court questions whether broad discovery is generally
available in arbitration, but the parties here do not argue
258 S.W.3d at 597 (citations omitted). As noted that it is. What is argued here is that the parties' contract
previously, the Court does not specify how Defendants provided how the arbitration was to be conducted—
proved, at the hearing on the Culls' motion to compel through adherence to the arbitrator's rules so long as those
arbitration, detriment from delay, damage to Defendants' rules do not conflict with the FAA—and that Defendants
legal position or a tactical advantage achieved by the did not prove any litigation discovery that would have
Culls, which perhaps is just as well because Defendants been in violation of the contract. The Court says that
did not claim those types of prejudice in the trial

51 Tex. Sup. Ct. J. 819
as of the time of the hearing on the Culls' motion to Evidence at the hearing on the Culls' motion to compel
compel arbitration, what discovery an arbitrator would arbitration consisted only of testimony by the Culls
allow was purely speculative. But arbitration is not and five documents they introduced: the earnest money
new; Defendants could have at least attempted to prove contract, the application for warranty, the limited
the custom and practice, if any, of arbitrators as to warranty agreement containing the arbitration provision,
discovery in arbitration, even though each arbitration a letter from the warranty company, and a copy of one
is governed by the particular agreement between the of Defendants' original answers. The Culls acknowledged
parties. Even if such evidence might have been ruled in their testimony that discovery and depositions had
speculative, as the Court concludes it would have been, occurred, but they were unsure of how many depositions
the obligation to overcome the burden of proof still lay and how much discovery. Defendants requested the trial
with Defendants. See Borg–Warner Corp. v. Flores, 232 court to take judicial notice of “five separate motions
S.W.3d 765, 772–74 (Tex.2007) (recognizing difficulties of to compel discovery and two separate orders on some,
proving asbestos claims against individual defendants, yet but not all, of the motions to compel.” The court took
requiring plaintiffs to meet that burden). notice of “its file,” which at that time mostly consisted
of copies of pleadings and discovery requests attached
The Court says that “a party who enjoys substantial as exhibits to motions. The file contained only one or
direct benefits by gaining an advantage in the pretrial two of the documents actually produced in discovery.
litigation process should be barred from turning around There were two orders on the Culls' motions to compel
and seeking arbitration with the spoils.” 258 S.W.3d at discovery. The second order referred only to the Kunkel
593. I agree with that statement. The problem is that the defendants who were not ordered to arbitration. Because
Court does not apply the statement in its entirety to this the Kunkel defendants were not ordered to arbitration,
case. The Court assumes, without requiring Defendants to the trial court could have determined that any orders or
prove, that the Culls obtained some advantage or caused motions relating solely to them should not be considered
detriment to Defendants by both parties having engaged in regard to prejudice as to the other Defendants. In short,
in discovery activities. It is hard to see how discovery the record on which the trial court ruled on December
of facts, witness names, documents, and testimony about 6 was not extensive, and although it showed what the
the controversy can prejudice either party. See Jampole Culls requested, practically none of the record was of
v. Touchy, 673 S.W.2d 569, 573 (Tex.1984) (noting that what Defendants produced in discovery, which was filed
discovery is done so disputes may be decided by what the later when Defendants sought to set aside the arbitration
facts are, not by what facts are concealed). Defendants award. And Defendants did not allege in the trial court
neither alleged nor proved that they were prejudiced that some or even any of the discovery would not be
because some privileged, proprietary, or confidential useful in arbitration, only that the discovery would not be
matter had been disclosed. Discovery in both judicial available in arbitration.
proceedings and in arbitration facilitates just *610 and
reasonable resolutions of disputes and helps prevent Last, the Court says that requiring Defendants to file
unjust and unreasonable resolutions because of ambush, detailed proof of the discovery would have made the
surprise, or concealment of relevant, nonprotected, record more cumbersome and would have entailed more
nonprivileged evidence which could sway the outcome. expense, and that to show prejudice, Defendants only had
Furthermore, I disagree with the idea that merely making to show substantial wasted effort anyway. The Court then
discovery disclosures is evidence of wasted effort or other concludes that the record before the trial court at the time
prejudice. Although the extent to which a party engages in of the hearing showed substantial wasted effort, and thus
litigation discovery plays a significant part in determining detriment, to Defendants. But in In re Vesta Ins. Group,
whether that party substantially engaged the litigation Inc., 192 S.W.3d 759 (Tex.2006), the Court declined to
process, disclosure of relevant, nonprivileged evidence, determine that waiver of the right to arbitrate occurred
names of witnesses, and information makes just and when the party opposing arbitration failed to introduce
reasonable dispute resolution more likely regardless of any of the discovery documents, present details about
whether disclosure is strictly voluntary or is made in them, or contend that the discovery would not be useful
judicial discovery proceedings or arbitration proceedings. in arbitration. The record, the Court stated,

51 Tex. Sup. Ct. J. 819
they were prejudiced because during post-arbitration

does not show whether these proceedings, the Culls' attorney testified that he reviewed
requests were limited or extensive, deposition testimony in preparing for the arbitration and
whether they sought information for
depositions are not generally available in arbitration. 6
affirmative claims or defensive ones,
First, Defendants did not introduce the AAA rules
or even whether they addressed the
into evidence at the hearing or ask the trial court to
merits or merely the arbitration
take judicial notice of them. Second, to the extent the
issue. Further, [plaintiff] does not
arguments encompass discovery depositions, Defendants
allege that the discovery already
did not complain in the trial court that they were
conducted would not be useful in
prejudiced by the taking of depositions or that the Culls
arbitration; to the contrary, he
planned to use them in arbitration, and the argument
concedes *611 it would be useful
cannot be raised here. See TEX.R.APP. P. 33.1; Mack
whether the case is arbitrated or
Trucks, Inc. v. Tamez, 206 S.W.3d 572, 577 (Tex.2006)
tried.
(noting that except for fundamental error, appellate courts
Id. at 763. are not authorized to consider issues not properly raised
by the parties). Third, even if the AAA rules had been
Neither party here claimed before arbitration (nor, for before the trial court, there was no evidence that all, most,
that matter, after arbitration) that the litigation discovery or any arbitrators would have refused to require disclosure
would not be useful in arbitration. On the other hand, and of any of the matters disclosed by Defendants. Finally,
as addressed below, Defendants claimed after arbitration Defendants' attorneys had access to the same deposition
that they suffered prejudice because Plaintiffs' attorney testimony to use for arbitration preparation, so there
used the discovery depositions to prepare for arbitration. could not have been an unfair advantage to the Culls by
In this regard, there are further inferences from the record use of the depositions.
that the Court does not credit but that the trial court
could have made when it compelled arbitration: both I conclude the record is not conclusive either that
parties would use the litigation discovery and depositions Defendants suffered prejudice as they claimed or that the
to prepare for arbitration, the discovery would be useful Culls obtained an unfair advantage by litigation conduct
in arbitration, and neither party was unfairly advantaged as the Court holds. I also conclude that evidence before the
or suffered detriment from the discovery. trial court required the court to weigh and draw inferences
from it and that some evidence supports the trial court's
In summary, the Court (1) does not limit its review determination that Defendants did not prove prejudice to
to Defendants' claims of prejudice made in the trial themselves *612 or unfair advantage to the Culls by use
court, (2) disregards factors that presented the trial court of the litigation process. Accordingly, I would hold that
with decisions to make based on evidence allowing for the trial court did not abuse its discretion by compelling
different interpretations and inferences, and (3) assumes the parties to arbitrate and I would affirm the judgment
“inherent unfairness” equates to Defendants' prejudice or of the court of appeals.
the Culls' unfair advantage from litigation conduct and
effectively forgives Defendants' failure to prove detriment
Justice WILLETT, concurring in part and dissenting in
to themselves or advantage to the Culls.
part.
Arbitration has become a hot-button topic for the Court
Defendants make other contentions not reached by the
of late—in this Term alone we have decided at least three
Court, but none of them warrant holding that the trial
court abused its discretion. In their brief to this Court, arbitration-related cases 1 and heard argument in four
Defendants reference rules of the American Arbitration more. 2 As the range of opinions in this case demonstrates,
Association and urge that the AAA Rules of Procedure the invocation and operation of arbitration provisions can
provide for limited discovery in that the arbitrator is present tricky legal questions that spark honest differences
limited to directing “(i) the production of documents of opinion. I agree with Parts I–V of the Court's decision,
and other information, and (ii) the identification of and also with much of Part VI regarding waiver. However,
any witnesses to be called.” Defendants also assert that I respectfully dissent from the Court's ultimate result, not

51 Tex. Sup. Ct. J. 819
on an arbitration law issue, but on a much more old- arbitration. I believe in waiver-by-conduct, but Perry
Homes bore the threshold responsibility of building a
fashioned ground—the applicable standard of review.
record upon which the trial court could find prejudice. The
record on appeal is far more extensive than what the trial
The Court properly acknowledges that a trial court's order
court considered (and the arguments far more refined),
compelling arbitration is reviewed for abuse of discretion.
but I agree with JUSTICE JOHNSON that the trial court
Under this standard, we will reverse the trial court only
—sitting where it sat, seeing what it saw, hearing what
when “it acts in an arbitrary or unreasonable manner,
it heard, reviewing what it reviewed—did not abuse its
without reference to any guiding rules or principles.” 3 I
discretion in concluding “no prejudice.” Trial courts do
agree with the Court, and the trial judge for that matter,
not have carte blanche “to send any case to arbitration
that the record clearly shows that the Culls substantially
no matter what has occurred in court,” 4 but I cannot
invoked the judicial process. I also agree with the Court
conclude that this trial court acted “without reference to
that the cost-reimbursement provision in the arbitration
agreement does not prevent Perry Homes from showing any *613 guiding rules or principles” 5 in ruling that
prejudice resulting from the Culls' arbitration flip-flop. Perry Homes fell short of building a trial-court record that
JUSTICE JOHNSON is comforted by the possibility that showed prejudice. This is admittedly a close call, and the
an arbitrator might (mis)construe this provision to award Court makes the best possible case for going the other
Perry Homes all its litigation-related costs and fees, but way. Given the relevant record, however, I have a difficult
I am not. The provision limits reimbursement to “costs time saying the trial court acted arbitrarily or disregarded
and expenses including attorney's fees incurred in seeking all guiding standards in not reaching the opposite result.
dismissal of such litigation,” and we cannot plausibly say Accordingly, I dissent from the Court's decision vacating
Perry Homes fails on prejudice because an arbitrator may the arbitration award and remanding for trial.
misread the agreement.
All Citations
Having said all that, I cannot conclude, as does the Court,
that the trial court abused its discretion by compelling 258 S.W.3d 580, 51 Tex. Sup. Ct. J. 819
Footnotes
1 See L.H. Lacy Co. v. City of Lubbock, 559 S.W.2d 348, 351 (Tex.1977).
2 See Republic Ins. Co. v. PAICO Receivables, LLC, 383 F.3d 341, 348 (5th Cir.2004); Com–Tech Assocs. v. Computer
Assocs. Int'l, Inc., 938 F.2d 1574, 1576–77 (2d Cir.1991); Price v. Drexel Burnham Lambert, Inc., 791 F.2d 1156, 1160
(5th Cir.1986); In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 764 (Tex.2006).
3 See, e.g., In re Vesta, 192 S.W.3d at 763; In re Bruce Terminix Co., 988 S.W.2d 702, 704–05 (Tex.1998); EZ Pawn Corp.
v. Mancias, 934 S.W.2d 87, 89–90 (Tex.1996).
4 The warranty provided:
Any “unresolved dispute” (defined below) that you may have with [Perry Homes or the warranty companies] shall
be submitted to binding arbitration governed by the procedures of the Federal Arbitration Act, 9 U.S.C. § 1 et seq....
The dispute will be submitted to the American Arbitration Association, or such other independent arbitration service
as is agreeable to the [warranty administrator] and you....
5 Perry Homes sought mandamus in the court of appeals on April 11, 2002, and was denied 7 days later. It refiled in this
Court on April 26, and was denied 13 days later.
6 173 S.W.3d 565, 568.
7 Chambers v. O'Quinn, 242 S.W.3d 30, 32 (Tex.2007).
8 In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135–36 (Tex.2004); Walker v. Packer, 827 S.W.2d 833, 840 (Tex.1992).
9 See Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 89, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000); Chambers, 242
S.W.3d at 31; see also Gulf Oil Corp. v. Guidry, 160 Tex. 139, 327 S.W.2d 406, 408 (1959) (invalidating portion of award
regarding nonarbitrable issues); Fortune v. Killebrew, 86 Tex. 172, 23 S.W. 976, 978 (1893) (same).
10 Pope v. Stephenson, 787 S.W.2d 953, 954 (Tex.1990) (“The decision not to pursue the extraordinary remedy of
mandamus does not prejudice or waive a party's right to complain on appeal.”); accord, City of San Benito v. Rio Grande
Valley Gas Co., 109 S.W.3d 750, 756 (Tex.2003); Walker v. Packer, 827 S.W.2d 833, 842 n.9 (Tex.1992).

51 Tex. Sup. Ct. J. 819
11 See 9 U.S.C. § 16(b)(2); see also TEX. CIV. PRAC. & REM.CODE § 171.098 (providing for interlocutory appeal only of
orders denying motion to compel arbitration).
12 See David D. Siegel, Appeals from Arbitrability Determinations, Practice Commentary to 9 U.S.C. § 16 (“The mission
of § 16 is to assure that if the district court does determine that arbitration is called for, the court system's interference
with the arbitral process will terminate then and there, leaving the arbitration free to go forward. To accomplish this, §
16 provides in general that there may be no appeal from the pro-arbitration determination until after the arbitration has
gone forward to a final award.”); see also CHARLES ALAN WRIGHT, ARTHUR R. MILLER & EDWARD H. COOPER,
FEDERAL PRACTICE AND PROCEDURE § 3914.17 (2d ed.1992).
13 In re Palacios, 221 S.W.3d 564, 565 (Tex.2006). Courts may review an order compelling arbitration if the order also
dismisses the underlying litigation so it is final rather than interlocutory. See Green Tree Fin. Corp.-Ala., 531 U.S. at 87
n.2, 121 S.Ct. 513; Childers v. Advanced Found. Repair, L.P., 193 S.W.3d 897, 898 (Tex.2006). As we noted in Palacios,
the Fifth Circuit has indicated it may review a district court's decision to stay rather than dismiss if a petitioner shows
“clearly and indisputably that the district court did not have the discretion to stay the proceedings pending arbitration.” Id.
(citing Apache Bohai Corp., LDC v. Texaco China, B.V., 330 F.3d 307, 310–11 (5th Cir.2003)).
14 See 9 U.S.C. § 10(a).
15 First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 947–48, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995). The Court noted that
a different rule would apply if the parties clearly and unmistakably indicated in the arbitration contract that the arbitrator
should decide arbitrability, id., but there is no such indication in this contract.
16 Preston v. Ferrer, 552 U.S. 346, 128 S.Ct. 978, 169 L.Ed.2d 917 (2008) (quoting Moses H. Cone Mem'l Hosp. v. Mercury
Constr. Corp., 460 U.S. 1, 22, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)).
17 In re Serv. Corp. Int'l, 85 S.W.3d 171, 174 (Tex.2002); In re Bruce Terminix Co., 988 S.W.2d 702, 703–04 (Tex.1998);
accord, In re Citigroup, Inc., 376 F.3d 23, 26 (1st Cir.2004); Thyssen, Inc. v. Calypso Shipping Corp., S.A., 310 F.3d
102, 104 (2d Cir.2002); Ivax Corp. v. B. Braun of Am., Inc., 286 F.3d 1309, 1316 n. 18 (11th Cir.2002); Price v. Drexel
Burnham Lambert, Inc., 791 F.2d 1156, 1159 (5th Cir.1986).
18 See In re Bank One, N.A., 216 S.W.3d 825, 827 (Tex.2007) (finding no waiver under FAA); In re D. Wilson Constr. Co.,
196 S.W.3d 774, 783 (Tex.2006) (same); In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 764 (Tex.2006) (same); In re Serv.
Corp. Int'l, 85 S.W.3d at 174 (same); In re Bruce Terminix Co., 988 S.W.2d at 704–05 (same); In re Oakwood Mobile
Homes, Inc., 987 S.W.2d 571, 574 (Tex.1999) (same); EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 89–90 (Tex.1996)
(same); Prudential Sec. Inc. v. Marshall, 909 S.W.2d 896, 899 (Tex.1995).
19 See, e.g., Creative Solutions Group, Inc. v. Pentzer Corp., 252 F.3d 28, 32–34 (1st Cir.2001); Doctor's Assocs., Inc.
v. Distajo, 66 F.3d 438, 456 (2d Cir.1995); Wood v. Prudential Ins. Co. of Am., 207 F.3d 674, 680 (3d Cir.2000); Am.
Recovery Corp. v. Computerized Thermal Imaging, Inc., 96 F.3d 88, 96 (4th Cir.1996); Subway Equip. Leasing Corp. v.
Forte, 169 F.3d 324, 329 (5th Cir.1999); Germany v. River Terminal Ry. Co., 477 F.2d 546, 547 (6th Cir.1973); Ernst &
Young LLP v. Baker O'Neal Holdings, Inc., 304 F.3d 753, 758 (7th Cir.2002); Ritzel Commc'ns v. Mid–American Cellular,
989 F.2d 966, 969–71 (8th Cir.1993); Martin Marietta Aluminum, Inc. v. Gen. Elec. Co., 586 F.2d 143, 146 (9th Cir.1978);
Metz v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 39 F.3d 1482, 1489–90 (10th Cir.1994); Ivax Corp., 286 F.3d at 1316;
Nat'l Found. for Cancer Research v. A.G. Edwards & Sons, Inc., 821 F.2d 772, 777–78 (D.C.Cir.1987).
20 537 U.S. 79, 84, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp.,
460 U.S. 1, 24–25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)).
21 See, e.g., Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444, 447, 123 S.Ct. 2402, 156 L.Ed.2d 414 (2003) (holding whether
arbitration could proceed by class action was question for arbitrator); John Wiley & Sons, Inc. v. Livingston, 376 U.S.
543, 557, 84 S.Ct. 909, 11 L.Ed.2d 898 (1964) (holding question whether steps of grievance procedure prerequisite to
arbitration had been completed was for arbitrator); Sleeper Farms v. Agway, Inc., 506 F.3d 98, 104 (1st Cir.2007) (noting
question whether breach of contract voided arbitration clause would normally be for arbitrator); United Steelworkers of
Am. v. Saint Gobain Ceramics & Plastics, Inc., 505 F.3d 417, 422 (6th Cir.2007) (holding question of timely demand
for arbitration was for arbitrator); Ansari v. Qwest Commc'ns Corp., 414 F.3d 1214, 1220–21 (10th Cir.2005) (holding
question whether plaintiffs waived forum selection clause by filing suit elsewhere was for arbitrator); Pro Tech Indus.,
Inc. v. URS Corp., 377 F.3d 868, 871–72 (8th Cir.2004) (holding questions of timely demand and waiver by failing to
initiate arbitration were for arbitrator); Glass v. Kidder Peabody & Co., 114 F.3d 446, 457 (4th Cir.1997) (holding question
of timely demand for arbitration was for arbitrator); Great W. Mortgage Corp. v. Peacock, 110 F.3d 222, 231–32 (3d
Cir.1997) (holding question of waiver of substantive state law rights was for arbitrator).
22 See Howsam, 537 U.S. at 81–82, 123 S.Ct. 588.
23 Id. at 86, 123 S.Ct. 588.

51 Tex. Sup. Ct. J. 819
24 Id. at 85, 123 S.Ct. 588.

25 Tristar Fin. Ins. Agency, Inc. v. Equicredit Corp. of Am., 97 Fed.Appx. 462, 464 (5th Cir.2004).
26 Id.
27 Howsam, 537 U.S. at 83–84, 123 S.Ct. 588 (internal quotations omitted); see also Green Tree Fin. Corp. v. Bazzle, 539
U.S. 444, 451–52, 123 S.Ct. 2402, 156 L.Ed.2d 414 (2003).
28 See Marie v. Allied Home Mortgage Corp., 402 F.3d 1, 13 (1st Cir.2005).
29 Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 449, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006) (“We reaffirm
today that ... a challenge to the validity of the contract as a whole, and not specifically to the arbitration clause, must
go to the arbitrator.”).
30 In re Merrill Lynch Trust Co. FSB, 235 S.W.3d 185, 190 (Tex.2007) (holding claim that contract was illusory went to
contract as a whole and thus was for arbitrators); In re FirstMerit Bank, N.A., 52 S.W.3d 749, 756 (Tex.2001) (“The de
los Santoses assert the defenses of unconscionability, duress, fraudulent inducement, and revocation. We again note
that these defenses must specifically relate to the Arbitration Addendum itself, not the contract as a whole, if they are
to defeat arbitration.”); see also In re Kaplan Higher Educ. Corp., 235 S.W.3d 206, 210 (Tex.2007) (holding claim of
“unclean hands” that went to contract as a whole rather than arbitration clause was question for arbitrators).
31 In re Tyco Int'l Ltd. Sec. Litig., 422 F.3d 41, 45–47 (1st Cir.2005); Marie, 402 F.3d at 13–14; In re Citigroup, Inc., 376
F.3d 23, 27–29 (1st Cir.2004); Rankin v. Allstate Ins. Co., 336 F.3d 8, 12–14 (1st Cir.2003); Restoration Pres. Masonry,
Inc. v. Grove Eur. Ltd., 325 F.3d 54, 61–63 (1st Cir.2003).
32 Ehleiter v. Grapetree Shores, Inc., 482 F.3d 207, 217–21 (3d Cir.2007).
33 Republic Ins. Co. v. PAICO Receivables, LLC, 383 F.3d 341, 344–47 (5th Cir.2004); Tristar Fin. Ins. Agency, Inc. v.
Equicredit Corp. of Am., 97 Fed.Appx. 462, 464 (5th Cir.2004).
34 Lewallen v. Green Tree Servicing, L.L.C., 487 F.3d 1085, 1090–94 (8th Cir.2007); Kelly v. Golden, 352 F.3d 344, 349–
50 (8th Cir.2003). The Eighth Circuit did refer to Howsam in one case as requiring waiver to be referred to arbitrators, but
that case involved an allegation of waiver by previous arbitration, not litigation. See Nat'l Am. Ins. Co. v. Transamerica
Occidental Life Ins. Co., 328 F.3d 462, 463–66 (8th Cir.2003).
35 See David LeFevre, Note, Whose Finding is it Anyway?: The Division of Labor Between Courts and Arbitrators with
Respect to Waiver, 2006 J. DISP. RESOL.. 305, 316–17 (2006); Stephen K. Huber, The Arbitration Jurisprudence of the
Fifth Circuit, Round II, 37 TEX. TECH L.REV. 531, 542 (2005).
36 In re Bank One, N.A., 216 S.W.3d 825, 827 (Tex.2007); In re D. Wilson Constr. Co., 196 S.W.3d 774, 783 (Tex.2006);
In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 763 (Tex.2006); In re Serv. Corp. Int'l, 85 S.W.3d 171, 174 (Tex.2002);
In re Oakwood Mobile Homes, Inc., 987 S.W.2d 571, 574 (Tex.1999); In re Bruce Terminix Co., 988 S.W.2d 702, 704
(Tex.1998); EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 89 (Tex.1996); Prudential Sec. Inc. v. Marshall, 909 S.W.2d
896, 898–99 (Tex.1995).
37 In re Bank One, N.A., 216 S.W.3d at 827; In re D. Wilson Constr. Co., 196 S.W.3d at 783; In re Vesta Ins. Group, Inc.,
192 S.W.3d at 763; In re Serv. Corp. Int'l, 85 S.W.3d at 174; In re Bruce Terminix Co., 988 S.W.2d at 704; EZ Pawn
Corp., 934 S.W.2d at 89.
38 In re D. Wilson Constr. Co., 196 S.W.3d at 783.
39 In re Vesta Ins. Group, Inc., 192 S.W.3d at 764.
40 In re Bank One, N.A., 216 S.W.3d at 827.
41 In re Serv. Corp. Int'l, 85 S.W.3d at 174–75.
42 Prudential Sec. Inc. v. Marshall, 909 S.W.2d 896, 898–99 (Tex.1995).
43 In re Bruce Terminix Co., 988 S.W.2d at 704.
44 EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 90 (Tex.1996).
45 In re Vesta Ins. Group, Inc., 192 S.W.3d at 763 (holding requests for disclosure, four depositions, and request for
production did not waive arbitration absent proof regarding extent of requests and whether they addressed merits or
arbitrability).
46 Id. at 764.
47 In re Tyco Int'l Ltd. Sec. Litig., 422 F.3d 41, 46 (1st Cir.2005) (“[E]ach case is to be judged on its particular facts.”);
Republic Ins. Co. v. PAICO Receivables, LLC, 383 F.3d 341, 346 (5th Cir.2004) (“Ultimately, however, the question of
what constitutes a waiver of the right of arbitration depends on the facts of each case.”); accord, Ivax Corp. v. B. Braun
of Am., Inc., 286 F.3d 1309, 1315 (11th Cir.2002); Grumhaus v. Comerica Sec., Inc., 223 F.3d 648, 650 (7th Cir.2000);

51 Tex. Sup. Ct. J. 819
Nat'l Found. for Cancer Research v. A.G. Edwards & Sons, Inc., 821 F.2d 772, 774 (D.C.Cir.1987); Tenneco Resins,
Inc. v. Davy Int'l, AG, 770 F.2d 416, 420 (5th Cir.1985).
48 Grumhaus, 223 F.3d at 650; see also Cabinetree of Wis., Inc. v. Kraftmaid Cabinetry, Inc., 50 F.3d 388, 391 (7th Cir.1995).
49 PAICO, 383 F.3d at 346; In re Citigroup, Inc., 376 F.3d 23, 26 (1st Cir.2004); Metz v. Merrill Lynch, Pierce, Fenner &
Smith, Inc., 39 F.3d 1482, 1489 (10th Cir.1994); Hoxworth v. Blinder, Robinson & Co., 980 F.2d 912, 926 (3d Cir.1992).
50 Brown v. Dillard's, Inc., 430 F.3d 1004, 1012 (9th Cir.2005); Patten Grading & Paving, Inc. v. Skanska USA Bldg., Inc.,
380 F.3d 200, 206 (4th Cir.2004).
51 PAICO, 383 F.3d at 346; Kelly v. Golden, 352 F.3d 344, 349 (8th Cir.2003); Hoxworth, 980 F.2d at 926; Gilmore v.
Shearson/American Express Inc., 811 F.2d 108, 112 (2d Cir.1987); Sedco, Inc. v. Petroleos Mexicanos Mexican Nat'l
Oil Co., 767 F.2d 1140, 1150–51 (5th Cir.1985).
52 PAICO, 383 F.3d at 346; Patten Grading, 380 F.3d at 205; In re Citigroup, 376 F.3d at 26; Metz, 39 F.3d at 1489;
Hoxworth, 980 F.2d at 927.
53 Hoxworth, 980 F.2d at 927; Com–Tech Assocs. v. Computer Assocs. Int'l, Inc., 938 F.2d 1574, 1577 (2d Cir.1991); E.C.
Ernst, Inc. v. Manhattan Constr. Co., 551 F.2d 1026, 1040–41 (5th Cir.1977); Blake Constr. Co. v. U.S. for Use and
Benefit of Lichter, 252 F.2d 658, 662 (5th Cir.1958).
54 In re Citigroup, 376 F.3d at 26; Metz, 39 F.3d at 1489.
55 In re Citigroup, 376 F.3d at 26; Kelly, 352 F.3d at 349; Metz, 39 F.3d at 1489.
56 Kelly, 352 F.3d at 349; Metz, 39 F.3d at 1489.
57 Leadertex, Inc. v. Morganton Dyeing & Finishing Corp., 67 F.3d 20, 25 (2d Cir.1995); Peterson v. Shearson/American
Express, Inc., 849 F.2d 464, 468 (10th Cir.1988) (finding waiver as movant waited until five weeks before trial date to
move to compel).
58 See, e.g., Restoration Preserv. Masonry, Inc. v. Grove Eur. Ltd., 325 F.3d 54, 62 (1st Cir.2003) (finding three-year delay
alone sufficient to establish waiver); Cabinetree of Wis., Inc. v. Kraftmaid Cabinetry, Inc., 50 F.3d 388, 391 (7th Cir.1995)
(finding removal to federal court alone sufficient to establish waiver).
59 See EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 88–89 (Tex.1996) (finding no waiver as defendant did not discover
existence of arbitration agreement for almost a year).
60 In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 763 (Tex.2006).
61 Id.
62 Id.
63 Id.; In re Bruce Terminix Co., 988 S.W.2d 702, 704 (Tex.1998).
65 173 S.W.3d at 570.
66 See In re Bruce Terminix Co., 988 S.W.2d at 704.
67 See, e.g., TEX. CIV. PRAC. & REM.CODE § 171.021(a) (“A court shall order the parties to arbitrate on application of a
party showing: (1) an agreement to arbitrate; and (2) the opposing party's refusal to arbitrate.”).
68 In re D. Wilson Constr. Co., 196 S.W.3d 774, 783 (Tex.2006); accord, United Computer Sys., Inc. v. AT & T Corp., 298
F.3d 756, 764 (9th Cir.2002).
69 See R.R. St. & Co. v. Pilgrim Enters., Inc., 166 S.W.3d 232, 242–43 (Tex.2005) (quotation marks omitted) (applying
totality-of-the-circumstances test in determining whether party “otherwise arranged” to dispose of hazardous waste).
70 See Burton–Dixie Corp. v. Timothy McCarthy Constr. Co., 436 F.2d 405, 407–08 (5th Cir.1971) (“There is no set rule,
however, as to what constitutes a waiver or abandonment of the arbitration agreement. The question depends upon
the facts of each case and usually must be determined by the trier of facts.”); Joel E. Smith, Annotation, Defendant's
Participation in Action as Waiver of Right to Arbitration of Dispute Involved Therein, 98 A.L.R.3d 767, 771 (1980) (“In
those cases involving the issue of whether the defendant's participation in an action constitutes a waiver of the right to
arbitrate the dispute involved therein, no general rules are readily apparent for determining waiver other than the general
adherence by the courts to the principle that waiver is to be determined from the particular facts and circumstances of
each case....”).
71 Kulko v. Superior Court of Cal., 436 U.S. 84, 92, 98 S.Ct. 1690, 56 L.Ed.2d 132 (1978) (quoting Estin v. Estin, 334 U.S.
541, 545, 68 S.Ct. 1213, 92 L.Ed. 1561 (1948)).
72 See, e.g., TEX.R. CIV. P. 190.2(c)(2) (limiting parties in Level 1 cases to six hours of depositions).
73 See, e.g., In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 763 (Tex.2006) (holding four depositions did not waive arbitration
as record did not show whether they were limited or extensive or whether they addressed merits or merely arbitrability).

51 Tex. Sup. Ct. J. 819
74 Trammell Crow Co. No. 60 v. Harkinson, 944 S.W.2d 631, 636 (Tex.1997); see English v. Fischer, 660 S.W.2d 521, 524
(Tex.1983); Moore Burger, Inc. v. Phillips Petroleum Co., 492 S.W.2d 934, 936–37 (Tex.1972); Wheeler v. White, 398
S.W.2d 93, 96 (Tex.1965); RESTATEMENT (SECOND) OF CONTRACTS § 90 (1979).
75 In re Weekley Homes, L.P., 180 S.W.3d 127, 133–35 (Tex.2005); accord, Meyer v. WMCO–GP, LLC, 211 S.W.3d 302,
305 (Tex.2006).
76 First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 943, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995).
77 See Van Indep. Sch. Dist. v. McCarty, 165 S.W.3d 351, 353 (Tex.2005); First Valley Bank of Los Fresnos v. Martin, 144
S.W.3d 466, 471 (Tex.2004); Jernigan v. Langley, 111 S.W.3d 153, 156 (Tex.2003); Equitable Life Assurance Soc'y of
U.S. v. Ellis, 105 Tex. 526, 152 S.W. 625, 628 (1913).
78 In re D. Wilson Constr. Co., 196 S.W.3d 774, 783 (Tex.2006); EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 89 (Tex.1996).
79 In re Bruce Terminix Co., 988 S.W.2d 702, 704 (Tex.1998).
80 In re Bank One, N.A., 216 S.W.3d 825, 827 (Tex.2007); In re D. Wilson Constr. Co., 196 S.W.3d at 783; In re Vesta
Ins. Group, Inc., 192 S.W.3d 759, 763 (Tex.2006); In re Serv. Corp. Int'l, 85 S.W.3d 171, 174 (Tex.2002); In re Bruce
Terminix Co., 988 S.W.2d at 704; In re Oakwood Mobile Homes, Inc., 987 S.W.2d 571, 574 (Tex.1999); EZ Pawn Corp.,
934 S.W.2d at 89; Prudential Sec. Inc. v. Marshall, 909 S.W.2d 896, 898–99 (Tex.1995).
81 See In re Gen. Elec. Capital Corp., 203 S.W.3d 314, 316 (Tex.2006); Sun Exploration & Prod. Co. v. Benton, 728 S.W.2d
35, 37 (Tex.1987); Bocanegra v. Aetna Life Ins. Co., 605 S.W.2d 848, 851 (Tex.1980); Mass. Bonding & Ins. Co. v.
Orkin Exterminating Co., 416 S.W.2d 396, 401 (Tex.1967); Texas & P. Ry. Co. v. Wood, 145 Tex. 534, 199 S.W.2d
652, 656 (1947); Kennedy v. Bender, 104 Tex. 149, 135 S.W. 524, 526 (1911); see also Cabinetree of Wis., Inc. v.
Kraftmaid Cabinetry, Inc., 50 F.3d 388, 390 (7th Cir.1995) (citing authorities showing that contract law generally holds
waiver effective without proof of detrimental reliance).
82 Mass. Bonding & Ins. Co. v. Orkin Exterminating Co., 416 S.W.2d 396, 401 (Tex.1967).
83 See Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 686–87, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996); Allied–Bruce
Terminix Cos. v. Dobson, 513 U.S. 265, 281, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995).
84 In re Citigroup, Inc., 376 F.3d 23, 26 (1st Cir.2004) (“We have emphasized that, to succeed on a claim of waiver, plaintiffs
must show prejudice.”); Thyssen, Inc. v. Calypso Shipping Corp., S.A., 310 F.3d 102, 105 (2d Cir.2002); Hoxworth v.
Blinder, Robinson & Co., 980 F.2d 912, 925 (3d Cir.1992) (“[P]rejudice is the touchstone for determining whether the
right to arbitrate has been waived....”); Patten Grading & Paving, Inc. v. Skanska USA Bldg., Inc., 380 F.3d 200, 206
(4th Cir.2004) ( “[T]he dispositive question is whether the party objecting to arbitration has suffered actual prejudice.”)
(internal quotations and italics omitted); Republic Ins. Co. v. PAICO Receivables, LLC, 383 F.3d 341, 346 (5th Cir.2004)
(“In addition to the invocation of the judicial process, there must be prejudice to the party opposing arbitration before we
will find that the right to arbitrate has been waived.”); O.J. Distrib., Inc. v. Hornell Brewing Co., 340 F.3d 345, 356 (6th
Cir.2003); Kelly v. Golden, 352 F.3d 344, 349 (8th Cir.2003) (“The actions must result in prejudice to the other party for
waiver to have occurred.”); Brown v. Dillard's, Inc., 430 F.3d 1004, 1012 (9th Cir.2005); Metz v. Merrill Lynch, Pierce,
Fenner & Smith, Inc., 39 F.3d 1482, 1490 (10th Cir.1994); Ivax Corp. v. B. Braun of Am., Inc., 286 F.3d 1309, 1316 (11th
Cir.2002) (“[W]e look to see whether, by [invoking the litigation process], that party has in some way prejudiced the other
party.”) (internal quotations omitted).
85 St. Mary's Med. Ctr. of Evansville, Inc. v. Disco Aluminum Prods. Co., 969 F.2d 585, 590–91 (7th Cir.1992); Nat'l Found.
for Cancer Research v. A.G. Edwards & Sons, Inc., 821 F.2d 772, 777 (D.C.Cir.1987) (holding “a court may consider
prejudice to the objecting party as a relevant factor among the circumstances that the court examines in deciding whether
the moving party has taken action inconsistent with the agreement to arbitrate”).
86 In re Weekley Homes, L.P., 180 S.W.3d 127, 130–31 (Tex.2005); In re Kellogg Brown & Root, Inc., 166 S.W.3d 732,
738–39 (Tex.2005); see also Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 87, 123 S.Ct. 588, 154 L.Ed.2d 491
(2002) (Thomas, J., concurring) (suggesting Supreme Court sometimes looks to federal law and sometimes law chosen
by parties); Wash. Mut. Fin. Group, LLC v. Bailey, 364 F.3d 260, 267 n. 6 (5th Cir.2004) (noting that whether state or
federal law of arbitrability applies “is often an uncertain question”).
87 Trammell Crow Co. No. 60 v. Harkinson, 944 S.W.2d 631, 636 (Tex.1997); see English v. Fischer, 660 S.W.2d 521,
524 (Tex.1983); Moore Burger, Inc. v. Phillips Petroleum Co., 492 S.W.2d 934, 936 (Tex.1972); Wheeler v. White, 398
88 RESTATEMENT (SECOND) OF CONTRACTS § 87(2) (1981) (“An offer which the offeror should reasonably expect to
induce action or forbearance of a substantial character on the part of the offeree before acceptance and which does
induce such action or forbearance is binding as an option contract to the extent necessary to avoid injustice.”).

51 Tex. Sup. Ct. J. 819
89 Because we limit our review to the record before the trial judge, we do not consider the Defendants' additional seven
volumes of discovery exhibits filed after the arbitration award.
90 173 S.W.3d 565, 570; see also Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 89, 121 S.Ct. 513, 148 L.Ed.2d
373 (2000) (holding that unconscionable arbitration fee would render clause unenforceable).
91 See In re Tyco Int'l Ltd. Sec. Litig., 422 F.3d 41, 46 (1st Cir.2005) (holding defendant's objections to arbitration before
criminal trial waived his right to arbitration); Gilmore v. Shearson/American Exp. Inc., 811 F.2d 108, 112 (2d Cir.1987)
(holding party's withdrawal of its prior motion to compel arbitration constituted express waiver of that right).
92 See In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 764 (Tex.2006) (citing Com–Tech Assocs. v. Computer Assocs. Int'l,
Inc., 938 F.2d 1574, 1576–77 (2d Cir.1991), in which arbitration was waived by request that did not come until 18 months
after filing and 4 months before trial).
93 Republic Ins. Co. v. PAICO Receivables, LLC, 383 F.3d 341, 346 (5th Cir.2004) (punctuation omitted); accord, In re Tyco,
422 F.3d at 46 n. 5 (“[A] party should not be allowed purposefully and unjustifiably to manipulate the exercise of its arbitral
rights simply to gain an unfair tactical advantage over the opposing party.”); In re Citigroup, Inc., 376 F.3d 23, 28 (1st
Cir.2004); Subway Equip. Leasing Corp. v. Forte, 169 F.3d 324, 327 (5th Cir.1999); PPG Indus., Inc. v. Webster Auto
Parts, Inc., 128 F.3d 103, 107 (2d Cir.1997); Doctor's Assocs. v. Distajo, 107 F.3d 126, 134 (2d Cir.1997) (“[P]rejudice as
defined by our cases refers to the inherent unfairness-in terms of delay, expense, or damage to a party's legal position-
that occurs when the party's opponent forces it to litigate an issue and later seeks to arbitrate that same issue.”).
94 In re Tyco, 422 F.3d at 46 n. 5.
95 See, e.g., Tenneco Inc. v. Enter. Prods. Co., 925 S.W.2d 640, 643 (Tex.1996) (holding companies waived contractual
right to approve assignments by treating assignee as full partner); Ford v. State Farm Mut. Auto. Ins. Co., 550 S.W.2d
663, 666 (Tex.1977) (holding insurer waived contractual right to consent to settlement by denying liability under policy).
96 See Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404 n. 12, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967) (“[T]he
purpose of Congress in 1925 was to make arbitration agreements as enforceable as other contracts, but not more so.”).
97 W. Wendell Hall, Standards of Review in Texas, 38 ST. MARY'S L.J . 43, 67 (2006).
98 TEX. CIV. PRAC. & REM.CODE § 37.009 (“In any proceeding under this chapter, the court may award costs and
reasonable and necessary attorney's fees as are equitable and just.” (emphasis added)).
99 See TEX.R. EVID. 801–806.
100 See Nat'l Liab. and Fire Ins. Co. v. Allen, 15 S.W.3d 525, 529 (Tex.2000) (hearsay); Bocquet v. Herring, 972 S.W.2d
19, 21 (Tex.1998) (declaratory fee award).
101 In re Serv. Corp. Int'l, 85 S.W.3d 171, 174 (Tex.2002); In re Oakwood Mobile Homes, Inc., 987 S.W.2d 571, 574
(Tex.1999); In re Bruce Terminix Co., 988 S.W.2d 702, 703–04 (Tex.1998).
102 Brainard v. State, 12 S.W.3d 6, 30 (Tex.1999) (holding that in abuse-of-discretion standard “we defer to the trial court's
factual determinations if they are supported by the evidence and review its legal determinations de novo”); Walker v.
Packer, 827 S.W.2d 833, 840 (Tex.1992) (“A trial court has no ‘discretion’ in determining what the law is or applying the
law to the facts. Thus, a clear failure by the trial court to analyze or apply the law correctly will constitute an abuse of
discretion ....”); see Hall, supra note 97, at 284 (“When the trial court's findings involve [mixed] questions of law and fact,
the appellate court reviews the trial court's decision for an abuse of discretion. In applying the standard, the reviewing
court defers to the trial court's factual determinations if supported by the evidence and reviews its legal determinations
de novo.”); cf. Gulf Guar. Life Ins. Co. v. Conn. Gen. Life Ins. Co., 304 F.3d 476, 484 (5th Cir.2002) (“This court reviews
de novo a district court's dismissal of a claim that a party waived its right to arbitrate.”); accord, Ivax Corp. v. B. Braun of
Am., Inc., 286 F.3d 1309, 1316 (11th Cir.2002); Subway Equip. Leasing Corp. v. Forte, 169 F.3d 324, 326 (5th Cir.1999).
103 Brainard, 12 S.W.3d at 30; Walker, 827 S.W.2d at 840; see Hall, supra note 97, at 284; cf. Gulf Guar., 304 F.3d at 484;
accord, Ivax Corp., 286 F.3d at 1316; Subway Equip., 169 F.3d at 326.
104 See Reliance Nat'l Indem. Co. v. Advance'd Temps., Inc., 227 S.W.3d 46, 50 (Tex.2007) (“What might otherwise be a
question of fact becomes one of law when the fact is not in dispute or is conclusively established.”); Hall, supra note 97,
at 284 (“[A] trial court abuses its discretion [if the court] ... fails to properly apply the law to the undisputed facts....”).
105 See supra Part VI.A.
106 258 S.W.3d at 606–07 (“But even if the Court is right and the reimbursement clause does not allow for recovery of all
Defendants' litigation attorney's fees, an arbitration award would not be subject to being vacated if an arbitrator interpreted
it to allow recovery of all the fees.”).
107 The parties contract limited reimbursement to costs incurred in “seeking dismissal” of litigation, not costs incurred in
preparing it for trial:

51 Tex. Sup. Ct. J. 819
Inasmuch as this Agreement provides for mandatory arbitration of disputes, if any party commences litigation in
violation of this Agreement, such party shall reimburse the other parties to the litigation for their costs and expenses
including attorney's fees incurred in seeking dismissal of such litigation.
(emphasis added).
108 See Preston v. Ferrer, 552 U.S. 346, 128 S.Ct. 978, 986, 169 L.Ed.2d 917 (2008) (“A prime objective of an agreement to
arbitrate is to achieve streamlined proceedings and expeditious results.”); Cabinetree of Wis., Inc. v. Kraftmaid Cabinetry,
Inc., 50 F.3d 388, 391 (7th Cir.1995) (noting that “the discovery provisions of the Federal Rules of Civil Procedure are
more generous than those of the American Arbitration Association”); cf. Price v. Drexel Burnham Lambert, Inc., 791 F.2d
1156, 1160 (5th Cir.1986) (finding prejudice due to discovery as “discovery—whether meaningful or otherwise—is not
available in arbitration”); Miller Brewing Co. v. Fort Worth Distrib. Co., 781 F.2d 494, 498 (5th Cir.1986) (“A party to
arbitration does not have a right to the pre-trial discovery procedures that are used in a case at law.”); Developments in the
Law–Discovery, 74 HARV. L.REV.. 940, 943 (1961) (noting expense of discovery as inconsistent with desire to arbitrate).
109 The court of appeals affirmed on this basis. 173 S.W.3d at 570 (“Appellants did not provide any evidence of the work
done, time spent, or costs incurred that would not have been done or incurred in anticipation of an arbitration hearing.”).
110 TEX. CIV. PRAC. & REM.CODE § 171.021(b); see Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 269 (Tex.1992).
111 Republic Ins. Co. v. PAICO Receivables, LLC, 383 F.3d 341, 346 (5th Cir.2004) (internal citations and punctuation
omitted).
112 In re Vesta Ins. Group, Inc., 192 S.W.3d 759 (Tex.2006).
113 Two of the numerous defendants in Vesta initially objected to the remaining defendants' motion to compel arbitration, but
withdrew that objection before the hearing on the motion.
114 Id. at 763.
115 Id.
116 The defendants in Vesta had stipulated that all discovery obtained so far could be used in arbitration.
117 See TEX.R. CIV. P. 12.
1 In relevant part, the provision provided for the homeowners, the builder, the administrator of the warranty program, and
the warranty insurer to submit to arbitration
all claims, demands, disputes, controversies, and differences that may arise between the parties to this Agreement
of whatever kind or nature, including without limitation, disputes: (1) as to events, representations, or omissions
which pre-date this Agreement; (2) arising out of this Agreement or other action performed or to be performed by
the Builder, the Administrator or the Insurer pursuant to this Agreement.
As to procedures in arbitration, the arbitration provision provided that “The Arbitration shall be conducted in accordance
with the Arbitrator's rules and regulations to the extent that they are not in conflict with the Federal Arbitration Act.”
2 The trial court did not order arbitration as to defendants Jerald W. Kunkel, the foundation engineer, and his firm. The Culls
agreed the Kunkel defendants were not covered by the arbitration agreement. The Kunkel defendants are not parties
to this appeal.
3 Defendants referenced depositions in their motion for rehearing. They did not take the position or offer proof at the hearing
on the Culls' motion to compel arbitration that depositions would not have occurred in arbitration either by permission
of the arbitrator or by agreement.
4 Although not before the trial court when it ordered arbitration, the arbitration record now before us shows that Defendants
considered the clause to provide for recovery of all litigation costs and attorneys' fees, not just those incurred in seeking
dismissal of the lawsuit. The arbitration record shows Defendants claimed that pursuant to the reimbursement clause
they were “entitled to recover or setoff [their] attorney's fees from [the Culls], which were incurred in connection, with the
litigation.” Perry Homes' attorney submitted an affidavit to the arbitrator in support of the claim for attorneys' fees recovery
or setoff. The affidavit mirrored the affidavit submitted as part of Defendants' motion for reconsideration that was earlier
filed in the lawsuit. The arbitration affidavit claimed that
Prior to the Court's order compelling arbitration, Perry Homes incurred one-hundred-twenty-two (122) attorney
hours and twenty (20) paralegal hours responding to Claimants' discovery requests and discovery-related motions.
Accordingly, Perry Homes is entitled to an offset in the amount of $26,400.00 against any damages awarded to
Claimants, due to their violation of the arbitration agreement.
5 The Federal Arbitration Act provides that an arbitration award may be set aside for limited reasons:
(1) where the award was procured by corruption, fraud, or undue means;
(2) where there was evident partiality or corruption in the arbitrators, or either of them;

51 Tex. Sup. Ct. J. 819
(3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown,
or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the
rights of any party have been prejudiced; or
(4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite
award upon the subject matter submitted was not made.
9 U.S.C. § 10(a).
6 Of course, that argument cuts against the idea that discovery was not usable in arbitration.
1 See Chambers v. O'Quinn, 242 S.W.3d 30 (Tex.2007); In re U.S. Home Corp., 236 S.W.3d 761 (Tex.2007). This case
is the third.
2 In re Great Western Drilling, Ltd., 211 S.W.3d 828 (Tex.App.–Eastland 2006), pet. granted, 51 Tex. Sup.Ct. J. 77 (Nov.
2, 2007); Werline v. E. Tex. Salt Water Disposal Co., 209 S.W.3d 888 (Tex.App.–Texarkana 2006), pet. granted, 51 Tex.
Sup.Ct. J. 77 (Nov. 2, 2007); Bison Bldg. Materials v. Aldridge, 2006 WL 2641280 (Tex.App.–Houston [1st Dist.] 2006),
pet. granted, 51 Tex. Sup.Ct. J. 77 (Nov. 2, 2007); Forest Oil Corp. v. McAllen, 2005 WL 3435061 (Tex.App.–Corpus
Christi 2005), pet. granted, 51 Tex. Sup.Ct. J. 667 (Apr. 27, 2007).
3 In re Nitla, 92 S.W.3d 419, 422 (Tex.2002) (citing Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241–42
(Tex.1985)).
4 258 S.W.3d at 598.
5 Nitla, 92 S.W.3d at 422.

Pilot Travel Centers, LLC v. McCray, 416 S.W.3d 168 (2013)
[6] employer did not “substantially invoke” litigation

416 S.W.3d 168
process, as required to establish waiver of employer's
contractual right to arbitration; and
Dallas.
PILOT TRAVEL CENTERS, LLC, Appellant [7] employee did not qualify as “transportation worker”
v. within meaning of FAA provision exempting contracts of
Joan McCRAY, James McCray, and employment of workers engaged in foreign or interstate
commerce from FAA's coverage.
Shamekia Gullatte, as Next Friend
of Brandon Gullatte, Appellees.
No. 05–13–00002–CV.
|
Nov. 5, 2013.
West Headnotes (30)
Synopsis
Background: Wrongful death beneficiaries of employee
who died as a result of injuries sustained within course [1] Alternative Dispute Resolution
and scope of his employment as a maintenance worker Review
brought wrongful death action against employer, alleging Employer who sought to compel arbitration
that employer's negligence proximately caused employee's in wrongful death action brought by estate of
death. Employer filed motion to compel arbitration and deceased employee was entitled to extension
to stay litigation. The 298th Judicial District Court, of time limit for filing interlocutory appeal
Dallas County, Emily G. Tobolowsky, J., denied motion. from trial court's order denying employer's
Employer appealed. motion to compel arbitration, pursuant to rule
extending time within which to file appeal
when a party does not receive notice or
knowledge of the judgment within 20 days
Holdings: The Court of Appeals, Fillmore, J., held that:
after judgment was signed, where employer
obtained requisite finding from trial court
[1] valid agreement to arbitrate all claims arising from
that it did not receive notice of trial court's
a work-related injury or illness under the Federal
original order within 20 days after order was
Arbitration Act (FAA) existed between employer and
signed. Rules App.Proc., Rule 4.2; Vernon's
employee;
Ann.Texas Rules Civ.Proc., Rule 306a(5).
[2] employee's wrongful death beneficiaries were bound by 1 Cases that cite this headnote
employee's agreement to arbitrate;
[3] mere inequality of bargaining power was not [2] Appeal and Error
sufficient render arbitration agreement procedurally Extension of Time
unconscionable; In order to invoke benefit of rule extending
time within which to file appeal when a party
[4] fee provision of arbitration agreement, which required does not receive notice or knowledge of the
that party seeking arbitration pay filing fee and that judgment within 20 days after judgment was
arbitrators' costs and fees be borne equally by the parties, signed, party must obtain an order from the
was not substantively unconscionable; trial court that reflects the date the party or the
party's attorney first either received notice or
[5] provision of arbitration agreement limiting amount acquired actual knowledge that the order was
of discovery to be conducted was not substantively signed. Vernon's Ann.Texas Rules Civ.Proc.,
unconscionable; Rules 306a(4, 5).


What law governs Remedies and Proceedings for
When a party asserts a right to arbitrate Enforcement in General
under the Federal Arbitration Act (FAA), the A court has no discretion and must compel
question of whether the dispute is subject to arbitration under the Federal Arbitration Act
arbitration is determined under federal law. 9 (FAA) if it is established that there is a valid
U.S.C.A. § 1 et seq. arbitration agreement and the claims raised
fall within the scope of that agreement. 9
Cases that cite this headnote U.S.C.A. § 1 et seq.

As a matter of federal law under the [8] Alternative Dispute Resolution
Federal Arbitration Act (FAA), any doubts Disputes and Matters Arbitrable Under
concerning the scope of arbitrable issues Agreement
are resolved in favor of arbitration, whether Under Federal Arbitration Act (FAA), an
pertaining to the construction of the contract order to arbitrate should not be denied unless
or a defense to arbitrability. 9 U.S.C.A. § 1 et it can be said with positive assurance that
seq. the arbitration cause is not susceptible of an
interpretation that covers the asserted dispute.
Cases that cite this headnote 9 U.S.C.A. § 1 et seq.

Validity
Alternative Dispute Resolution [9] Alternative Dispute Resolution
Disputes and Matters Arbitrable Under Disputes and Matters Arbitrable Under
Agreement Agreement
In general, a party seeking to compel To determine if a claim falls within the scope
arbitration under the Federal Arbitration Act of an arbitration agreement under the Federal
(FAA) must establish (1) the existence of a Arbitration Act (FAA), the court focuses on
valid, enforceable arbitration agreement and the facts alleged, not the causes of action
(2) that the claims at issue fall within that asserted. 9 U.S.C.A. § 1 et seq.
agreement's scope. 9 U.S.C.A. § 1 et seq.
[6] Alternative Dispute Resolution Employment disputes
Evidence Under terms of employer's occupational
Party seeking to avoid arbitration under the injury benefit plan, valid agreement to
Federal Arbitration Act (FAA) bears the arbitrate all claims arising from a work-
burden of raising an affirmative defense to related injury or illness under the Federal
enforcement of the otherwise valid arbitration Arbitration Act (FAA) existed between
provision. 9 U.S.C.A. § 1 et seq. employer and employee who died as a
result of injuries sustained within the
course of his employment, even though

employee's wrongful death beneficiaries refers to the fairness of the arbitration

challenged the validity of employee's provision itself.
signature on document acknowledging
employee's receipt of mandatory arbitration 3 Cases that cite this headnote
provision of occupational injury benefit
plan in their wrongful death action [14] Alternative Dispute Resolution
against employer, where wrongful death Unconscionability
beneficiaries failed to file verified pleading
Mere inequality of bargaining power is
denying that employee had executed
not a sufficient reason to hold an
challenged document acknowledging receipt
arbitration agreement unenforceable, on
of arbitration agreement. 9 U.S.C.A. § 1 et
grounds of procedural unconscionability, in
seq.; Vernon's Ann.Texas Rules Civ.Proc.,
the employment context.
Rule 93(7).

Unconscionability
Fee provision of arbitration agreement
Employee's wrongful death beneficiaries,
between employer and employee who died
as derivative claimants, were bound by
as a result of injuries sustained within the
employee's agreement to arbitrate, pursuant
course of his employment, which required
to employer's occupational injury benefit plan
that parties arbitrate all claims arising
that contained an agreement to arbitrate all
from a work-related injury or illness, that
claims arising from a work-related injury
party seeking arbitration pay filing fee,
or illness under the Federal Arbitration
and that arbitrators' costs and fees be
Act (FAA), even though wrongful death
borne equally by the parties, was not
beneficiaries had not signed the arbitration
substantively unconscionable, as a defense to
agreement. 9 U.S.C.A. § 1 et seq.
enforcement of agreement in wrongful death
Cases that cite this headnote action by deceased employee's wrongful death
beneficiaries; although beneficiaries resided
in Alabama and employer requested that
[12] Alternative Dispute Resolution arbitration be held in Texas, beneficiaries filed
Evidence wrongful death action in Texas and failed to
Because the law favors arbitration, the party demonstrate that cost of arbitration in Texas
opposing arbitration bears the burden to would be greater than cost of litigation in
prove unconscionability. Texas, and beneficiaries failed to demonstrate
that they lacked financial ability to pay a
2 Cases that cite this headnote portion of arbitrator's fees.

Unconscionability
Unconscionability of an arbitration [16] Alternative Dispute Resolution
agreement may exist in one or both of Unconscionability
two forms: (1) procedural unconscionability, An arbitration agreement that provides for
which refers to the circumstances surrounding fee-splitting is not, by itself, unconscionable.
the adoption of the arbitration provision,
and (2) substantive unconscionability, which 3 Cases that cite this headnote


Unconscionability Evidence
Provision of arbitration agreement between When presented with question of whether a
employer and employee, who died as a result party waived its contractual arbitration rights,
of injuries sustained within the course of his court is required to resolve any doubts in favor
employment, limiting amount of discovery to of arbitration.
be conducted during arbitration proceedings
in a matter involving work-related injury or Cases that cite this headnote
illness was not substantively unconscionable,
as a defense to enforcement of agreement [22] Alternative Dispute Resolution
in wrongful death action by deceased Evidence
employee's wrongful death beneficiaries,
Waiver of a party's contractual arbitration
where agreement permitted each party the
rights may be implied from the party's
same amount of discovery, and agreement
conduct, so long as that conduct is
provided that, upon a showing of good cause,
unequivocal, and in close cases, the strong
either party could obtain an order from the
arbitrator for taking additional depositions
and could obtain approval from the arbitrator 1 Cases that cite this headnote
to utilize requests for production and for
admissions.
Cases that cite this headnote Suing or participating in suit
The judicial process is “substantially
invoked,” as required to establish waiver of
arbitration by litigation conduct, when the
Unconscionability
party seeking arbitration has taken specific
Substantive unconscionability refers to
and deliberate actions, after the filing of the
fairness of an arbitration provision.
suit, that are inconsistent with the right to
3 Cases that cite this headnote arbitrate or has actively tried, but failed, to
achieve a satisfactory result through litigation
before turning to arbitration.
Suing or participating in suit 2 Cases that cite this headnote
A party may waive contractual arbitration
rights by substantially invoking the judicial [24] Alternative Dispute Resolution
process to the detriment of the other party. Suing or participating in suit
1 Cases that cite this headnote Factors considered in determining whether a

movant has substantially invoked the judicial
process, as required to establish waiver of
[20] Alternative Dispute Resolution arbitration by litigation conduct, include
Evidence when the movant knew of the arbitration
Because public policy favors resolving clause, how much discovery has been initiated
disputes through arbitration, the law imposes and who initiated it, the extent to which
a strong presumption against the waiver of discovery related to the merits rather than
contractual arbitration rights. arbitrability or standing, how much of the
discovery would be useful in arbitration,
Cases that cite this headnote whether the movant sought judgment on the

merits, and whether the movant sought to Delay alone generally does not establish
compel arbitration on the eve of trial. waiver of right to arbitration.
2 Cases that cite this headnote Cases that cite this headnote

Suing or participating in suit Suing or participating in suit
“Prejudice,” as required to establish waiver of Litigation conduct of employer of employee
arbitration by litigation conduct, refers to the who died from injuries sustained within the
inherent unfairness in terms of delay, expense, course of his employee did not prejudice
or damage to a party's legal position that employee's wrongful death beneficiaries in
occurs when the party's opponent forces it to their wrongful death action against employer,
litigate an issue and later seeks to arbitrate as required to establish waiver of employer's
that same issue; thus, a party should not contractual right to arbitration pursuant to
be allowed purposefully and unjustifiably to agreement in which employer and employee
manipulate the exercise of its arbitral rights agreed to arbitrate all claims arising from
simply to gain an unfair tactical advantage a work-related injury or illness; although
over the opposing party. employer waited over one year to file motion
to compel arbitration, discovery that had been
Cases that cite this headnote conducted in judicial proceedings would be
useful in arbitration, employer did not seek
[26] Alternative Dispute Resolution to compel arbitration in order to gain an
Suing or participating in suit unfair tactical advantage, and record failed
to demonstrate other detriment suffered by
Employer of employee who died from
beneficiaries.
injuries sustained within the course of his
employee did not “substantially invoke” the Cases that cite this headnote
litigation process in wrongful death action
by employee's wrongful death beneficiaries,
as required to establish waiver of employer's [29] Alternative Dispute Resolution
contractual right to arbitration pursuant to Employment disputes
agreement in which employer and employee Commerce
agreed to arbitrate all claims arising from a Arbitration
work-related injury or illness, even though Truck stop maintenance worker who
employer waited over one year to file maintained parking lots and facilities within
motion to compel arbitration, where employer one state did not qualify as “transportation
asserted affirmative defense that wrongful worker,” within meaning of provision of
death claims were the subject of a binding Federal Arbitration Act (FAA) exempting
arbitration agreement in its original answer, contracts of employment of workers engaged
did not file any motions on the merits, and in foreign or interstate commerce from its
did not engage in extensive discovery, but coverage, since maintenance worker was
rather participated in discovery initiated by not engaged in the movement of goods in
employer's co-defendants. interstate commerce. 9 U.S.C.A. § 1.

Waiver or Estoppel Employment disputes
Commerce

Arbitration or illness, and neither an employee nor Pilot Travel “may

Federal Arbitration Act's (FAA) exclusion of bring a lawsuit in any state or federal court against the
“contracts of employment of workers engaged other regarding a work related injury or illness or the
in foreign or interstate commerce” from the severity of alleged damages arising from a work related
Act's coverage applies only to employment injury or illness.” More specifically, paragraph 1.05 of the
contracts of those workers actually engaged in arbitration agreement provides:
movement of goods in interstate commerce. 9
U.S.C.A. § 1.
All employees, by applying for, accepting or by
Cases that cite this headnote continuing employment after the implementation of
this Plan, shall be required to submit any legally
recognized claim for a work related injury or illness
to arbitration, rather than to litigation, according to
this Plan and the rules established for its enforcement.
The Company shall also be required to proceed to
*172 Carl Evans Jr., Stephanie Almeter, Jeffrey C. arbitration on all work related injury or illness matters
Wright, McCathern, PLLC, Dallas, TX, for Appellant. brought for arbitration by an employee. The duty
imposed on both the Company and Employee to
Augustus Corbett, The Corbett Law Firm, Dallas, TX, for arbitrate all legally recognized claims arising from a
Appellees. work related injury or illness shall continue beyond and
not be affected by, the termination of an employee's
Before Justices MOSELEY, FILLMORE, and MYERS.
employment.
A document captioned “Employer Notice to Current
Texas Employees” (Employer Notice), dated January 18,
OPINION 2011, contains Tony's signature, initialing of paragraphs,
and social security number, as well as the witness
Opinion by Justice FILLMORE.
signature of Pilot Travel's representative, Brandy Allen.
In this interlocutory appeal, Pilot Travel Centers, LLC The Employer Notice contains an “Acknowledgment
(Pilot Travel) asserts the trial court erred by denying its Receipt Regarding Mandatory Arbitration Plan for Texas
motion to compel arbitration and for a stay of the trial Employees” which provides:
court proceedings against it. We reverse the trial court's
I, James McCray hereby certify
order denying Pilot Travel's motion to compel arbitration
by my initials and signature below
and for stay of the trial court proceedings.
that I have received a copy of
the Mandatory Arbitration Plan. I
also understand that ALL issues
Background related to the work related injury
or illness or benefits pertaining
On January 18, 2011, James Antonio McCray (Tony) 1 thereto MUST be settled through
began employment with *173 Pilot Travel as a binding arbitration, not litigation,
maintenance worker. Pilot Travel was a non-subscriber per Pilot Travel Centers' Mandatory
to the Texas Workers' Compensation insurance system; Arbitration Plan. Neither party shall
it provided an Occupational Injury Benefit Plan (Benefit have the right to file a suit in
Plan) for its Texas employees. Amendment 1 to the Benefit any state or federal court. Any
Plan is a Mandatory Arbitration Plan for Resolution such arbitration will be governed
of Work Related Injury or Illness Claims of Texas by the Federal Arbitration Act
Employees (arbitration agreement). By its terms, the and administered by the American
arbitration agreement indicates it is the exclusive and Mediation Association.
mandatory means for an employee and Pilot Travel to
resolve their disputes arising from a work-related injury (Emphasis in original.)

signature date of December 12, 2012, the December 12,

On January 26, 2011, Tony was working within the course 2012 Order is identical to the November 12, 2012 Order.
and scope of his employment with Pilot Travel at a truck On December 28, 2012, Pilot Travel filed its notice of
stop in Dallas, Texas, when he was struck by a tractor interlocutory appeal of the denial of its motion to compel
trailer rig owned by Smile Transportation and operated arbitration.
by Ljubo Dilber. Tony died several weeks later as a result
of the injuries he sustained. At the time of his death, On January 16, 2013, the trial judge signed an order
Tony was survived by his parents, appellees Joan and granting appellees' “Motion for Judgment Nunc Pro
James McCray, and his son, appellee Brandon Gullatte, Tunc” (January 16, 2013 Order). 2 In the January 16,
as represented by his next friend, Shamekia Gullatte. 2013 Order, the trial court found that the December 12,
2012 Order contained a clerical error; according to the
The record contains Pilot Travel's July 20, 2011 trial court, the signature date of December 12, 2012 was
demand for arbitration before the American Mediation incorrect and should have been November 16, 2012. In
Association, which was received by the American the January 16, 2013 Order, the trial court ordered the
Mediation *174 Association on July 21, 2011. Pilot December 12, 2012 Order corrected to reflect the finding
Travel referenced the “respondents in this arbitration” that the date of the trial judge's signature should be
as “Joan and James McCray, Individually and as Next November 16, 2012.
Friends of James Antonio McCray, Deceased; The Estate
of James Antonio McCray; and Shemekia Gullatte, On February 6, 2013, Pilot Travel filed its verified
as next Friend of Brandon Gullatte, a Minor.” Pilot objection to the January 16, 2013 Order and motion to
Travel requested the arbitration be conducted in Dallas,
vacate that order. 3 In its motion to vacate the January
Texas, where the accident occurred and where Tony was
16, 2013 Order, Pilot Travel stated that on December 14,
employed.
2012, it received the trial court's December 12, 2012 Order
denying Pilot Travel's motion to compel arbitration. Pilot
On July 22, 2011, appellees Joan and James McCray,
Travel stated the December 12, 2012 Order was the only
and Shamekia Gullatte, as next friend of Brandon
signed order it received regarding its motion to compel
Gullatte, filed their original petition in a district court of
arbitration. Citing rule of civil procedure 306a and rule of
Dallas County, Texas, against Pilot Travel and others in
appellate procedure 26.1(b), *175 Pilot Travel asserted
the lawsuit underlying this appeal. Appellees allege the
its timetable for filing an interlocutory appeal of the denial
negligence of Pilot Travel and the other named defendants
of its motion to compel arbitration began to run on
proximately caused Tony's death and appellees' damages
December 12, 2012.
resulting from his death. On August 29, 2011, Pilot Travel
filed its answer to appellees' lawsuit. Included in Pilot
On May 1, 2013, the trial court signed an “Order on [Pilot
Travel's answer is the affirmative defense that the claims
Travel's] Motion for Court to Vacate Order Granting
asserted in the lawsuit were the subject of a mandatory
[Appellees'] Judgment Nunc Pro Tunc and Order Denying
arbitration agreement signed by Tony. On September 6,
Motion to Compel Arbitration” (May 1, 2013 Order). In
2012, Pilot Travel filed its motion to compel arbitration of
the May 1, 2013 Order, the trial court vacated its January
appellees' claims and for a stay of appellees' lawsuit against
16, 2013 Order, and again denied Pilot Travel's motion to
it.
compel arbitration.
By order with a signature date of November 12, 2012,

By letter dated February 19, 2013, this Court
the trial court denied Pilot Travel's motion to compel
communicated to the parties to this interlocutory appeal
arbitration (November 12, 2012 Order). The November
that, after review of the record, it appeared Pilot Travel's
12, 2012 Order indicates that Pilot Travel's motion to
notice of appeal of the trial court's denial of its motion to
compel arbitration was considered on November 16, 2012.
compel arbitration was untimely under rule of appellate
By order with a signature date of December 12, 2012, the
procedure 26.1(b) and requested that the parties file
trial court again denied Pilot Travel's motion to compel
a jurisdictional brief explaining how this Court has
arbitration (December 12, 2012 Order). Other than a mark
jurisdiction over this appeal. See TEX.R.APP. P. 26.1(b).
through the November 12, 2012 date and a handwritten

[1] If applicable, rule of civil procedure 306a may operate

Jurisdiction
to extend the deadline for filing a notice of appeal of an
Section 51.016 of the civil practice and remedies code interlocutory order. See TEX.R. CIV. P. 306a; see also
provides that in a matter subject to the Federal John v. Marshall Health Servs., Inc., 58 S.W.3d 738, 740
Arbitration Act (FAA), a party may appeal from an (Tex.2001). If a party affected by an appealable order or
interlocutory order of a district court “under the same the party's attorney has not, within twenty days after the
circumstances that an appeal from a federal district court's order was signed, either received notice required by rule
order ... would be permitted by 9 U.S.C. Section 16.” of civil procedure 306a(3) or acquired actual knowledge
TEX. CIV. PRAC. & REM.CODE ANN. § 51.016 (West of the signing, then any period that, under the rules of
Supp.2012); see CMH Homes v. Perez, 340 S.W.3d 444, appellate procedure, runs from the signing of the order
448–49 (Tex.2011) (explaining that section 51.016 of the will begin on the earlier of the date when the party or
civil practice and remedies code provides for interlocutory the party's attorney receives notice or acquires actual
appeals in FAA cases so long as “it would be permitted knowledge of the signed order; however, no such period
under the same circumstances in federal court under [9 may begin to run more than ninety days after the judgment
U.S.C] section 16”). Section 16 of the FAA provides or order was signed. TEX.R.APP. P. 4.2(a)(1); see also
an appeal may be taken from an order “denying an TEX.R.CIV.P. 306a(4).
application under section 206 of this title to compel
arbitration.” 9 U.S.CA. § 16(a)(1)(C) (West 2009); Austin [2] Subsection (5) of rule of civil procedure 306a provides
Commercial Contractors, L.P. v. Carter & Burgess, Inc., a procedure that enables the trial court to change the date
347 S.W.3d 897, 900 (Tex.App.-Dallas 2011, pet. denied); the appellate timetable begins to run from the actual date
Texas La Fiesta Auto Sales, LLC v. Belk, 349 S.W.3d 872, of the interlocutory order to the date on which the party or
877 (Tex.App.-Houston [14th Dist.] 2011, no pet.). the party's attorney received the clerk's notice or acquired
actual knowledge that the trial court signed the order,
An appeal from an interlocutory order denying a motion whichever occurs first, as long as that date is not more than
to compel arbitration is an accelerated appeal. See ninety days after the trial court signed the interlocutory
TEX.R.APP. P. 28.1 (“Appeals from interlocutory orders order. TEX.R. CIV. P. 306a(5). A party must obtain
(when allowed by statute) ... are accelerated appeals.”). an order from the trial court that reflects the date the
In an accelerated appeal, absent a rule of appellate party or the party's attorney first either received notice
procedure 26.3 motion, the deadline for filing a notice of or acquired actual knowledge that the order was signed.
appeal is strictly set at twenty days after the appealable Hone v. Hanafin, 105 S.W.3d 15, 18 (Tex.App.-Dallas
interlocutory order is signed. TEX.R.APP. P. 26.1(b); 2002), rev'd on other grounds, 104 S.W.3d 884 (Tex.2003)
TEX.R.APP. P. 26.3; see also In re K.A.F., 160 S.W.3d (per curiam); see TEX.R.APP. P. 4.2(c); Moore Landrey,
923, 927 (Tex.2005); Iron Mountain Bison Ranch, Inc. v. L.L.P. v. Hirsch & Westheimer, P.C., 126 S.W.3d 536,
Easley Trailer Mfg., Inc., 964 S.W.2d 762, 763 (Tex.App.- 540 (Tex.App.-Houston [1st Dist.] 2003, no pet.); Nedd–
Amarillo 1998, no pet.) (interlocutory appeal is perfected Johnson v. Wells Fargo Bank, N.A., 338 S.W.3d 612, 613
by filing notice of appeal with trial court within twenty (Tex.App.-Dallas 2010, no pet.); Mem'l Hosp. of Galveston
days after judgment or order is signed). Cnty. v. Gillis, 741 S.W.2d 364, 366 (Tex.1987) ( “Rule
306a plainly requires that this proof be made in the trial
The notice of accelerated appeal of the November 12, 2012 court, not the court of appeals.”).
Order denying Pilot Travel's motion to compel arbitration
and for stay had to be filed within twenty days after the On September 25, 2013, the trial court signed an order on
date the order was signed. Because the twentieth day after Pilot Travel's motion to reconsider Pilot Travel's request
the November 12, 2012 Order fell on Sunday, December 2, for factual finding under rule of civil procedure 306a(5).
2012, Pilot Travel's deadline for perfecting the appeal from In that order, the trial court found that the date Pilot
that order fell on the following day, Monday, December Travel or its attorney first received notice or acquired
actual knowledge of a signed order denying its motion to
3, 2012. See TEX.R.APP. P. 4.1(a). 4 Pilot *176 Travel
compel arbitration and for stay was December 11, 2012,
filed its notice of appeal on December 28, 2012, more than
more than twenty days after the November 12, 2012 Order
twenty days after the November 12, 2012 Order.

denying Pilot Travel's motion to compel arbitration was (1) the existence of a valid, enforceable arbitration
signed by the trial court. Therefore, pursuant to rule of agreement and (2) that the claims at issue fall within
civil procedure 306a(4) and rule of appellate procedure that agreement's scope. In re Kellogg Brown & Root, Inc.,
4.2(a)(1), the twenty-day deadline for filing Pilot Travel's 166 S.W.3d 732, 737 (Tex.2005) (orig. proceeding); see
notice of appeal of the denial of its motion to compel also J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223,
arbitration and for stay began on December 11, 2012. See 227 (Tex.2003) (although there is strong presumption
TEX.R. CIV. P. 306a(4); TEX.R.APP. P. 4.2(a)(1). favoring arbitration, presumption arises only after party
seeking to compel arbitration proves a valid arbitration
Pilot Travel's notice of appeal was filed December 28, agreement exists). The party seeking to avoid arbitration
2012, within twenty days from the date Pilot Travel then bears the burden of raising an affirmative defense to
or its attorney first received notice or acquired actual enforcement of the otherwise valid arbitration provision.
knowledge of a signed order denying its motion to compel In re AdvancePCS Health, 172 S.W.3d at 607. A court
arbitration and for stay. Thus, Pilot Travel's notice of has no discretion and must compel arbitration if it is
appeal was timely perfected and this Court has jurisdiction established that there is a valid arbitration agreement and
over the accelerated appeal. the claims raised fall within the scope of that agreement. In
re Tenet Healthcare, Ltd., 84 S.W.3d 760, 765 (Tex.App.-
Houston [1st Dist.] 2002, orig. proceeding). “An order
to arbitrate should not be denied unless it can be said
*177 Motion to Compel Arbitration
with positive assurance that the arbitration cause is not
and to Stay Trial Court Proceedings
susceptible of an interpretation that covers the asserted
In a single issue, Pilot Travel asserts that, because a dispute.” Hou–Scape, Inc. v. Lloyd, 945 S.W.2d 202,
valid arbitration agreement exists that is applicable to 205 (Tex.App.-Houston [1st Dist.] 1997, no writ) (citing
appellees' pleaded claims, the trial court erred in denying United Steelworkers v. Warrior & Gulf Navigation Co.,
its motion to compel arbitration and to stay the trial court 363 U.S. 574, 582–83, 80 S.Ct. 1347, 4 L.Ed.2d 1409
proceedings. (1960)). To determine if a claim falls within the scope of an
arbitration agreement, we focus on the facts alleged, not
[3] [4] The arbitration agreement provides that the the causes of action asserted. Hou–Scape, 945 S.W.2d at
FAA applies to and governs any matter submitted to 205.
arbitration. See In re AdvancePCS Health, L.P., 172
S.W.3d 603, 605–06 & n. 3 (Tex.2005) (orig. proceeding) We review de novo whether an enforceable agreement to
(per curiam) (FAA governs arbitration in Texas if arbitrate exits. In re Jindal Saw, Ltd., 264 S.W.3d 755, 761
parties expressly contracted for FAA's application); In re (Tex.App.-Houston [1st Dist.] 2008, orig. proceeding). We
ReadyOne Indus., Inc., 294 S.W.3d 764, 769 (Tex.App.- defer to the trial court's factual determinations if they
El Paso 2009, orig. proceeding) (if parties expressly are supported by evidence, but we review the trial court's
choose for arbitration agreement to be governed by FAA, legal determinations de novo. In re Labatt Food Serv.,
agreement should be enforced regardless of parties' nexus L.P., 279 S.W.3d 640, 643 (Tex.2009) (orig. proceeding);
to interstate commerce). When a party asserts a right see also J.M. Davidson, 128 S.W.3d at 227 (whether an
to arbitrate under the FAA, the question of whether agreement imposes a duty to arbitrate is question of law
the dispute is subject to arbitration is determined under which is reviewed de novo); Trammell v. Galaxy Ranch
federal law. Prudential Secs. Inc. v. Marshall, 909 S.W.2d Sch., L.P., 246 S.W.3d 815, 820 (Tex.App.-Dallas 2008,
896, 899 (Tex.1995). As a matter of federal law, any no pet.). “This *178 standard is the same as the abuse
doubts concerning the scope of arbitrable issues are of discretion standard of review and we will apply that
resolved in favor of arbitration, whether pertaining to the standard of review to interlocutory appeals under section
construction of the contract or a defense to arbitrability. 51.016.” Sidley Austin Brown & Wood, LLP v. J.A. Green
See Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., Dev. Corp., 327 S.W.3d 859, 863 (Tex.App.-Dallas 2010,
460 U.S. 1, 24–25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). no pet.).
[5] [6] [7] [8] [9] In general, a party seeking

to compel arbitration under the FAA must establish

instrument in writing shall be verified by affidavit; where

party denying execution of a document by person then
Arbitration Agreement
deceased, affidavit shall be sufficient if it states affiant has
reason to believe and does believe that such instrument
Existence of Arbitration Agreement was not executed by the decedent or by his authority);
Between Pilot Travel and Tony TEX.R. EVID. 601(b) (Dead Man's Rule); Munden v.
Chambless, 315 S.W.2d 355, 358 (Tex.Civ.App.-Dallas
[10] Pilot Travel argues that it established a valid 1958, writ ref'd n.r.e.) (test of whether evidence should
arbitration agreement existed between it and Tony. The be excluded under Dead Man's Statute is whether, “in
record contains the “Acknowledgment Receipt Regarding case the witness testified falsely, the deceased, if living
Mandatory Arbitration Plan for Texas Employees” could contradict the testimony of his own knowledge”).
reflecting Tony's certification “by [his] initials and Based on the documentation in the record, we agree with
signature” on the date he was hired by Pilot Travel Pilot Travel that it established a valid and enforceable
that he received a copy of the arbitration agreement arbitration agreement existed between it and Tony.
and understood that all issues “related to the work
related injury or illness or benefits pertaining thereto
must be settled through binding arbitration” governed by
the FAA and administered by the American Mediation Appellees as Non–Signatories to Arbitration Agreement
Association, and that neither he nor Pilot Travel had
[11] Appellees Joan and James McCray are Tony's
the right to file suit in any state or federal court.
surviving parents, and appellee Brandon Gullatte,
Further, that Acknowledgment was signed by a company
represented by his mother as his next friend, is Tony's
representative.
*179 surviving son. Appellees' wrongful death claims
against Pilot Travel are made in their capacities as the
While appellees do not contest that the arbitration
surviving parents and child of Tony. See TEX. CIV.
agreement was incorporated into Pilot Travel's Benefit
PRAC. & REM.CODE ANN. § 71.004 (West 2008)
Plan, appellees contend Pilot Travel failed to establish
(action to recover damages as provided by this subchapter
the arbitration agreement was signed by Tony
is for exclusive benefit of surviving spouse, children, and
or that he “assented to arbitration.” Pilot Travel
parents of the deceased). Appellees argue that as non-
is unable to “authenticate” Tony's signature on
signatories to the arbitration agreement between Pilot
the “Acknowledgement Receipt Regarding Mandatory
Travel and Tony, their claims are not subject to the
Arbitration Plan for Texas Employees” through
arbitration agreement. They argue their claims are not
questioning him. Cf. In re Halliburton Co., 80 S.W.3d
derivative of any rights that belonged to Tony had he
566, 568 n. 2 (Tex.2002) (orig. proceeding) (in response
survived.
to motion to compel arbitration of employee's claim of
employment discrimination, employee asserted signature
Paragraph 1.02 of the arbitration agreement defines the
on a document agreeing to binding arbitration was
term “employee” to include the employee and “any
not his). During her deposition, appellee Joan McCray
individual, child, dependent, spouse, relative, executor,
testified she recognized Tony's signature on the arbitration
estate or guardian which would have the legal standing
agreement, although she later apparently “disavowed” her
required to bring a lawsuit for damages arising out of
answer “since she is neither a handwriting expert nor had
a claim.” Paragraph 1.04 of the arbitration agreement
she paid close attention to [Tony's] signature in more than
provides as follows with regard to claims arising from
ten years.”
work-related injuries or illnesses:
Ultimately, appellees' argument fails because their As used in this Plan, “Claim,” “Controversy,”
response in opposition to Pilot Travel's motion to “Dispute” or “Difference” means any claim, dispute,
compel arbitration is unverified. Appellees have cited no disagreement, contention, or grievance arising from
authority, and we are aware of none, requiring Pilot a work related injury or illness which an Employee
Travel in this circumstance to “authenticate” Tony's has with the Company, or the Company has with the
signature on the arbitration agreement. See TEX.R. CIV. Employee, which could normally be made the basis of a
P. 93(7) (pleading setting up denial of execution of

lawsuit in a State or Federal Court. This pertains only to arbitration bears the burden to prove unconscionability.
those claims, controversies, disputes or differences for See In re FirstMerit Bank, N.A., 52 S.W.3d 749, 756
work related injuries and illnesses. (Tex.2001); see also In re Oakwood Mobile Homes, Inc.,
987 S.W.2d 571, 573 (Tex.1999) (orig. proceeding) (per
This Plan DOES NOT provide for resolution of curiam) (once party establishes a claim within scope
disputes arising from any claim, dispute, disagreement, of an arbitration agreement, trial court must compel
contention or grievance other than those arising from a arbitration unless other party presents evidence agreement
work related injury or illness. was procured in unconscionable manner, induced or
procured by fraud or duress, or waived), abrogated in
(Emphasis in original.)
part on other grounds by In re Halliburton, 80 S.W.3d
at 572. Unconscionability of an arbitration agreement
The Texas Supreme Court has held that wrongful death
may exist in one or both of two forms: (1) procedural
beneficiaries, as derivative claimants, are bound by the
unconscionability, which refers to the circumstances
decedent's agreement to arbitrate. In re Golden Peanut
surrounding the adoption of the arbitration provision,
Co., 298 S.W.3d 629, 630 (Tex.2009) (orig. proceeding);
and (2) substantive unconscionability, which refers to
In re Labatt Food Serv., 279 S.W.3d at 646 (decedent's
the fairness of the arbitration provision itself. In re
pre-death arbitration agreement binds his wrongful death
Halliburton, 80 S.W.3d at 571. Whether a contract is
beneficiaries because, under Texas law, the wrongful
unconscionable at the time it is formed is a question of law.
death cause of action is entirely derivative of the decedent's
In re Poly–America, L.P., 262 S.W.3d 337, 349 (Tex.2008)
rights); Arredondo v. Dugger, 347 S.W.3d 757, 764
(orig. proceeding). A trial court has no discretion to
(Tex.App.-Dallas 2011) (citing In re Golden Peanut Co.,
determine what the law is or to apply the law incorrectly,
298 S.W.3d at 631), aff'd on other grounds, Dugger v.
and a failure to properly analyze or apply the law of
Arredondo, 408 S.W.3d 825 (Tex.2013). 5 unconscionability constitutes an abuse of discretion. Id.
Pursuant to the arbitration agreement, if Tony sued Pilot

Travel for his own injuries prior to his death, he would
have been compelled to arbitrate his claims. Texas law Procedural Unconscionability
and the arbitration agreement therefore provide that all
In response to Pilot Travel's motion to compel
of the claims asserted by appellees against Pilot Travel
arbitration, appellees argued the arbitration agreement is
are subject to mandatory binding arbitration as agreed to
procedurally unconscionable because it was difficult for
by Tony. Accordingly, appellees' argument that they are
an unsophisticated man like Tony to understand, and
not bound to arbitrate because they are not signatories
Pilot Travel knew Tony's level of education, and was
to Tony's arbitration agreement with Pilot Travel is not
aware of his lack of sophistication, based on information
persuasive.
contained in his application for employment. Appellees
further argue the procedural unconscionability of the
arbitration agreement based on Tony's lack of input
Conclusion concerning the terms of the agreement and the one-sided
character of the agreement which Tony had to accept or
We conclude Pilot Travel established the existence of an forego employment by Pilot Travel.
arbitration agreement and *180 that appellees' claims
against it fall within that agreement's scope. [14] Appellees' unverified response to Pilot Travel's
motion to compel arbitration contained no evidence the
arbitration agreement is procedurally unconscionable.
Unconscionability of Arbitration Agreement Further, there is no evidence in the record establishing
Tony's lack of education and “sophistication” as argued
[12] [13] Appellees contend the arbitration agreement is by appellees. With regard to appellees' argument that the
invalid and unenforceable because under Texas contract arbitration agreement was procedurally unconscionable
law it is procedurally and substantively unconscionable. because Tony had to accept the arbitration agreement
Because the law favors arbitration, the party opposing terms to be employed by Pilot Travel, the Texas Supreme

Court has recognized that an employer may make no event would an employee be assessed more than one-
precisely such a “take it or leave it” offer to its at- half of the arbitration fees (except attorney fees) and
will employees. See In re Halliburton, 80 S.W.3d at costs.” An agreement that provides for fee-splitting is not,
572 (rejecting argument that disparity in bargaining by itself, unconscionable. In re Weeks Marine, Inc., 242
power between employer and employee rendered S.W.3d 849, 860 (Tex.App.-Houston [14th Dist.] 2007,
arbitration agreement procedurally unconscionable) orig. proceeding). There is no evidence in the record that
(citing Hathaway v. Gen. Mills, Inc., 711 S.W.2d 227, 228– appellees do not have the financial ability to pay a portion
29 (Tex.1986)). Mere inequality of bargaining power is of the arbitrator's fees. Appellees admit in their brief
not a sufficient reason to hold an arbitration agreement that appellee James McCray makes a living wage and
unenforceable in the employment context. Gilmer v. that “Appellee Shamekia Gullatte is a registered nurse.”
Interstate/Johnson Lane Corp., 500 U.S. 20, 33, 111 Appellees cannot point to evidence of severe monetary
S.Ct. 1647, 114 L.Ed.2d 26 (1991). On this record, constraints that would effectively preclude participation
nothing about the specific circumstances surrounding the in arbitration. Further, there is no evidence in the record
adoption of the arbitration agreement shows it to be supporting appellees' assertion an arbitration will be more
procedurally unconscionable. costly than litigating appellees' wrongful death claims in
state court.
[17] By the express terms of the arbitration agreement,

*181 Substantive Unconscionability
remedies available to appellees in arbitration shall be
With regard to their argument the arbitration agreement the same remedies available to them in a state court
is substantively unconscionable, appellees contended proceeding. With regard to the amount of discovery
in their response to Pilot Travel's motion to compel permitted, paragraph 1.17 of the arbitration agreement
arbitration that the costs and fees to arbitrate their provides:
wrongful death claims effectively preclude them from
Unless so ordered by the arbitrator,
vindicating their rights because they are indigent. Further,
and only upon a showing of good
appellees stated they live in Alabama and the travel
cause, no more than three (3)
expenses to Texas are more than they can bear; yet
depositions, excluding depositions
appellees also indicated that “court costs” to litigate
of expert witnesses, may be taken
before a jury have been “very costly but manageable.”
by any party. No single deposition
Finally, appellees argued the limitations on discovery
may exceed four (4) hours.
contained in the arbitration agreement are substantively
Interrogatories may be utilized by
unconscionable.
any party. Each party is allowed
two (2) sets of Interrogatories
[15] [16] Addressing first appellees' argument that
requiring no more than twenty
arbitration conducted in Texas will be prohibitively
(20) separate responses per set
expensive for them, we note appellees filed their wrongful
(subset requests such as IA, IB
death lawsuit in Texas, and there is no evidence in the
or questions requesting multiple
record that arbitration in Texas will entail greater travel
answers shall each count as one
expense than litigation of the wrongful death case in a
response). The arbitrator shall have
Texas state court. Moreover, the arbitration agreement
sole authority to determine which
indicates that the party seeking arbitration (Pilot Travel)
discovery procedures are necessary
shall pay the American Mediation Association filing fee.
and appropriate in the case to
The arbitration agreement further provides that the costs
reduce the time, cost and expense
and fees charged by the arbitrator shall be borne equally
of the discovery process, while
by the parties; however, the arbitrator shall have the
still affording each party a fair
discretion, upon request of a party and for good cause, “to
opportunity to prepare its case.
reapportion the arbitration fees (except attorney fees) and
Requests for Production may be
costs in a manner which the arbitrator deems equitable.”
utilized by any party upon approval
According to the terms of the arbitration agreement, “in
by the arbitrator. Requests for

Admission may be utilized by any

party upon *182 approval by
Waiver of Arbitration Agreement
the arbitrator. Unless a greater
time is allowed by the requesting [19] A party may waive contractual arbitration rights by
party, Interrogatories, Requests substantially invoking the judicial process to the detriment
for Production and Requests for of the other party. Perry Homes v. Cull, 258 S.W.3d
Admission shall be answered or 580, 589–90 (Tex.2008). As a defense to Pilot Travel's
objected to within thirty (30) days motion to compel arbitration, appellees contend Pilot
from the date of service. Travel waived arbitration and that they were prejudiced
by Pilot Travel invoking the judicial process.
Under the arbitration agreement, the parties are permitted
the same amount of discovery. See In re Poly–America,
262 S.W.3d at 357–58 (discovery limitations in arbitration
agreement applied equally to both sides and were not Standard of Review and Applicable Law
per se substantively unconscionable; limitations that
[20] [21] [22] Waiver of contractual arbitration rights
operate to prevent effective presentation of claim are
is a question of law that this Court reviews de novo.
unenforceable, but that determination is best left to
Id. at 598; see also Small v. Specialty Contractors, Inc.,
arbitrator as case unfolds). Appellees contend they need
310 S.W.3d 639, 644 (Tex.App.-Dallas 2010, no pet.).
to conduct discovery beyond that contemplated by the
Because public policy favors resolving disputes through
arbitration agreement. However, appellees acknowledge
arbitration, the law imposes a strong presumption against
written discovery has been exchanged and depositions
the waiver of contractual arbitration rights. See In re
have previously been taken in the lawsuit. In addition,
Bruce Terminix Co., 988 S.W.2d 702, 704 (Tex.1998)
the arbitration agreement provides that upon a showing
(orig. proceeding); see also In re Vesta Ins. Group, Inc.,
of good cause, a party may obtain an order from the
arbitrator for taking additional depositions, and may
curiam) (there is a strong presumption against waiver
obtain approval from the arbitrator to utilize requests
under the FAA). When presented with questions of
for production and for admissions. At this point in
waiver, we are required to resolve any doubts in favor
the proceeding, we cannot conclude that the evidence
of arbitration. In re Oakwood Mobile Homes, 987 S.W.2d
presented to the trial court compelled a finding that the
at 574. The standard for determining waiver is the same
discovery limitations were per se unconscionable. See id.
under federal and state law. See Holmes, Woods &
at 358.
Diggs v. Gentry, 333 S.W.3d 650, 654 (Tex.App.-Dallas
2009, no pet.). Waiver may be implied from a party's
[18] Substantive unconscionability refers to fairness of
an arbitration provision. See In re Halliburton, 80 S.W.3d *183 conduct, so long as that conduct is unequivocal.
Perry Homes, 258 S.W.3d at 593. In “close cases, the
at 571. Here, the terms of the arbitration agreement do
‘strong presumption against waiver’ should govern.” Id.
not favor either party. Appellees have not established
(quoting In re D. Wilson Constr. Co., 196 S.W.3d 774, 783
that the cost of arbitration or the discovery limitations
contained in the arbitration agreement will prevent them (Tex.2006) (orig. proceeding)).
from effectively presenting their wrongful death claims.
[23] [24] As the parties claiming waiver, appellees had
On this record, appellees failed to establish the terms of the
the heavy burden of establishing Pilot Travel substantially
arbitration agreement arc substantively unconscionable.
invoked the judicial process. See Bruce Terminix, 988
S.W.2d at 704; Adams v. StaxxRing, Inc., 344 S.W.3d 641,
648 (Tex.App.-Dallas 2011, pet. denied). In determining
Conclusion whether appellees met their burden, we must examine
the case-specific facts and look to the totality of the
Appellees failed to establish procedural or substantive
circumstances. See Perry Homes, 258 S.W.3d at 591
unconscionability as a defense to Pilot Travel's motion to
(whether a party has waived arbitration must be decided
compel arbitration.
on a case-by-case basis, based upon an examination of
the totality of the circumstances). The judicial process is

substantially invoked when the party seeking arbitration USA, Inc. v. Ain Temouchent M/V, 404 F.3d 891, 897
has taken specific and deliberate actions, after the filing (5th Cir.2005)). Pilot Travel filed its motion to compel
of the suit, that are inconsistent with the right to arbitration and for stay of the trial court proceedings
arbitrate or has actively tried, but failed, to achieve a against it on September 6, 2012. Appellees filed their
satisfactory result through litigation before turning to response to Pilot Travel's motion to compel arbitration on
arbitration. In re Vesta Ins. Group, Inc., 192 S.W.3d at 763. October 11, 2012.
Factors considered in determining whether a movant has
substantially invoked the judicial process include when *184 Appellees assert they have expended considerable
the movant knew of the arbitration clause, how much time and resources responding to Pilot Travel's “actions
discovery has been initiated and who initiated it, the in litigation.” According to appellees, Pilot Travel gained
extent to which discovery related to the merits rather valuable information “during discovery,” especially from
than arbitrability or standing, how much of the discovery depositions that “potentially” would not have been
would be useful in arbitration, whether the movant sought available in arbitration. Appellees also state their “pretrial
judgment on the merits, and whether the movant sought strategy would have been substantially different” had
to compel arbitration on the “eve of trial.” Perry Homes, Pilot Travel filed its motion to compel arbitration earlier.
258 S.W.3d at 590–92. Appellees state they have “endured two years of litigation
including being deposed, answering interrogatories,
[25] In addition to their burden of showing Pilot Travel interstate traveling and so forth.”
substantially invoked the judicial process, appellees had
the burden to show prejudice. See id. at 595 (“waiver of [27] With regard to appellees' argument that Pilot Travel
arbitration requires a showing of prejudice”). “Prejudice” waived arbitration by its delay in seeking an order
in the context of waiver of contractual arbitration rights from the trial court compelling arbitration, delay alone
“refers to the inherent unfairness in terms of delay, generally does not establish waiver. See In re Vesta Ins.
expense, or damage to a party's legal position that occurs Group, 192 S.W.3d at 763. The record shows a period
when the party's opponent forces it to litigate an issue and of approximately one year between the time Pilot Travel
later seeks to arbitrate that same issue.” Id. at 597 (quoting answered the lawsuit and the time it filed its motion to
Republic Ins. Co. v. PAICO Receivables, LLC, 383 F.3d compel arbitration. Greater delays in moving to compel
341, 346 (5th Cir.2004)). “Thus, ‘a party should not be arbitration have been insufficient to constitute waiver of
allowed purposefully and unjustifiably to manipulate the arbitration rights. See, e.g., id. (litigating for two years in
exercise of its arbitral rights simply to gain an unfair trial court insufficient to overcome presumption against
tactical advantage over the opposing party.’ ” Id. (quoting waiver). We must consider this delay in the context of
In re Tyco Inti'l Ltd. Sec. Litig., 422 F.3d 41, 46 n. 5 (1st other factors affecting the litigation process. Small, 310
Cir.2005)). S.W.3d at 639.
We note there was no evidentiary hearing and no

reporter's record of argument before the trial court
Substantial Invocation of Judicial Process
concerning Pilot Travel's motion to compel arbitration.
[26] On July 20, 2011, Pilot Travel demanded arbitration The trial court made no findings pertinent to the merits
before the American Mediation Association. On July 22, of Pilot Travel's motion to compel arbitration. Appellees
2011, appellees filed their original petition and request do not cite to evidence purportedly presented to the trial
for disclosures. Pilot Travel's original answer filed on court, nor can appellees cite to any evidence in the record,
August 29, 2011 included the affirmative defense that that demonstrates Pilot Travel substantially invoked the
appellees' claims against Pilot Travel were the subject judicial process. See Small, 310 S.W.3d at 645–46, 649
of a binding arbitration agreement. See In re H & R (record did not support argument that movants had
Block Fin. Advisors, Inc., 262 S.W.3d 896, 901 (Tex.App.- waived their right to arbitration by invoking the judicial
Houston [14th Dist.] 2008, orig. proceeding) (burden of process to the prejudice of nonmovant; record contained
demonstrating waiver “falls even more heavily” when no reporter's record of argument before the trial court,
the party seeking arbitration included a demand for no evidentiary hearing regarding the motion to compel
arbitration in its original answer) (quoting Keytrade arbitration, and no trial court findings).

argue that by merely participating in the depositions, Pilot

The quantum of litigation conduct that will be deemed Travel invoked the judicial process.
“substantial” depends very much on the context. See
Perry Homes, 258 S.W.3d at 593; EZ Pawn Corp. v. Appellees' arguments regarding discovery concern matters
Mancias, 934 S.W.2d 87, 89–90 (Tex.1996) (per curiam) that are not reflected in the record. No discovery was
(party did not waive arbitration right by answering admitted into evidence or attached to appellees' response
the suit, participating in docket control conference, to Pilot Travel's motion to compel arbitration. Because
propounding requests for production and interrogatories, appellees offered none of the discovery documents as
noticing plaintiff's deposition, and entering into an agreed evidence in the trial court and presented no details about
order to reset the original trial date); Walker v. J.C. any of them, the record does not show whether the written
Bradford & Co., 938 F.2d 575, 576–78 (5th Cir.1991) discovery was limited or extensive, sought information for
(party did not waive arbitration right by propounding affirmative or defensive issues, or whether the discovery
interrogatories and requests for production, attending addressed the merits of the lawsuit. Further, appellees
pretrial conference, and delaying thirteen months before do not allege that the discovery already conducted
filing motion to compel arbitration). would not be useful in arbitration. See In re Vesta Ins.
Group, 192 S.W.3d at 763 (noting that no prejudice from
In response to Pilot Travel's motion to compel arbitration, allegedly “extensive discovery” was shown where party
appellees argued Pilot Travel invoked the judicial process opposing arbitration failed to present evidence detailing
by consenting to co-defendants' removal of the state court the discovery conducted and failed to allege discovery
litigation to federal court, participating in scheduling already conducted would not be useful in arbitration); see
conferences in federal and state court, agreeing to trial Small, 310 S.W.3d at 648 (appellee did not claim discovery
dates in state and federal court, and signing scheduling already exchanged could not be used in arbitration).
orders in federal and state court. 6 By appellees' own
admission, Pilot *185 Travel did not “invoke” the The supreme court in Perry Homes emphasized facts that
judicial process with regard to removal of the case to would constitute waiver: “allowing a party to conduct
federal court, but rather consented to co-defendants' full discovery, file motions going to the merits, and seek
removal of the case. We disagree that by purported arbitration only on the eve of trial.” Perry Homes, 258
agreement to trial settings, Pilot Travel “sought judgment S.W.3d at 590 (quoting In re Vesta Ins. Group, 192 S.W.3d
on the merits” as argued by appellees. Further, the record at 764). Here, the record does not show Pilot Travel filed
contains no evidence of scheduling orders or trial dates in a motion on the merits, engaged in extensive discovery,
the lawsuit during its pendency in either federal or state or sought arbitration on the eve of trial. See Small, 310
S.W.3d at 645–47.
court. 7
In their appellate brief, appellees state the discovery in

this lawsuit “has been pretty extensive” between appellees Prejudice
and Pilot Travel's co-defendants, and the exchange
of discovery between appellees and Pilot Travel's co- [28] Additionally, appellees did not present any evidence
defendants has “greatly benefitted” Pilot Travel because it that they suffered *186 prejudice. “Prejudice” in the
received copies of the discovery exchanged. Appellees do context of waiver of a contractual right to arbitration
not contend Pilot Travel has initiated discovery; instead, means “the inherent unfairness in terms of delay, expense,
they argue Pilot Travel has not needed to initiate discovery or damage to a party's legal position that occurs when
because of the discovery exchanged between appellees the party's opponent forces it to litigate an issue and later
and Pilot Travel's co-defendants. Further, appellees assert seeks to arbitrate that same issue.” Perry Homes, 258
Pilot Travel participated in discovery by “significantly” S.W.3d at 597; see also In re Bruce Terminix Co., 988
deposing three parties, co-defendant Dilber and appellees S.W.2d at 704 (noting that even substantial invocation
Joan McCray and Shamekia Gullatte. However, appellees of judicial process does not constitute waiver absent
do not contend Pilot Travel invoked the judicial process proof of prejudice). In appellees' brief they state Pilot
by noticing any of the parties for deposition; instead, they Travel's “delay” and “actions” caused them “detriment
and prejudice in terms of burgeoning and unnecessary

legal fees, etc.” We question whether this argument was daily” and. “[b]y extension, workers who maintain the
made before the trial court. In their response to Pilot parking lots and facilities that service these trucks as
Travel's motion to compel arbitration, appellees state well as providing other services to these truckers and
Pilot Travel delayed in moving to compel arbitration their trucking companies are directly engaged in interstate
which resulted in appellees “expending considerable time commerce.”
and resources.” Assuming this argument can be construed
to comport with appellees' argument on appeal, the record [30] Appellee's argument that “nothing in the FAA
is void of evidence relating to legal fees and expenses applies to employment contracts of workers engaged in
incurred as a result of Pilot Travel's allegedly invoking interstate commerce” has been previously rejected by the
the litigation process to appellees' detriment. See id. United States Supreme Court and by this Court. The
Further, although appellees argue their “pretrial strategy” United States Supreme Court has held that “[s]ection 1
would have been “substantially different” had Pilot Travel exempts from the FAA only contracts of employment of
filed its motion to compel arbitration earlier, appellees transportation workers.” *187 Circuit City Stores, Inc.
have not established how their legal position has been v. Adams, 532 U.S. 105, 119, 121 S.Ct. 1302, 149 L.Ed.2d
prejudiced. Appellees have not carried their burden to 234 (2001). Many years prior to the decision in Adams, this
establish expense or damage to their legal position as a Court concluded that section 1's exemption related only
result of Pilot Travel's alleged invoking the judicial process to employment contracts of workers “actually engaged
to appellees' detriment. in the movement of goods in interstate commerce.”
White–Weld & Co. Inc. v. Mosser, 587 S.W.2d 485, 487
(Tex.Civ.App.-Dallas 1979, writ ref'd n.r.e.) (employee
who sold government bonds not engaged in movement of
Conclusion
goods in interstate commerce for purposes of section 1
On this record and considering the totality of the exclusion) (citing Dickstein v. duPont, 443 F.2d 783, 785
circumstances in this case, we conclude appellees have (1st Cir.1971)).
not met their heavy burden of establishing Pilot Travel
waived arbitration by substantially invoking the judicial While appellees also argue that workers who maintain
process, nor have they demonstrated sufficient prejudice parking lots and facilities at a truck stop are “by
to overcome the strong presumption against waiver of extension” engaged in interstate commerce, there is no
arbitration. evidence in this record to support an argument Tony was a
transportation worker actually engaged in the movement
of goods in interstate commerce within the meaning of
the exemption of section 1 of the FAA. See Adams, 532
Section 1 of the FAA U.S. at 119, 121 S.Ct. 1302; Mosser, 587 S.W.2d at 487.
Instead, the record indicates Tony was employed as a
[29] According to appellees, the arbitration agreement
truck stop maintenance worker, and as a maintenance
is unenforceable under section 1 of the FAA. Section
worker Tony was no more engaged in the movement of
1 is an exemption provision and it provides the FAA
goods in interstate commerce than a clerk in a truck stop
does not apply “to contracts of employment of seamen,
convenience store or wait staff in a truck stop restaurant.
railroad employees, or any other class of worker engaged
The facts on this record are insufficient to trigger the
in foreign or interstate commerce.” 9 U.S.C.A. § 1
exemption in section 1 of the FAA. See Cole v. Burns Int'l
(West 2009). Appellees argued to the trial court in their
Sec. Servs., 105 F.3d 1465, 1472 (D.C.Cir.1997) (security
response to Pilot Travel's motion to compel arbitration
guard at Union Station in Washington, D.C. not engaged
that “nothing in the FAA applies to employment contracts
in transportation of goods in commerce for purposes of
of workers engaged in interstate commerce.” More
section 1 exclusion). Accordingly, we are not persuaded
specifically, appellees argued to the trial court that Tony
by appellees' defense to Pilot Travel's motion to compel
was a maintenance worker for Pilot Travel and a large
arbitration based on section 1 of the FAA.
portion of Pilot Travel's business “involves providing fuel,
rest facilities, food, etc. for truck drivers of 18–wheeler
tractor trailers.” According to appellees, “these drivers
and their trucks are engaged in interstate commerce

Section 171.002 of the Texas Arbitration Act Travel does not contend Tony was represented by an
attorney at the time of signing the arbitration agreement
The arbitration agreement provides the FAA shall apply or that an attorney *188 for Tony signed the arbitration
to and govern any matter submitted to arbitration agreement. However, as discussed above, we conclude
pursuant to Pilot Travel's Benefit Plan, and that in the section 1 of the FAA does not exempt this matter from
event or to the extent the FAA may be determined arbitration. Therefore, appellees' argument that section
to be inapplicable, “and only in such an event,” the 171.002 of the TAA exempts this matter from arbitration
Texas General Arbitration Act (TAA) shall apply. In is unpersuasive.
defense to Pilot Travel's motion to compel arbitration,
appellees assert that because section 1 of the FAA
does not apply to employment contracts of workers Conclusion
engaged in interstate commerce, section 171.002 of the
TAA applies and exempts this matter from arbitration. The trial court abused its discretion by refusing to compel
Section 171.002 of the TAA excludes claims for personal arbitration of appellees' claims against Pilot Travel. Under
injury from arbitration under the TAA unless each the FAA, a trial court must stay the litigation of issues
party to the claim, on the advice of counsel, agrees in that are subject to arbitration. See 9 U.S.C.A. § 3 (West
writing to arbitrate and the agreement is signed by each 2009). The trial court's order denied Pilot Travel's motion
party and each party's attorney. TEX. CIV. PRAC. & to compel arbitration and for stay in “all respects.”
REM.CODE ANN. § 171.002(a)(3), (c) (West 2011); see Therefore, it appears the trial court, in addition to denying
also In re Nexion Health at Humble, Inc., 173 S.W.3d Pilot Travel's motion to compel arbitration, also denied
67, 69 (Tex.2005) (orig. proceeding) (TAA interfered Pilot Travel's motion to stay further litigation of appellees'
with enforceability of arbitration agreement governed by claims against it. Having concluded the trial court erred in
FAA by adding requirement of signature of a party's failing to compel arbitration of appellees' claims asserted
counsel to arbitration agreements in personal injury cases, against Pilot Travel, the trial court also erred in failing
and FAA preempts the TAA); Doctor's Assocs., Inc. v. to stay further litigation of those claims. See Courtland
Casarotto, 517 U.S. 681, 686–87, 116 S.Ct. 1652, 134 Bldg. Co., Inc. v. Jalal Family P'ship, Ltd., 403 S.W.3d
L.Ed.2d 902 (1996) (“Courts may not, however, invalidate 265, 276 (Tex.App.-Houston [14th Dist.] 2012, no pet.).
arbitration agreements under state laws applicable only to Accordingly, we reverse the order of the trial court
arbitration provisions.”). Here, the parties do not dispute denying Pilot Travel's motion to compel arbitration and
that appellees' wrongful death claims arc personal injury for stay of the trial court proceedings and remand the case
claims. See TEX. CIV. PRAC. & REM.CODE ANN. § to the trial court for further proceedings consistent with
71.002(b) (West 2008) (person is liable for damages arising this opinion.
from an injury that causes an individual's death if injury
was caused by person's or his agent's or servant's wrongful
act, neglect, carelessness, unskillfulness, or default). Pilot All Citations
416 S.W.3d 168
Footnotes
1 The record indicates James Antonio McCray signed his name on Pilot Travel employment documents as “James McCray.”
In this opinion, we refer to James Antonio McCray as “Tony” in order to avoid confusion with our references to Tony's
father, appellee James McCray.
2 The January 16, 2013 Order states the trial court considered appellees' “Motion for Judgment Nunc Pro Tunc, and the
response thereto.” However, the record contains no motion for judgment nunc pro tunc, nor any response by Pilot Travel
to such a motion. See TEX.R. CIV. P. 316 (permits trial court to correct mistakes and incorrect recitals in judgments but
only after reasonable notice of any application for correction is given to opposing party).
3 In its objection to the January 16, 2013 order and motion to vacate that order, Pilot Travel stated it was never served
with a motion for judgment nunc pro tunc.
4 On appeal, the parties do not dispute the trial court conducted a hearing on Pilot Travel's motion to compel arbitration on
November 16, 2012, However, no reporter's record containing a transcript of the November 16, 2012 hearing has been

filed with this Court, Even assuming the November 12, 2012 date of signature on the order was incorrect and should have
been November 16, 2012, the deadline for filing a notice of accelerated appeal of a November 16, 2012 order denying
Pilot Travel's motion to compel arbitration and for stay would have been December 6, 2012.
5 Appellees assert that even if this Court concludes the arbitration agreement is enforceable, appellees' loss of consortium
claims are not subject to the arbitration agreement. As was explained in In re Labatt Food Service, a tort action seeking
damages for loss of consortium arises from nonfatal injuries to a parent or child and are not entirely derivative as are
wrongful death claims. 279 S.W.3d at 646. However, “[a] wrongful death action is different than a loss of consortium
claim because the Wrongful Death Act expressly conditions the beneficiaries' claims on the decedent's right to maintain
suit for his injuries.” Id.
6 According to appellees, because of a lack of complete diversity jurisdiction, the federal case was remanded to state
court. The record contains no evidence of when the case was removed to federal court or remanded to state court. The
docket sheet from the state court litigation references removal and remand. However, docket sheets are not part of the
record. See Energo Int'l Corp. v. Modern Indus. Heating. Inc., 722 S.W.2d 149, 151 & n. 2 (Tex.App.-Dallas 1986, no
writ) (docket sheet entries are not part of the record which may be considered because they lack the formality of orders
and judgments; rather, docket sheet entry is a memorandum made for the convenience of the trial court and clerk).
7 Appellees state in their response to Pilot Travel's motion to compel arbitration that the case was set for trial on July 23,
2012. However, appellees do not argue that Pilot Travel invoked the judicial process by seeking a continuance of that
trial setting.

Prescott-Follett & Associates, Inc. v. Delasa/Prescott Follett..., Not Reported in...
2002 WL 31528463
In November 1999, the Parties allegedly negotiated a

new operating agreement (the “November Operating
2002 WL 31528463
Agreement”). The terms of the November Operating
Agreement were substantially different from the March
Operating Agreement, but contained the same dispute
E.D. Louisiana.
resolution clause as the original March Operating
PRESCOTT–FOLLETT & ASSOCIATES, INC. et al Agreement, in that it required the members to resolve “any
v. dispute under this Agreement ... by arbitration in New
DELASA/PRESCOTT York.” 5
FOLLETT & ASSOCIATES, et al
The Delaware Company was ultimately successful in
No. Civ.A. 01–3178. securing the lease and it assumed control of the port
| at Puerto Cabezas in July, 2001. 6 As a prerequisite for
Nov. 8, 2002. doing business in Nicaragua, Nicaraguan law required
the Delaware Company to be registered in Nicaragua
Opinion
and to appoint an agent who resided in Nicaragua. 7 The
AFRICK, J. Delaware Company appointed Arnaldo Talavera to act as
its agent and it granted him power of attorney to handle,
*1 Before this Court is the motion of defendants, Delasa/
inter alia, certain banking transactions for the Delaware
Prescott Follett & Associates, a Delaware limited liability
company, Alma Finance Group, Kris N. Mahabir, Arete, Company. 8
LLC, and Mary Wright, to compel arbitration pursuant
to an operating agreement of Delasa/Prescott Follett & In August, 2001, the majority shareholder of the
Associates. Plaintiffs, Prescott–Follett & Associates, Inc. Delaware Company requested that Talavera provide
and Latin American Energy Development, Inc. d/b/a an accounting of funds he handled on behalf of the
Delasa oppose the motion. For the following reasons, the Delaware Company. 9 Talavera failed to respond to
motion is GRANTED. these requests. Shortly thereafter, it was discovered that
John Wheelock 10 had allegedly opened a bank account
in Nicaragua under the same name as the Delaware
FACTUAL BACKGROUND Company and that he wrongfully deposited checks
belonging to the Delaware Company. 11
In 1999, Prescott–Follett & Associates, Inc., Latin
American Energy Development, Inc. d/b/a Delasa, 1 Consequently, the Delaware Company filed charges in
Alma Finance Group, and Arete, LLC, (the “Parties”) Nicaragua against Talavera on September 18, 2002,
formed a Delaware limited liability company, Delasa/ seeking an accounting of the Delaware Company's
Prescott–Follett & Associates LLC (the “Delaware funds. 12 On December 12, 2001, a judge of the Criminal
Company”), for the purpose of securing a twenty five year Court of Puerto Cabezas convicted Talavera of the
lease of the port facilities at Puerto Cabezas, Nicaragua. 2 crime of theft with abuse of trust in violation of
Shortly after forming the Delaware Company, the Parties the Nicaraguan Criminal Code. 13 In the judgment of
signed an operating agreement dated March 29, 1999, conviction, defendants allege that the judge also set
(the “March Operating Agreement”) to formalize their
forth a criminal complaint 14 against Wheelock for being
3
agreement to work together on the project. The March
presumed to be Talavera's co-conspirator. 15 Plaintiffs
Operating Agreement contained a clause requiring that,
agree that Wheelock was subsequently convicted of this
“[i]n the Event of any dispute under this Agreement, such
dispute shall be settled by arbitration in New York, New alleged crime in absentia. 16
York, in accordance with the rules then promulgated by
*2 On October 19, 2001, plaintiffs filed the present
the American Arbitration Association ...” 4
lawsuit seeking to have the November Operating

2002 WL 31528463
Agreement declared null and void and to reinstate the arbitration provisions. 20 Accordingly, the FAA governs
March Operating Agreement. Plaintiffs also seek damages this Court's determination regarding the arbitrability of
arising from the defendants' alleged breach of the March this dispute.
Operating Agreement.
The FAA expresses a strong presumption favoring
arbitration of disputes and “all doubts concerning the
LAW AND ANALYSIS arbitrability of claims should be resolved in favor of
arbitration.” Primerica Life Insurance Co. v. Brown, 304
The Federal Arbitration Act (“FAA”) applies to written F.3d 469, 471 (5 th Cir.2002). “By its terms, the Act leaves
arbitration provisions contained in contracts involving no place for the exercise of discretion by a district court,
commerce and “its reach is coextensive with the but instead mandates that district courts shall direct the
Congressional power to regulate under the Commerce parties to proceed to arbitration on issues as to which
Clause.” Trapp Chevrolet–Oldsmobile–Cadillac, Inc. v. an arbitration agreement has been signed.” Dean Witter
General Motors Corporation, 2002 WL 11633611, *2 Reynolds, Inc. v. Byrd, 470 U.S. 614, 625–26, 105 S.Ct.
(E.D.La.5/31/02). Specifically, Section 2 of the FAA 1238, 1241, 84 L.Ed.2d 158 (1985)(emphasis added). In
provides: determining whether the parties should be compelled to
arbitrate a dispute, the Court performs a two-step inquiry.
A written provision in any maritime
Primerica Life Insurance Co. v. Brown, 304 F.3d 469, 471
transaction or a contract evidencing
a transaction involving commerce to (5 th Cir.2002). “First, the court must determine whether
settle by arbitration a controversy the parties agreed to arbitrate the dispute. 21 Once the
thereafter arising out of such court finds that the parties agreed to arbitrate, it must
contract or transaction, or the consider whether any federal statute or policy renders
refusal to perform the whole or the claims nonarbitrable.” Id. In conducting this two
any part thereof, or an agreement step analysis, “courts must not consider the merits of the
in writing to submit to arbitration underlying action.” Downer v. Siegel, 2002 WL 31106920,
an existing controversy arising out *2 (E.D .La. 9/19/02).
of such a contract, transaction, or
refusal, shall be valid, irrevocable, *3 Here, plaintiffs do not deny that both the March
and enforceable, save upon such and November operating agreements at issue contain
grounds as exist at law or in equity an identical arbitration clause requiring “any dispute”
for the revocation of any contract. under the agreement to be arbitrated in New York. 22
Likewise, plaintiffs do not contest that their claims
9 U.S.C. § 2. The term “commerce” refers to “commerce
for breach of the original operating agreement (i.e.
among the several States or with foreign nations” 17 and
the March Operating Agreement) fall within the broad
it is to be broadly construed. Atlantic Aviation, Inc. v.
scope 23 of the arbitration clause. 24 Rather, plaintiffs
EBM Group, Inc., 11 F.3d 1276, 1280 (5 th Cir.1994).
sole argument is that they should not be compelled to
Furthermore, it is well established that although the
arbitrate at all because both the March and November
FAA is substantive law, the Act applies “in diversity
agreements are invalid as a whole as a result of fraudulent
cases because Congress ha[s] so intended.” 18 Allied Bruce
misrepresentations by the defendants . 25 Specifically,
Terminex Companies, Inc. v. Dobson, 513 U.S. 265, 271,
plaintiffs contend “that the entire consent to form the
115 S.Ct. 834, 838, 130 L.Ed.2d 753 (1995).
contract initially was obtained by the fraud, manipulation
and misrepresentation” 26 of facts by the defendants
In this case, none of the parties dispute that the operating
“upon which the plaintiffs relied, and without which the
agreements between the parties are contracts involving
entire contract, including the arbitration clause, would
commerce within the meaning of 9 U.S.C. § 2. 19
never have been entered into or agreed to.” 27
Moreover, it is also undisputed that both the March
and November operating agreements contain written

2002 WL 31528463
The Court notes that plaintiffs' arguments, legally and Arnoldo Talavera in matters arising out of the
actionable as they may be, do not render their claims Lease and Operating Agreement; and by their conscious
nonarbitrable. At no time have plaintiffs asserted that and deliberate efforts to violate, illegally modify and
there was fraud in the inducement or misrepresentations undermine the operation of DELASA/Delaware and
relative to the arbitration clause alone. 28 In Prima Paint the proper operation of Puerto Cabezas under the
Corporation v. Flood & Conklin Mfg. Co., 388 U.S. 395, Lease. 34
403–04, 87 S.Ct. 1801, 1806, 18 L.Ed.2d 1270 (1967), “Waiver of arbitration is not a favored finding and there
the United States Supreme Court specifically held that is a presumption against it.” Lawrence v. Comprehensive
pursuant to the FAA, “ ‘if the claim is fraud in the Bus. Servs. Co ., 833 F.2d 1159, 1164 (5 th Cir.1987);
inducement of the arbitration clause itself—an issue which Subway Equipment Leasing v. Forte, 169 F.3d 324, 326
goes to the ‘making’ of the agreement to arbitrate—the
(5 th Cir.1999)(“There is a strong presumption against
federal court may proceed to adjudicate it,' but the federal
waiver of arbitration”); Walker v. J .C. Bradford &
court cannot consider claims of fraud in the inducement of
the contract itself.” Downer v. Siegel, 2002 WL 31106920, Co., 938 F.2d 575, 577 (5 th Cir.1991)(“In general, we
*2 (E.D.La.9/19/02)(citing Prima Paint, 388 U.S. at 403– hesitate to find that a party has waived its contractual
04, 87 S.Ct. at 1806)). Thus, unless a defense relates right to arbitration.”); Moses H. Cone Mem'l Hosp.,
solely to the arbitration clause, it must be submitted to 460 U.S. 1, 24–25, 103 S.Ct. 927, 941, 74 Led.2d 765
the arbitrator for consideration as part of the underlying (1983)(“[A]ny doubts concerning the scope of arbitrable
issues should be resolved in favor of arbitration, whether
dispute between the parties. 29 Primerica Life Insurance
the problem at hand is the construction of the contract
Co. v. Brown, 304 F.3d 469, 471–72 (5 th Cir.2002). itself or an allegation of waiver, delay, or a like defense
to arbitrability”). Accordingly, a party asserting waiver
Plaintiffs in this case seek a declaratory judgment that of arbitration bears a heavy burden of proof. Subway,
the November operating agreement is “null, void, ultra
169 F.3d at 326 (5 th Cir.1999). “Waiver will be found
vires, in violation of the Original Consent and Terms of
when the party seeking arbitration substantially invokes
the Operating Agreement, and of no effect whatsoever”
the judicial process to the detriment or prejudice of
as a result of alleged fraudulent misrepresentations by
the other party.” Miller v. Brewing Co. v. Forth Worth
the defendants. 30 In their opposition to the motion to
Distrib. Co., 781 F.2d 494, 497 (5 th Cir.1986). Waiver
compel arbitration, the plaintiffs further allege that “even
requires a showing of “both a substantial invocation of
th[e] March 29 Operating Agreement was manipulated by
the judicial process and either detriment or prejudice to
defendants” and should be voided. 31 As plaintiffs' fraud
the other party.” 35 Consorcio Rive v. Briggs of Cancun,
defense relates to the operating agreements generally,
Inc., 134 F.Supp.2d 789, 795 (E.D.La.2001). Finally,
the jurisprudence and the FAA mandate that plaintiffs'
it is well established that “a party only invokes the
claims, including the fraud in the inducement defense, be
judicial process to the extent it litigates a specific claim
resolved by the arbitrator. 32 See Prima Paint, 388 U.S. it subsequently wants to arbitrate.” Subway, 169 F.3d at
395, 404, 87 S.Ct. 1801, 1806; Rushe, 2002 WL 575706 at
328; Doctor's Associates v. Distajo, 107 F.3d 126, 134 (2 nd
*7.
Cir.1997)(“[O]nly prior litigation of the same legal and
factual issues as those the party now wants to arbitrate
Plaintiffs next argue that arbitration should be denied
results in a waiver of the right to arbitrate”).
in this case because defendants sought the intervention
of the judicial system in Nicaragua rather than resorting
Defendants' filing of alleged civil and/or criminal matters
to arbitration, thereby waiving their right to compel
in Nicaragua against Talavera and Wheelock did not
arbitration. 33 Specifically, in their supplemental and amount to a substantial invocation of the judicial process
amending complaint plaintiffs aver: and it was not inconsistent with the defendants' desire
to arbitrate the present claims arising out of the parties'
operating agreement. With respect to the alleged civil
*4 Defendants have waived any right to arbitration
and criminal proceedings against Talavera, plaintiffs have
of this claim both by their filing or causing the filing
presented no evidence that Talavera was a member of
of civil and criminal litigation against John Wheelock

2002 WL 31528463
the Delaware Company or a party to the March and/or

In sum, the Court finds that there is no impediment
November agreements. 36 Accordingly, the Court fails to
to the arbitration of plaintiffs' claims. All of the
see how litigation against a non-party to an agreement
parties, including the plaintiffs, admittedly signed the
can result in a waiver of arbitration rights pursuant to
operating agreements. 40 All agreed to arbitrate “any
that agreement. 37 Further, defendants' actions in filing
dispute under th[e] Agreement[s].” 41 Further, plaintiffs
proceedings against Talavera for theft of funds could not
point to no federal statute or policy that may render
have resulted in any detriment or prejudice to plaintiffs
their claims nonarbitrable. Consequently, considering the
with respect to this action. Plaintiffs were not even parties
to the litigation against Talavera and did not have to broad nature of the arbitration clause 42 and the U.S.
bear the expense of burdensome litigation. Plaintiffs' Supreme Court's pronouncement in Prima Paint, this
claims against defendants for breach of the operating Court holds that plaintiffs' claims, including their claim
agreements are unrelated to any claims against Talavera, for fraud in the inducement of the operating agreement,
individually, for alleged theft of funds. Consequently, the must be submitted to arbitration. 43
Court finds that any proceeding by defendants against
Talavera, whether civil or criminal, did not result in a Accordingly,
waiver of arbitration rights in this matter. See Subway,
169 F.2d at 328 (holding that franchisor did not waive IT IS ORDERED that the motion to compel arbitration
right to arbitration under franchise agreement by filing of defendants, Delasa/Prescott Follett & Associates, a
previous lawsuit against franchisees where the earlier Delaware Limited Liability Company, Alma Finance
action involved claims that were different from the one the Group, Kris N. Mahabir, Arete, LLC, and Mary Wright,
franchisor now sought to arbitrate); Amalgamated Local is GRANTED.
No. 55, United Automobile, Aerospace & Agricultural
Implement Workers of America v. Metal and Alloy Division IT IS FURTHER ORDERED that the claims of
of Silver Creek Precision Corporation, 396 F.Supp. 667, plaintiffs, Prescott–Follett & Associates, Inc. and Latin
670 (N.D.N.Y.1975)(finding that union did not waive American Energy Development, Inc. d/b/a Delasa, shall
arbitration under collective bargaining agreement by be submitted to arbitration, in accordance with the parties'
filing criminal charge against one of employer's officers arbitration agreement.
where criminal action was based upon different issues
than those before the court and was brought against an IT IS FURTHER ORDERED that this case BE AND IS
individual and not the defendant corporation). HEREBY STAYED PENDING ARBITRATION.
*5 Similarly, the Court finds that the alleged filing of IT IS FURTHER ORDERED that the Clerk of Court
38 mark this action closed for statistical purposes and place
criminal charges against Wheelock did not amount to
a waiver of defendants' right to arbitrate. Federal courts this matter in a Civil Suspense File;
have held that the FAA, while promoting arbitration, does
not contemplate the arbitration of criminal activity. See IT IS FURTHER ORDERED that the Court shall retain
Myers v. Rosenberg, 1986 WL 3329, *2 (N.D.Ill.3/7/86). jurisdiction and the matter shall be restored to the trial
Therefore, defendants' alleged filing of criminal charges docket if circumstances change this action, upon motion
cannot be held to be inconsistent with their desire to of a party, within thirty (30) days of any such change of
arbitrate. Nor can it be held to have resulted in any circumstances, so that it may proceed to final disposition.
detriment or prejudice to the plaintiffs, particularly in light This order shall not prejudice the rights of the parties to
of the fact that Wheelock “was convicted in absentia, being this litigation.
out of the Country of Nicaragua at the time, never having
been formally faced with his accusers, never having been
All Citations
permitted to go to trial.” 39 Accordingly, plaintiffs fail to
meet their burden of proving a waiver of the arbitration. Not Reported in F.Supp.2d, 2002 WL 31528463

2002 WL 31528463
Footnotes
1 Plaintiffs, Prescott–Follett & Associates, Inc. and Latin American Energy Development, Inc. d/b/a Delasa, are both
Louisiana corporations. Alma Finance Group and Arete LLC are foreign companies. R. Doc. No. 1, ¶ 1.
2 R. Doc. No. 18, Memorandum, p. 2.
The purpose of the project was “the commercial, long-term development and privatization of Puerto Cabezas, as a
major port in Nicaragua, on the Atlantic coast, serving the North Atlantic Autonomous Region of Nicaragua.” R. Doc.
No. 1, ¶ 8.
3 Id. at pp. 2–3.
4 R. Doc. No. 5, Exhibit D–1, Article XXII, § 22.1.
5 R. Doc. No. 18, Exhibit 1, Operating Agreement, Article 10, § 10.1.
7 Id.
8 Id. at p. 4.
9 Id.
10 John Wheelock is the principal of Latin American Energy Development d/b/a Delasa, and a member of the Delaware
Company. R. Doc. No. 1, ¶ 8–9.
11 R. Doc. No. 18, p. 4. Plaintiffs dispute that Wheelock wrongfully deposited money into this account.
12 R. Doc. No. 18, p. 5; R. Doc. No. 5, Exhibits M–1, M–2, and N.
13 R. Doc. No. 18, p. 5; R. Doc. No. 32, p. 2.
14 According to the record, the judge ordered that an “instructive of law” be opened against Wheelock. R. Doc. No. 32, p. 5.
15 R. Doc. No. 18, p. 5 and Exhibit 2.
16 R. Doc. No. 23, p. 12. Plaintiffs further argue that the conviction was subsequently overturned by the judge who held that
the charges against Wheelock were civil in nature. Id. However, plaintiffs arguments are unsupported by any evidence
in the record.
17 9 U.S.C. § 1.
18 In fact, the U.S. Supreme Court has made it clear that the FAA preempts state law. Id., 513 U.S. at 272, 115 S.Ct. at 838.
19 R. Doc. No. 18, Memorandum, p. 6; R. Doc. No. 23, pp. 1, 6–7. Although the parties dispute whether the March or
November operating agreement should apply, it is clear that both agreements “involve commerce” as the parties to the
agreements are residents of different states and the agreements relate to the operations of a Delaware Company whose
business was the development of a major foreign port in Nicaragua. As such, they fall under the coverage of the FAA. See
Rushe v. NMTC, Inc., 2002 WL 575706, *5 (E.D.La.4/16/02)(holding that where distributorship agreement was between
residents of different states and involved the distribution of products from outside the State of Louisiana and “where the
claims and allegations of the suit involve[d] meetings and communications which took place between Ohio and Louisiana,”
the agreement was one which involved commerce within the meaning of the FAA).
20 R. Doc. No. 18, Memorandum, p. 6; R. Doc. No. 1, p. 1.
21 This determination involves two considerations: “(1) whether there is a valid agreement to arbitrate between the parties;
and (2) whether the dispute in question falls within the scope of that arbitration agreement.” Webb v. Investacorp, Inc.,
th
89 F.3d 252, 258 (5 Cir.1996).
22 R. Doc. No. 5, Exhibit D–1, Operating Agreement, Article XXII, § 22.1; R. Doc. No. 18, Exhibit 1, Article 10, § 10.1.
23 The Fifth Circuit has differentiated between arbitration clauses which are “broad” and those which are “narrow.” Rushe,
2002 WL 575706 at *5. “Where an arbitration clause is ‘broad,’ the action should be stayed and the arbitrator permitted
to decide if the dispute falls within the clause. Whereas in cases where the clause is ‘narrow,’ the case is not referred
to arbitration or stayed, unless the Court determines that the dispute falls within the clause.” Id. (citing In Re Complaint
th
of Hornbeck Offshore Corp., 981 F.2d 752, 755 (5 Cir.1993)).
Clauses which contain the term “any dispute” have been held to be “broad.” Id.; see also Pennzoil, 139 F.3d at 1067;
th
Mesa Operating Limited Partnership v. Louisiana Intrastate Gas Corporation, 797 F.2d 238, 244 (5 Cir.1986)(finding
that arbitration clause requiring arbitration of “any controversy between the parties ... arising under this Contract” was
th
broad); Rojas v. TK Communications, Inc., 87 F.3f 745 (5 Cir.1996)(“any other dispute” was sufficiently broad); In Re
Complaint of Hornbeck, 981 F.2d at 755 (holding that arbitration clause in towage agreement providing for reference
to arbitration of “any dispute” arising between the parties was broad); Sedco v. Petroleos Mexicanos Mexican Nat'l Oil,

2002 WL 31528463
th
767 F.2d 1140, 1144 (5 Cir.1985)(finding that clause providing for arbitration of “any dispute or difference between
th
the parties” was sufficiently broad); Neal v. Hardee's Food Systems, Inc., 918 F.2d 34, 38 (5 Cir.1990)(clause
governing “any and all disputes” between the parties was broad). In this case, both the March and November Operating
Agreements contain identical arbitration provisions requiring arbitration of “any dispute under this Agreement.” The
Court finds that regardless of which operating agreement is applied, the clauses are of the “broad” type. Therefore, in
accordance with the jurisprudence, the matter should be stayed and submitted to arbitration.
24 In fact, plaintiffs do not even address this issue in their opposition memorandum.
25 R. Doc. No. 23, p. 7–10. The Court notes that plaintiffs' original and first supplemental and amending complaints assert
only that the November Operating Agreement should be voided. R. Doc. No. 1, R. Doc. No. 5. On September 19, 2002,
plaintiffs requested leave to file a second supplemental and amending complaint wherein they asserted claims that the
March operating agreement should also be rescinded on the same basis as the November agreement. R. Doc. No. 27.
Although the Court denied plaintiffs request for leave, the Court, in the interest of justice, nevertheless considers plaintiffs'
arguments with respect to the March Operating Agreement as these are raised in opposition to the present motion to
compel arbitration.
26 R. Doc. No. 23, p. 14.
27 Id. at p. 7.
28 Plaintiffs' contention that the arbitration clause should be voided because the entire contract is null and void is not a
challenge to the arbitration clause, itself, but a challenge to the entire contract, including the arbitration clause.
29 th
See Primerica Life Insurance Company v. Brown, 304 F.3d 469, 471–72 (5 Cir.2002)(holding that where defendant's
capacity defense was a defense to the entire agreement and not a specific challenge to the arbitration clause, the defense
was part of the underlying dispute between the parties which must be submitted to the arbitrator); Snap–On Tools Corp.
th
v. Mason, 18 F .3d 1261, 1267–68 (5 Cir.1994)(submitting allegations of fraud in the inducement to arbitration because
allegations did not concern arbitration clause specifically, but rather was a challenge to the contract in its entirety);
th
Lawrence v. Comprehensive Business Services Company, 833 F.2d 1159, 1162 (5 Cir.1987)(submitting defense of
illegality of the contract to arbitration because it was not a challenge to the arbitration clause, itself, but rather to the
th
contract as a whole); Mesa Operating Limited Partnership v. Louisiana Intrastate Gas Corp., 797 F.2d 238, 244 (5
Cir.1986)(submitting to arbitration a defense that contract was void from its inception because defendant did not argue
“that the agreement to arbitrate [was] invalid separately from the entire contract).
30 R. Doc. No. 1, ¶ 21,
31 R. Doc. No. 23, p. 2.
32 Plaintiffs cite George Engine Co., Inc. v. Southern Shipbuilding Corp., 350 So.2d 881 (La.1977) in support of their
contention that the district court, not the arbitrator, has jurisdiction to decide the issue of fraud in the inducement of a
contract containing an arbitration clause. Id. at 884. In George Engine, the Louisiana Supreme Court declined to follow
Prima Paint. However, in Rushe and Downer, the federal district courts, faced with the same argument presented by the
plaintiffs herein, rejected the holding in George Engine, explaining that in George Engine the Louisiana Supreme Court
“was interpreting the Louisiana Arbitration Act §§ 4201, 4203, not the FAA.” Rushe, 2002 WL 575706 at *6; Downer,
2002 WL 31106920 at *3, n. 3.
33 R. Doc. No. 23, p. 11.
34 R. Doc. No. 5, ¶ 50.
35 “Substantial” invocation of the judicial process requires “active participation in a lawsuit or some other type of act
inconsistent with the desire to arbitrate.” Consorcio Rive v. Briggs of Cancun, Inc., 134 F.Supp.2d 789, 795 (E.D.La.2001).
With respect to the requirement of “prejudice,” the Fifth Circuit has held that, “[w]hen one party reveals a disinclination to
resort to arbitration on any phase of a lawsuit involving all parties, those parties are prejudiced by being forced to bear
the expenses of a trial ... Arbitration is designed to avoid this very expense. Substantially invoking the litigation machinery
qualifies as the kind of prejudice ... that is the essence of waiver.” Id. (quoting E.C. Ernst, Inc. v. Manhattan Construction
th
Co. of Texas, 559 F.2d 268, 269 (5 Cir.1977)).
36 To the contrary, the Operating Agreements themselves show that the only parties to the operating agreements and the
only entities/individuals having an ownership interest in the Delaware Company are Alma Finance (through its principal,
Kris N. Mahabir), Arete LLC (through its principal, Mary A. Wright), Delasa, Inc. (through its principal John F. Wheelock),
Prescott Follett and Associates, Inc. (through its principal, Prescott Follett), Michael Beaury, and Todd Esse. See R. Doc.
No. 18, Exhibit 1, Schedule A.

2002 WL 31528463
37 Clearly, as a non-party to the agreement, there was no duty owed to Talavera to resolve any disputes arising out of the
agreement through arbitration.
38 The Court notes that although plaintiffs argue that civil charges were also filed against Wheelock, the evidence submitted
by plaintiffs to the Court do not reveal the filing of any such civil matters. See R. Doc. No. 5, Exhibits M–1, M–2 and N.
To the contrary, a review of the documents submitted by plaintiffs show that the only matter against Wheelock is/was
pending before the Criminal District Court of Puerto Cabezas. R. Doc. No. 5, Exhibit M–2. Accordingly, any arguments
by plaintiff that a civil lawsuit was filed against Wheelock or, alternatively, that the criminal charges “were purely civil in
nature,” R. Doc. No. 23, p. 12, are merely speculative and unsupported by any evidence in the record.
39 R. Doc. No. 23, p. 12. Because Wheelock was convicted in absentia, there was no “active participation in a lawsuit”
sufficient to amount to substantial invocation of the judicial process. Consorcio Rive, 134 F.Supp.2d at 795.
40 R. Doc. No. 23, p. 2.
41 R. Doc. No. 23, p. 1.
42 In Re Complaint of Hornbeck Offshore Corp., 981 F.2d at 755 (“[A]rbitration clauses containing the ‘any dispute’
language ... are of the broad type.”).
43 th
Id.; Sedco, Inc. v. Petroleos Mexicanos Mexican National Oil Co., 767 F.2d 1140, 1148 (5 Cir.1985)(“ ‘[a]bsent
allegations of fraud in the inducement of the arbitration clause itself, arbitration must proceed when an arbitration clause
on its face appears broad enough to encompass the party's claims.” ’)(quoting Life of America Insurance Co. v. Aetna
th
Life Insurance Co., 744 F.2d 409, 413 (5 Cir.1984)).

Preston v. Ferrer, 552 U.S. 346 (2008)
128 S.Ct. 978, 169 L.Ed.2d 917, 76 USLW 3437, 76 USLW 4097, 27 IER Cases 257...
When parties agree to arbitrate all disputes

arising under their contract, questions
KeyCite Yellow Flag - Negative Treatment concerning the validity of the entire contract
Declined to Extend by Dalton v. Santander Consumer USA, Inc., N.M.,
are to be resolved by the arbitrator in the first
September 22, 2016
instance, not by a federal or state court.
128 S.Ct. 978
Supreme Court of the United States 127 Cases that cite this headnote
Arnold M. PRESTON, Petitioner,

v. [2] Alternative Dispute Resolution
Alex E. FERRER. Arbitration favored; public policy
National policy favoring arbitration applies in
No. 06–1463. state as well as federal courts and forecloses
| state legislative attempts to undercut the
Argued Jan. 14, 2008. enforceability of arbitration agreements. 9
| U.S.C.A. § 2.
Decided Feb. 20, 2008.
Synopsis
Background: Attorney who rendered services for
personnel in motion picture-television industry initiated [3] Alternative Dispute Resolution
arbitration proceeding against television performer, Preemption
seeking to recover fees to which he claimed he was Labor and Employment
entitled under their contract. The Superior Court of Los Employment Agencies
Angeles County, No. BC342454, Haley J. Fromholz, J., States
denied arbitration and granted performer's motion to stay Labor and Employment
action pending proceedings before Labor Commissioner. Federal Arbitration Act (FAA) preempts
Attorney appealed. The California Court of Appeal, California Talent Agencies Act (TAA)
Jackson, J., 145 Cal.App.4th 440, 51 Cal.Rptr.3d 628, provisions granting Labor Commissioner
affirmed. Certiorari was granted. exclusive jurisdiction to decide issue that
parties agreed to arbitrate and imposing
prerequisites to enforcement of arbitration
[Holding:] The Supreme Court, Justice Ginsburg, held that agreement that are not applicable to contracts
when parties agree to arbitrate all questions arising under generally. West's Ann.Cal.Labor Code §§
contract, Federal Arbitration Act (FAA) supersedes state 1700.44(a), 1700.45.
laws lodging primary jurisdiction in another forum,
whether judicial or administrative.

Reversed and remanded. Nature, purpose, and right to arbitration
in general
Justice Thomas filed dissenting opinion.
Prime objective of agreement to arbitrate
is to achieve streamlined proceedings and
expeditious results.
West Headnotes (5)

Preemption

States that Buckeye was inapposite because it did not involve an

Particular cases, preemption or administrative agency with exclusive jurisdiction over a
supersession disputed issue.
When parties agree to arbitrate all questions
arising under a contract, the Federal Held: When parties agree to arbitrate all questions arising
Arbitration Act (FAA) supersedes state under a contract, the Federal Arbitration Act (FAA),
laws lodging primary jurisdiction in another 9 U.S.C. § 1 et seq., supersedes state laws lodging
forum, whether judicial or administrative. 9 primary jurisdiction in another forum, whether judicial or
U.S.C.A. § 1 et seq. administrative. Pp. 982 – 988.
191 Cases that cite this headnote (a) The issue is not whether the FAA preempts the TAA
wholesale. Instead, the question is simply who decides
—the arbitrator or the Labor Commissioner—whether
Preston acted as an unlicensed talent agent in violation of
West Codenotes the TAA, as Ferrer claims, or as a personal manager not
governed by the TAA, as Preston contends. P. 983.
Preempted
West's Ann.Cal Labor Code §§ 1700.44(a), 1700.45. (b) FAA § 2 “declare[s] a national policy favoring
arbitration” when the parties contract for that mode
of dispute resolution. Southland Corp. v. Keating, 465
**978 Syllabus *
U.S. 1, 10, 104 S.Ct. 852, 79 L.Ed.2d 1. That national
A contract between respondent Ferrer, who appears policy “appli[es] in state as well as federal courts” and
on television as “Judge **979 Alex,” and petitioner “foreclose[s] state legislative attempts to undercut the
Preston, an entertainment industry attorney, requires enforceability of arbitration agreements.” Id., at 16, 104
arbitration of “any dispute ... relating to the [contract's] S.Ct. 852. The FAA's displacement of conflicting state law
terms ... or the breach, validity, or legality thereof ... has been repeatedly reaffirmed. See, e.g., Buckeye, 546
in accordance with [American Arbitration Association U.S., at 445–446, 126 S.Ct. 1204; Allied–Bruce Terminix
(AAA) ] rules.” Preston invoked this provision to gain Cos. v. Dobson, 513 U.S. 265, 272, 115 S.Ct. 834, 130
fees allegedly due under the contract. Ferrer thereupon L.Ed.2d 753. A recurring question under § 2 is who should
petitioned the California Labor Commissioner (Labor decide whether “grounds ... exist at law or in equity” to
Commissioner) for a determination that the contract invalidate an arbitration agreement. In Prima Paint Corp.
was invalid and unenforceable under California's Talent v. Flood & Conklin Mfg. Co., 388 U.S. 395, 403–404, 87
Agencies Act (TAA) because Preston had acted as a S.Ct. 1801, 18 L.Ed.2d 1270, which originated in federal
talent agent without the required license. After the Labor court, this Court held that attacks on an entire contract's
Commissioner's hearing officer denied Ferrer's motion validity, as distinct from attacks on the arbitration clause
to stay the arbitration, Ferrer filed suit in state court alone, are within the arbitrator's ken. Buckeye held that
seeking to enjoin arbitration, and Preston moved to the same rule applies in state court. See 546 U.S., at 446,
compel arbitration. The court denied Preston's motion 126 S.Ct. 1204.
and enjoined him from proceeding before the arbitrator
unless and until the Labor Commissioner determined Buckeye largely, if not entirely, resolves the present
she lacked jurisdiction over the dispute. While Preston's dispute. The contract at issue clearly “evidenc[ed] a
appeal was pending, this Court held, in Buckeye Check transaction involving commerce” under § 2, and Ferrer
Cashing, Inc. v. Cardegna, 546 U.S. 440, 446, 126 S.Ct. has never disputed that the contract's written arbitration
1204, 163 L.Ed.2d 1038, that challenges to the validity provision falls within **980 § 2's purview. Ferrer sought
of a contract requiring arbitration of disputes ordinarily invalidation of the contract as a whole. He made no
“should ... be considered by an arbitrator, not a court.” discrete challenge to the validity of the arbitration clause,
Affirming the judgment below, the California Court of and thus sought to override that clause on a ground
Appeal held that the TAA vested the Labor Commissioner Buckeye requires the arbitrator to decide in the first
with exclusive original jurisdiction over the dispute, and instance. Pp. 983 – 984.

proceedings to avoid the possibility of conflicting rulings

(c) Ferrer attempts to distinguish Buckeye, urging that on a common issue. Here, in contrast, the arbitration
the TAA merely requires exhaustion of administrative clause speaks to the matter in controversy; both parties
remedies before the parties proceed to arbitration. This are bound by the arbitration agreement; the question of
argument is unconvincing. Pp. 984 – 987. Preston's status as a talent agent relates to the validity
or legality of the contract; there is no risk that related
(1) Procedural prescriptions of the TAA conflict with the litigation will yield conflicting rulings on common issues;
FAA's dispute resolution regime in two basic respects: and there is no other procedural void for the choice-of-law
(1) One TAA provision grants the Labor Commissioner clause to fill. Second, the Court is guided by its decision
exclusive jurisdiction to decide an issue that the parties in Mastrobuono v. Shearson Lehman Hutton, Inc., 514
agreed to arbitrate, see Buckeye, 546 U.S., at 446, U.S. 52, 115 S.Ct. 1212, 131 L.Ed.2d 76. Although the
126 S.Ct. 1204; (2) another imposes prerequisites to Volt contract provided for arbitration in accordance with
enforcement of an arbitration agreement that are not AAA rules, 489 U.S., at 470, n. 1, 109 S.Ct. 1248, Volt
applicable to contracts generally, see Doctor's Associates, never argued that incorporation of those rules by reference
Inc. v. Casarotto, 517 U.S. 681, 687, 116 S.Ct. 1652, 134 trumped the contract's choice-of-law clause, so this Court
L.Ed.2d 902. Pp. 984 – 985. never addressed the import of such incorporation. In
Mastrobuono, the Court reached that open question,
(2) Ferrer contends that the TAA is compatible with declaring that the “best way to harmonize” **981 a
the FAA because the TAA provision vesting exclusive New York choice-of-law clause and a clause providing
jurisdiction in the Labor Commissioner merely postpones for arbitration in accordance with privately promulgated
arbitration. That position is contrary to the one Ferrer arbitration rules was to read the choice-of-law clause “to
took in the California courts and does not withstand encompass substantive principles that New York courts
examination. Arbitration, if it ever occurred following would apply, but not to include [New York's] special
the Labor Commissioner's decision, would likely be long rules limiting [arbitrators'] authority.” 514 U.S., at 63–
delayed, in contravention of Congress' intent “to move 64, 115 S.Ct. 1212. Similarly here, the “best way to
the parties to an arbitrable dispute out of court and into harmonize” the Ferrer–Preston contract's adoption of the
arbitration as quickly and easily as possible.” Moses H. AAA rules and its selection of California law is to read the
Cone Memorial Hospital v. Mercury Constr. Corp., 460 latter to encompass prescriptions governing the parties'
U.S. 1, 22, 103 S.Ct. 927, 74 L.Ed.2d 765. Pp. 985 – 986. substantive rights and obligations, but not the State's
“special rules limiting [arbitrators'] authority.” Ibid. Pp.
(3) Ferrer contends that the conflict between 987 – 989.
the arbitration clause and the TAA should be
overlooked because Labor Commissioner proceedings are 145 Cal.App. 4th 440, 51 Cal.Rptr.3d 628, reversed and
administrative rather than judicial. The Court rejected remanded.
a similar argument in Gilmer v. Interstate/Johnson Lane
Corp., 500 U.S. 20, 28–29, 111 S.Ct. 1647, 114 L.Ed.2d 26. GINSBURG, J., delivered the opinion of the Court,
Pp. 986 – 987. in which ROBERTS, C.J., and STEVENS, SCALIA,
KENNEDY, SOUTER, BREYER, and ALITO, JJ.,
(d) Ferrer's reliance on Volt Information Sciences, Inc. v. joined. THOMAS, J., filed a dissenting opinion, post, at
Board of Trustees of Leland Stanford Junior Univ., 489 989.
U.S. 468, 109 S.Ct. 1248, 103 L.Ed.2d 488, is misplaced
for two reasons. First, arbitration was stayed in Volt
to accommodate litigation involving third parties who Attorneys and Law Firms
were strangers to the arbitration agreement. Because the
Joseph D. Schleimer, Beverly Hills, CA, for petitioner.
contract at issue in Volt did not address the order of
proceedings and included a choice-of-law clause adopting G. Eric Brunstad, Jr., Hartford, Connecticut, for
California law, the Volt Court recognized as the gap respondent.
filler a California statute authorizing the state court to
stay either third-party court proceedings or arbitration

**982 program, and petitioner Arnold M. Preston, a

Robert M. Dudnik, Mitchell, Silberberg & Knupp California attorney who renders services to persons in the
LLP, Los Angeles, CA, G. Eric Brunstad, Jr., Counsel entertainment industry. Seeking fees allegedly due under
of Record, Rheba Rutkowski, Brian R. Hole, Collin the contract, Preston invoked the parties' agreement to
O'Connor Udell Bingham McCutchen LLP, Hartford, arbitrate “any dispute ... relating to the terms of [the
Connecticut, for Respondents. contract] or the breach, validity, or legality thereof ... in
accordance with the rules [of the American Arbitration
Joseph D. Schleimer, Counsel of Record, Kenneth D.
Association].” App. 18.
Freundlich, Schleimer & Freundlich, LLP, Beverly Hills,
CA, for Petitioner.
Preston's demand for arbitration, made in June 2005,
Opinion was countered a month later by Ferrer's petition
to the California Labor Commissioner charging that
Justice GINSBURG delivered the opinion of the Court. the contract was invalid and unenforceable under the
California Talent Agencies Act (TAA), Cal. Lab.Code
[1] *349 As this Court recognized in Southland Corp. v. Ann. § 1700 et seq. (West 2003 and Supp.2008). Ferrer
Keating, 465 U.S. 1, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984), asserted that Preston acted as a talent agent without the
the Federal Arbitration Act (FAA or Act), 9 U.S.C. § license required by the TAA, and that Preston's unlicensed
1 et seq. (2000 ed. and Supp. V), establishes a national
status rendered the entire contract void. 1
policy favoring arbitration when the parties contract for
that mode of dispute resolution. The Act, which rests on
The Labor Commissioner's hearing officer, in November
Congress' authority under the Commerce Clause, supplies
2005, determined that Ferrer had stated a “colorable basis
not simply a procedural framework applicable in federal
for exercise of the Labor Commissioner's jurisdiction.”
courts; it also calls for the application, in state as well
App. 33. The officer denied Ferrer's motion to stay
as federal courts, of federal substantive law regarding
the arbitration, however, on the ground that the Labor
arbitration. 465 U.S., at 16, 104 S.Ct. 852. More recently,
Commissioner lacked authority to order such relief. Ferrer
in Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S.
then filed suit in the Los Angeles Superior Court, seeking
440, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006), the Court
a declaration that the controversy between the parties
clarified that, when parties agree to arbitrate all disputes
“arising from the [c]ontract, including in particular the
arising under their contract, questions concerning the
issue of the validity of the [c]ontract, is not subject to
validity of the entire contract are to be resolved by the
arbitration.” *351 Id., at 29. As interim relief, Ferrer
arbitrator in the first instance, not by a federal or state
sought an injunction restraining Preston from proceeding
court.
before the arbitrator. Preston responded by moving to
compel arbitration.
The instant petition presents the following question: Does
the FAA override not only state statutes that refer certain
In December 2005, the Superior Court denied Preston's
state-law controversies initially to a judicial forum, but
motion to compel arbitration and enjoined Preston from
also state statutes that refer certain disputes initially to an
proceeding before the arbitrator “unless and until the
administrative agency? We hold today that, when parties
Labor Commissioner determines that ... she is without
agree to arbitrate all questions arising under a contract,
jurisdiction over the disputes between Preston and
state laws lodging primary jurisdiction in another forum,
Ferrer.” No. BC342454 (Dec. 7, 2005), App. C to Pet.
*350 whether judicial or administrative, are superseded
for Cert. 18a, 26a–27a. During the pendency of Preston's
by the FAA.
appeal from the Superior Court's decision, this Court
reaffirmed, in Buckeye, that challenges to the validity of
a contract providing for arbitration ordinarily “should ...
I be considered by an arbitrator, not a court.” 546 U.S., at
446, 126 S.Ct. 1204.
This case concerns a contract between respondent Alex E.
Ferrer, a former Florida trial court judge who currently
In a 2–to–1 decision issued in November 2006, the
appears as “Judge Alex” on a Fox television network
California Court of Appeal affirmed the Superior

Court's judgment. The appeals court held that the

relevant provision of the TAA, Cal. Lab.Code Ann. The dispositive issue, then, contrary to Ferrer's
§ 1700.44(a) (West 2003), vests “exclusive original suggestion, is not whether the FAA preempts the TAA
jurisdiction” over the dispute in the Labor Commissioner. wholesale. See id., at 44–48. The FAA plainly has no such
145 Cal.App.4th 440, 447, 51 Cal.Rptr.3d 628, 634. destructive aim or effect. Instead, the question is simply
Buckeye is “inapposite,” the court said, because that case who decides whether Preston acted as personal manager
“did not involve an administrative agency with exclusive or as talent agent.
jurisdiction over a disputed issue.” 145 Cal.App.4th, at
447, 51 Cal.Rptr.3d, at 634. The dissenting judge, in
contrast, viewed Buckeye as controlling; she reasoned
III
that the FAA called for immediate recognition and
enforcement of the parties' agreement to arbitrate and [2] Section 2 of the FAA states:
afforded no basis for distinguishing prior resort to a state
administrative agency from prior resort to a state court. “A written provision in any ... contract evidencing a
145 Cal.App.4th, at 450–451, 51 Cal.Rptr.3d, at 636–637 transaction involving commerce to settle by arbitration
(Vogel, J., dissenting). a controversy thereafter arising out of such contract
or transaction ... shall be valid, irrevocable, and
The California Supreme Court denied Preston's petition enforceable, *353 save upon such grounds as exist at
for review. No. S149190 (Feb. 14, 2007), 2007 Cal. LEXIS law or in equity for the revocation of any contract.” 9
1539, App. A to Pet. for Cert. 1a. We granted certiorari U.S.C. § 2.
to determine whether the FAA overrides a state law
Section 2 “declare[s] a national policy favoring
vesting *352 initial adjudicatory **983 authority in an
arbitration” of claims that parties contract to settle in
administrative agency. 551 U.S. 1190, 128 S.Ct. 31, 168
that manner. Southland Corp., 465 U.S., at 10, 104 S.Ct.
L.Ed.2d 807 (2007).
852. That national policy, we held in Southland, “appli
[es] in state as well as federal courts” and “foreclose[s]
state legislative attempts to undercut the enforceability
II of arbitration agreements.” Id., at 16, 104 S.Ct. 852. The
FAA's displacement of conflicting state law is “now well-
An easily stated question underlies this controversy.
established,” Allied–Bruce Terminix Cos. v. Dobson, 513
Ferrer claims that Preston was a talent agent who operated
U.S. 265, 272, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995),
without a license in violation of the TAA. Accordingly,
and has been repeatedly reaffirmed, see, e.g., Buckeye, 546
he urges, the contract between the parties, purportedly for
U.S., at 445–446, 126 S.Ct. 1204; Doctor's Associates, Inc.
“personal management,” is void, and Preston is entitled
v. Casarotto, 517 U.S. 681, 684–685, 116 S.Ct. 1652, 134
to no compensation for any services he rendered. Preston,
L.Ed.2d 902 (1996); Perry v. Thomas, 482 U.S. 483, 489,
on the other hand, maintains that he acted as a personal
manager, not as a talent agent, hence his contract with 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987). 2
Ferrer is not governed by the TAA and is both lawful and
fully binding on the parties. A recurring question under § 2 is who should decide
whether “grounds ... exist at law or in equity” to invalidate
Because the contract between Ferrer and Preston provides an arbitration agreement. In **984 Prima Paint Corp. v.
that “any dispute ... relating to the ... validity, or legality,” Flood & Conklin Mfg. Co., 388 U.S. 395, 403–404, 87 S.Ct.
of the agreement “shall be submitted to arbitration,” App. 1801, 18 L.Ed.2d 1270 (1967), we held that attacks on
18, Preston urges that Ferrer must litigate “his TAA the validity of an entire contract, as distinct from attacks
defense in the arbitral forum,” Reply Brief 31. Ferrer aimed at the arbitration clause, are within the arbitrator's
insists, however, that the “personal manager” or “talent ken.
agent” inquiry falls, under California law, within the
exclusive original jurisdiction of the Labor Commissioner, The litigation in Prima Paint originated in federal court,
and that the FAA does not displace the Commissioner's but the same rule, we held in Buckeye, applies in state
primary jurisdiction. Brief for Respondent 14, 30, 40–44. court. 546 U.S., at 447–448, 126 S.Ct. 1204. The plaintiffs

in Buckeye alleged that the contracts they signed, which unlicensed person's contract with an artist to provide the
contained arbitration clauses, were illegal under state law services of a talent agency is illegal and void.” Ibid. 4
and void ab initio. Id., at 443, 126 S.Ct. 1204. Relying on
Southland, we held that the plaintiffs' challenge was within **985 [3] Section 1700.44(a) of the TAA states:
the province of the arbitrator to decide. See 546 U.S., at
446, 126 S.Ct. 1204. “In cases of controversy arising
under this chapter, the parties
*354 Buckeye largely, if not entirely, resolves the dispute involved shall refer the matters in
before us. The contract between Preston and Ferrer dispute to the Labor Commissioner,
clearly “evidenc[ed] a transaction involving commerce,” 9 who shall hear and determine the
U.S.C. § 2, and Ferrer has never disputed that the written same, subject to an appeal within
arbitration provision in the contract falls within the 10 days after determination, to the
purview of § 2. Moreover, Ferrer sought invalidation of superior court where the same shall
the contract as a whole. In the proceedings below, he made be heard de novo.”
no discrete challenge to the validity of the arbitration
clause. See 145 Cal.App.4th, at 449, 51 Cal.Rptr.3d, Absent a notice of appeal filed within ten days, the Labor
Commissioner's determination becomes final and binding
at 635 (Vogel, J., dissenting). 3 Ferrer thus urged the
on the parties. REO Broadcasting Consultants v. Martin,
Labor Commissioner and California courts to override
69 Cal.App.4th 489, 495, 81 Cal.Rptr.2d 639, 642–643
the contract's arbitration clause on a ground that Buckeye
requires the arbitrator to decide in the first instance. (1999). 5
The TAA permits arbitration in lieu of proceeding before

the Labor Commissioner if an arbitration provision “in
IV a contract between a talent agency and [an artist]”
both “provides for reasonable notice to the Labor
Ferrer attempts to distinguish Buckeye by arguing that
Commissioner of the time and place of all arbitration
the TAA merely requires exhaustion of administrative
hearings” and gives the Commissioner *356 “the right
remedies before the parties proceed to arbitration. We
to attend all arbitration hearings.” § 1700.45. This
reject that argument.
prescription demonstrates that there is no inherent conflict
between the TAA and arbitration as a dispute resolution
mechanism. But § 1700.45 was of no utility to Preston. He
A has consistently maintained that he is not a talent agent
as that term is defined in § 1700.4(a), but is, instead, a
The TAA regulates talent agents and talent agency personal manager not subject to the TAA's regulatory
agreements. “Talent agency” is defined, with exceptions regime. 145 Cal.App.4th, at 444, 51 Cal.Rptr.3d, at 631.
not relevant here, as “a person or corporation who To invoke § 1700.45, Preston would have been required to
engages in the occupation of procuring, offering, concede a point fatal to his claim for compensation—i.e.,
promising, or attempting to procure employment or that he is a talent agent, albeit an unlicensed one—and to
engagements for an artist or artists.” Cal. Lab.Code Ann. have drafted his contract in compliance with a statute that
§ 1700.4(a) (West 2003). The definition *355 “does not he maintains is inapplicable.
cover other services for which artists often contract, such
as personal and career management (i.e., advice, direction, Procedural prescriptions of the TAA thus conflict with
coordination, and oversight with respect to an artist's the FAA's dispute resolution regime in two basic respects:
career or personal or financial affairs).” Styne v. Stevens, First, the TAA, in § 1700.44(a), grants the Labor
26 Cal.4th 42, 51, 109 Cal.Rptr.2d 14, 26 P.3d 343, 349 Commissioner exclusive jurisdiction to decide an issue
(2001) (emphasis deleted). The TAA requires talent agents that the parties agreed to arbitrate, see Buckeye, 546 U.S.,
to procure a license from the Labor Commissioner. § at 446, 126 S.Ct. 1204; second, the TAA, in § 1700.45,
1700.5. “In furtherance of the [TAA's] protective aims, an imposes prerequisites to enforcement of an arbitration
agreement that are not applicable to contracts generally,

see Doctor's Associates, Inc., 517 U.S., at 687, 116 S.Ct. [4] A prime objective of an agreement to arbitrate
1652. is to achieve “streamlined proceedings and expeditious
results.” *358 Mitsubishi Motors Corp. v. Soler Chrysler–
Plymouth, Inc., 473 U.S. 614, 633, 105 S.Ct. 3346, 87
L.Ed.2d 444 (1985). See also Allied–Bruce Terminix Cos.,
B
513 U.S., at 278; Southland Corp., 465 U.S., at 7, 104 S.Ct.
Ferrer contends that the TAA is nevertheless compatible 852. That objective would be frustrated even if Preston
with the FAA because § 1700.44(a) merely postpones could compel arbitration in lieu of de novo Superior Court
arbitration until after the Labor Commissioner has review. Requiring initial reference of the parties' dispute
exercised her primary jurisdiction. Brief for Respondent to the Labor Commissioner would, at the least, hinder
14, 40. The party that loses before the Labor speedy resolution of the controversy.
Commissioner may file for de novo review in Superior
Court. See § 1700.44(a). At that point, Ferrer asserts, Ferrer asks us to overlook the apparent conflict
either party could move to compel arbitration under between the arbitration clause and § 1700.44(a)
Cal.Civ.Proc.Code Ann. § 1281.2 (West 2007), and because proceedings before the Labor Commissioner
thereby obtain an arbitrator's determination prior to are administrative rather than judicial. Brief for
judicial review. See Brief for Respondent 13. Respondent 40–48. Allowing parties to proceed directly to
arbitration, Ferrer contends, would undermine the Labor
That is not the position Ferrer took in the California Commissioner's ability to stay informed of potentially
courts. In his complaint, he urged the Superior Court illegal activity, id., at 43, and would deprive artists
to *357 declare that “the [c]ontract, including in protected by the TAA of the Labor Commissioner's
particular the issue of the validity of the [c]ontract, is expertise, id., at 41–43.
not subject to arbitration,” and he sought an injunction
stopping arbitration “unless and until, if ever, the In Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20,
Labor Commissioner determines that he/she has no 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991), we considered and
jurisdiction over the parties' dispute.” App. 29 (emphasis rejected a similar argument, namely, that arbitration of
added). Ferrer also told the Superior Court: “[I]f ... the age discrimination claims would undermine the role of the
Commissioner rules that the [c]ontract is void, Preston Equal Employment Opportunity Commission (EEOC)
may appeal that ruling and have a hearing de novo before in enforcing federal law. The “mere involvement of an
this Court.” Appellant's **986 App. in No. B188997 administrative agency in the enforcement of a statute,” we
(Cal.App.), p. 157, n. 1 (emphasis added). held, does not limit private parties' obligation to comply
with their arbitration agreements. Id., at 28–29, 111 S.Ct.
Nor does Ferrer's current argument—that § 1700.44(a) 1647.
merely postpones arbitration—withstand examination.
Section 1700.44(a) provides for de novo review in Superior Ferrer points to our holding in EEOC v. Waffle House,
Inc., 534 U.S. 279, 293–294, 122 S.Ct. 754, 151 L.Ed.2d
Court, not elsewhere. 6 Arbitration, if it ever occurred
755 (2002), that an arbitration agreement signed by an
following the Labor Commissioner's decision, would
employee who becomes a discrimination complainant
likely be long delayed, in contravention of Congress' intent
does not bar the EEOC from filing an enforcement suit
“to move the parties to an arbitrable dispute out of court
in its own name. He further emphasizes our observation
and into arbitration as quickly and easily as possible.”
in Gilmer that individuals who agreed to arbitrate their
Moses H. Cone Memorial Hospital v. Mercury Constr.
discrimination claims would “still be free to file a
Corp., 460 U.S. 1, 22, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983).
charge with the EEOC.” 500 U.S., at 28, 111 S.Ct.
If Ferrer prevailed in the California courts, moreover, he
1647. Consistent with these decisions, Ferrer argues, the
would no doubt argue that judicial findings of fact and
arbitration clause in his contract **987 with Preston
conclusions of law, made after a full and fair de novo
leaves undisturbed the Labor Commissioner's *359
hearing in court, are binding on the parties and preclude
independent authority to enforce the TAA. See Brief for
the arbitrator from making any contrary rulings.
Respondent 44–48. And so it may. 7 But in proceedings
under § 1700.44(a), the Labor Commissioner functions

not as an advocate advancing a cause before a tribunal Volt Information Sciences and Stanford University
authorized to find the facts and apply the law; instead, the were parties to a construction contract containing an
Commissioner serves as impartial arbiter. That role is just arbitration clause. When a dispute arose and Volt
what the FAA-governed agreement between Ferrer and demanded arbitration, Stanford sued Volt and two other
Preston reserves for the arbitrator. In contrast, in Waffle companies involved in the construction project. Those
House and in the Gilmer aside Ferrer quotes, the Court other companies were not parties to the arbitration
addressed the role of an agency, not as adjudicator but agreement; Stanford sought indemnification from them
as prosecutor, pursuing an enforcement action in its own in the event that Volt prevailed against Stanford.
name or reviewing a discrimination charge to determine At Stanford's request, the Superior Court stayed the
whether to initiate judicial proceedings. arbitration. The California Court of Appeal affirmed the
stay order. Volt and Stanford incorporated § 1281.2(c)
Finally, it bears repeating that Preston's petition presents into their agreement, the appeals court held. They did so
precisely and only a question concerning the forum in by stipulating that the contract—otherwise silent **988
which the parties' dispute will be heard. See supra, at 983. on the priority of suits drawing in parties not subject
“By agreeing to arbitrate a statutory claim, a party does to arbitration—would be governed by California law.
not forgo the substantive rights afforded by the statute; it Board of Trustees of Leland Stanford Junior Univ. v. Volt
only submits to their resolution in an arbitral ... forum.” Information Sciences, Inc., 240 Cal.Rptr. 558, 561 (1987)
Mitsubishi Motors Corp., 473 U.S., at 628, 105 S.Ct. 3346. (officially depublished). Relying on the Court of Appeal's
So here, Ferrer relinquishes no substantive rights the TAA interpretation of the contract, we held that the FAA did
or other California law may accord him. But under the not bar a stay of arbitration pending the resolution of
contract he signed, he cannot escape resolution of those Stanford's Superior Court suit against Volt and the two
rights in an arbitral forum. companies not bound by the arbitration agreement.
[5] In sum, we disapprove the distinction between judicial *361 Preston and Ferrer's contract also contains a
and administrative proceedings drawn by Ferrer and choice-of-law clause, which states that the “agreement
adopted by the appeals court. When parties agree to shall be governed by the laws of the state of California.”
arbitrate all questions arising under a contract, the FAA App. 17. A separate saving clause provides: “If there is any
supersedes state laws lodging primary jurisdiction in conflict between this agreement and any present or future
another forum, whether judicial or administrative. law,” the law prevails over the contract “to the extent
necessary to bring [the contract] within the requirements
of said law.” Id., at 18. Those contractual terms, according
to Ferrer, call for the application of California procedural
*360 V
law, including § 1700.44(a) 's grant of exclusive jurisdiction
Ferrer's final attempt to distinguish Buckeye relies on Volt to the Labor Commissioner.
Information Sciences, Inc. v. Board of Trustees of Leland
Stanford Junior Univ., 489 U.S. 468, 109 S.Ct. 1248, 103 Ferrer's reliance on Volt is misplaced for two discrete
L.Ed.2d 488 (1989). Volt involved a California statute reasons. First, arbitration was stayed in Volt to
dealing with cases in which “[a] party to [an] arbitration accommodate litigation involving third parties who were
agreement is also a party to a pending court action ... strangers to the arbitration agreement. Nothing in the
[involving] a third party [not bound by the arbitration arbitration agreement addressed the order of proceedings
agreement], arising out of the same transaction or series of when pending litigation with third parties presented the
related transactions.” Cal.Civ.Proc.Code Ann. § 1281.2(c) prospect of inconsistent rulings. We thought it proper,
(West 2007). To avoid the “possibility of conflicting in those circumstances, to recognize state law as the gap
rulings on a common issue of law or fact,” the statute gives filler.
the Superior Court authority, inter alia, to stay the court
proceeding “pending the outcome of the arbitration” or Here, in contrast, the arbitration clause speaks to the
to stay the arbitration “pending the outcome of the court matter in controversy; it states that “any dispute ...
action.” Ibid. relating to ... the breach, validity, or legality” of the
contract should be arbitrated in accordance with the

American Arbitration Association (AAA) rules. App. 18. in particular Rule 7(b), weighs against inferring from
the choice-of-law clause an understanding shared by
Both parties are bound by the arbitration agreement; the
Ferrer and Preston that their disputes would be heard,
question of Preston's status as a talent agent relates to the
in *363 the first instance, by the Labor Commissioner.
validity or legality of the contract; there is no risk that
Following the guide Mastrobuono provides, the “best way
related litigation will yield conflicting rulings on common
to harmonize” the parties' adoption of the AAA rules and
issues; and there is no other procedural void for the choice-
their selection of California law is to read the latter to
of-law clause to fill.
encompass prescriptions governing the substantive rights
and obligations of the parties, but not the State's “special
Second, we are guided by our more recent decision in
rules limiting the authority of arbitrators.” 514 U.S., at
Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S.
63–64, 115 S.Ct. 1212.
52, 115 S.Ct. 1212, 131 L.Ed.2d 76 (1995). Although the
contract in Volt provided for “arbitration in accordance
with the Construction Industry Arbitration Rules of the
American Arbitration Association,” 489 U.S., at 470, n. ***
1, 109 S.Ct. 1248 (internal quotation marks omitted), Volt
never argued that incorporation of those rules trumped For the reasons stated, the judgment of the California
the choice-of-law clause contained in the contract, see Court of Appeal is reversed, and the case is remanded for
Brief for *362 Appellant, and Reply Brief, in Volt further proceedings not inconsistent with this opinion.
Information Sciences, Inc. v. Board of Trustees of Leland
Stanford Junior Univ., O.T. 1988, No. 87–1318. Therefore, It is so ordered.
neither our decision in Volt nor the decision of the
California appeals court in that case addressed the import
of the contract's incorporation by reference of privately JUSTICE THOMAS, dissenting.
promulgated arbitration rules. As I have stated on many previous occasions, I believe
that the Federal Arbitration Act (FAA), 9 U.S.C. §
In Mastrobuono, we reached that open question while 1 et seq. (2000 ed. and Supp. V), does not apply to
interpreting a contract with both a New York choice- proceedings in state courts. See Allied–Bruce Terminix
of-law clause and a clause providing for arbitration in Cos. v. Dobson, 513 U.S. 265, 285–297, 115 S.Ct. 834,
accordance with the rules of the National Association of 130 L.Ed.2d 753 (1995) (dissenting opinion); see also
Securities Dealers (NASD). 514 U.S., at 58–59, 115 S.Ct. Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440,
1212. 8 The “best **989 way to harmonize” the two 449, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006) (same);
clauses, we held, was to read the choice-of-law clause “to Green Tree Financial Corp. v. Bazzle, 539 U.S. 444, 460,
encompass substantive principles that New York courts 123 S.Ct. 2402, 156 L.Ed.2d 414 (2003) (same); Doctor's
would apply, but not to include [New York's] special rules Associates, Inc. v. Casarotto, 517 U.S. 681, 689, 116 S.Ct.
limiting the authority of arbitrators.” Id., at 63–64, 115 1652, 134 L.Ed.2d 902 (1996) (same). Thus, in state-court
S.Ct. 1212. proceedings, the FAA cannot displace a state law that
delays arbitration until administrative proceedings are
Preston and Ferrer's contract, as noted, provides for completed. Accordingly, I would affirm the judgment of
arbitration in accordance with the AAA rules. App. the Court of Appeal.
18. One of those rules states that “[t]he arbitrator shall
have the power to determine the existence or validity
of a contract of which an arbitration clause forms a All Citations
part.” AAA, Commercial Arbitration Rules ¶ R–7(b)
552 U.S. 346, 128 S.Ct. 978, 169 L.Ed.2d 917, 76 USLW
(2007), online at http://www.adr.org/sp.asp? id=22440
3437, 76 USLW 4097, 27 IER Cases 257, 08 Cal. Daily
(as visited Feb. 15, 2008, and in Clerk of Court's
Op. Serv. 2100, 2008 Daily Journal D.A.R. 2511, 21 Fla.
case file). The incorporation of the AAA rules, and
L. Weekly Fed. S 77, 28 A.L.R. Fed. 2d 681
Footnotes

L.Ed. 499.
1 The TAA uses the term “talent agency” to describe both corporations and individual talent agents. We use the terms
“talent agent” and “talent agency” interchangeably.
2 Although Ferrer urges us to overrule Southland, he relies on the same arguments we considered and rejected in Allied–
Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995). Compare Brief for Respondent 55–
59 with Brief for Attorney General of Alabama et al. as Amici Curiae in Allied–Bruce Terminix Cos. v. Dobson, O.T.1994;
No. 93–1001, pp. 11–19. Adhering to precedent, we do not take up Ferrer's invitation to overrule Southland.
3 Ferrer's petition to the Labor Commissioner sought a declaration that the contract “is void under the [TAA].” App. 23. His
complaint in Superior Court seeking to enjoin arbitration asserted: “[T]he [c]ontract is void by reason of [Preston's] attempt
to procure employment for [Ferrer] in violation of the [TAA],” and “the [c]ontract's arbitration clause does not vest authority
in an arbitrator to determine whether the contract is void.” Id., at 27. His brief in the appeals court stated: “Ferrer does not
contend that the arbitration clause in the [c]ontract was procured by fraud. Ferrer contends that Preston unlawfully acted
as an unlicensed talent agent and hence cannot enforce the [c]ontract.” Brief for Respondent in No. B188997, p. 18.
4 Courts “may void the entire contract” where talent agency services regulated by the TAA are “inseparable from
[unregulated] managerial services.” Marathon Entertainment, Inc. v. Blasi, 42 Cal.4th 974, 998, 174 P.3d 741, 744 (2008).
If the contractual terms are severable, however, “an isolated instance” of unlicensed conduct “does not automatically bar
recovery for services that could lawfully be provided without a license.” Ibid.
5 To appeal the Labor Commissioner's decision, an aggrieved party must post a bond of at least $1,000 and up to twice
the amount of any judgment approved by the Commissioner. § 1700.44(a).
6 From Superior Court an appeal lies in the Court of Appeal. Cal. Civ. Proc. Code Ann. § 904.1(a) (West 2007); Cal. Rule
of Court 8.100(a) (Appellate Rules) (West 2007 rev. ed.). Thereafter, the losing party may seek review in the California
Supreme Court, Rule 8.500(a)(1) (Appellate Rules), perhaps followed by a petition for a writ of certiorari in this Court,
28 U.S.C. § 1257. Ferrer has not identified a single case holding that California law permits interruption of this chain of
appeals to allow the arbitrator to review the Labor Commissioner's decision. See Tr. of Oral Arg. 35.
7 Enforcement of the parties' arbitration agreement in this case does not displace any independent authority the
Labor Commissioner may have to investigate and rectify violations of the TAA. See Brief for Respondent 47 (“[T]he
Commissioner has independent investigatory authority and may receive information concerning alleged violations of the
TAA from any source.” (citation omitted)). See also Tr. of Oral Arg. 13–14.
8 The question in Mastrobuono was whether the arbitrator could award punitive damages. See Mastrobuono v. Shearson
Lehman Hutton, Inc., 514 U.S. 52, 53–54, 115 S.Ct. 1212, 131 L.Ed.2d 76 (1995). New York law prohibited arbitrators, but
not courts, from awarding such damages. Id., at 55, 115 S.Ct. 1212. The NASD rules, in contrast, authorized “damages
and other relief,” which, according to an NASD arbitration manual, included punitive damages. Id., at 61, 115 S.Ct. 1212
(internal quotation marks omitted). Relying on Volt, respondents argued that the choice-of-law clause incorporated into
the parties' arbitration agreement New York's ban on arbitral awards of punitive damages. Opposing that argument,
petitioners successfully urged that the agreement to arbitrate in accordance with the NASD rules controlled.

Primerica Life Ins. Co. v. Brown, 304 F.3d 469 (2002)

Federal Arbitration Act (FAA) expresses
strong national policy favoring arbitration
Disagreed With by Spahr v. Secco, 10th Cir.(Colo.), June 3, 2003
of disputes, and all doubts concerning
304 F.3d 469
arbitrability of claims should be resolved in
favor of arbitration. 9 U.S.C.A. § 1 et seq.
Fifth Circuit.
PRIMERICA LIFE INSURANCE
CO.; et al., Plaintiffs,
Primerica Life Insurance Co.; Primerica Financial [3] Alternative Dispute Resolution
Services, Inc.; Citigroup, Inc.; Sanford L. Weill; Merits of Controversy
and CitiFinancial, Inc., Plaintiffs-Appellants, Court, when determining whether parties
v. should be compelled to arbitrate dispute, must
Catherine E. BROWN, individually and not consider merits of underlying action.
in her representative capacity for John E. 64 Cases that cite this headnote
Brown; John E. Brown, Defendants-Appellees.
No. 01-60852. [4] Alternative Dispute Resolution

| Unconscionability
Aug. 28, 2002. Party could avoid arbitration on ground
that costs made arbitration requirement
Borrower brought action against lender for breach of
unconscionable absent showing of likelihood
contract. The United States District Court for the
of incurring prohibitive costs.
Northern District of Mississippi, Glen H. Davidson, Chief
Judge, declined to compel arbitration, and appeal was 6 Cases that cite this headnote
taken. The Court of Appeals, Edith H. Jones, Circuit
Judge, held that plaintiff's incapacity defense had to be
submitted to arbitrators.
Existence and Validity of Agreement
Reversed and remanded. Issue of whether party to contract containing
arbitration clause had mental capacity to
Dennis, Circuit Judge, concurred and filed opinion. execute contract was question for arbitrators;
party's capacity defense did not relate
specifically to arbitration clause, but rather
was part of underlying dispute. 9 U.S.C.A. § 4.
West Headnotes (5)

Grant or denial of petition to compel
arbitration is subject to de novo review. 9
U.S.C.A. § 4. *470 Fred H. Krutz, III, John Chase Bryan, Forman,
Perry, Watkins, Krutz & Tardy, Jackson, MS, Phillip
S. McKinney, Christopher J. Willis, Richard H.
Sinkfield (argued), Rogers & Hardin, Atlanta, GA, for
[2] Alternative Dispute Resolution CitiFinancial, Inc.
Arbitration Favored; Public Policy

to arbitrate the dispute. Once the court finds that the

William Eason Mitchell (argued), Albert Gamaliel parties agreed to arbitrate, it must consider whether any
Lewis, III, Susan Mason Donovan, Lewis & Mitchell, federal statute or policy renders the claims nonarbitrable.”
Tuscaloosa, AL, Winston James Thompson, The Colom R.M. Perez & Assoc., Inc. v. Welch, 960 F.2d 534, 538
Law Firm, Columbus, MS, for Defendants-Appellees. (5th Cir.1992) (citing Mitsubishi Motors Corp. v. Soler
Chrysler-Plymouth, 473 U.S. 614, 105 S.Ct. 3346, 87
Appeals from the United States District Court for the
L.Ed.2d 444 (1985)). When conducting this two-pronged
Northern District of Mississippi.
analysis, courts must not consider the merits of the
Before JONES, WIENER and DENNIS, Circuit Judges. underlying action. Snap-On Tools Corp. v. Mason, 18
F.3d 1261, 1267 (5th Cir.1994). “Under § 4 of the FAA,
Opinion the federal district court ascertains only whether the
arbitration clause covers the allegations at issue. ‘If the
EDITH H. JONES, Circuit Judge: dispute is within the scope of the arbitration clause, the
court may not delve further into the merits of the dispute.’
John Brown sued CitiFinancial, Inc., and its affiliates
” Id. (quoting Municipal Energy Agency of Miss. v. Big
(“Appellants”), in state court alleging breach of contract
Rivers Elec. Corp., 804 F.2d 338, 342 (5th Cir.1986)).
and related claims. Brown's contract with CitiFinancial
contains an arbitration clause requiring arbitration of his
[4] Brown's contract with CitiFinancial contains an
claims. CitiFinancial *471 filed a petition to compel
express arbitration agreement. Brown's state court claims
arbitration of Brown's claims in federal district court,
fall within the scope of the arbitration agreement. There
pursuant to § 4 of the Federal Arbitration Act (“FAA”),
are no external impediments to the arbitrability of Brown's
9 U.S.C. § 4. The district court determined that Brown
lacked the mental capacity to execute a contract under claims. 1 Therefore, a straightforward application of the
Mississippi law, and that Brown's entire contract with required two-pronged inquiry supports CitiFinancial's
CitiFinancial was void. On this basis, the district court petition to compel arbitration.
refused to compel arbitration of Brown's claims.
[5] The district court nevertheless refused to compel
CitiFinancial now appeals and contends that the district arbitration by delving into the merits of the underlying
court erred by reaching the merits of Brown's capacity dispute. Specifically, the district court determined that
defense. Appellants contend that Prima Paint Corp. v. Brown lacked the capacity to contract under Mississippi
Flood & Conklin Mfg. Co., 388 U.S. 395, 87 S.Ct. 1801, law. As explained above, the district court's inquiry when
18 L.Ed.2d 1270 (1967), requires arbitration of Brown's reviewing a petition to compel arbitration is limited.
capacity defense. We agree, and reverse the judgment of “[T]he merits of the underlying dispute are for the
the district court. arbitrator to consider, not for this Court or the district
court.” Snap-On *472 Tools Corp., 18 F.3d at 1267.
Brown's capacity defense is part of the underlying dispute
between the parties, and the defense must be submitted to
DISCUSSION
the arbitrator.
[1] [2] This court reviews de novo the grant or denial
of a petition to compel arbitration pursuant to § 4 of In Prima Paint, the Court held that, under § 4 of the
the FAA. Webb v. Investacorp, 89 F.3d 252, 257 (5th FAA, the “making” of an agreement to arbitrate was
Cir.1996). The FAA expresses a strong national policy not called into question by an allegation that the entire
favoring arbitration of disputes, and all doubts concerning contract was void as fraudulently induced. 388 U.S. at
the arbitrability of claims should be resolved in favor of 403-04, 87 S.Ct. 1801. “[The FAA] does not permit the
arbitration. Southland Corp. v. Keating, 465 U.S. 1, 10, 104 federal court to consider claims of fraud in the inducement
S.Ct. 852, 79 L.Ed.2d 1 (1984). of the contract generally ... A federal court may consider
only issues relating to the making and performance of the
[3] “Courts perform a two-step inquiry to determine agreement to arbitrate.” Id. Accordingly, unless a defense
whether parties should be compelled to arbitrate a dispute. relates specifically to the arbitration agreement, it must
First, the court must determine whether the parties agreed

be submitted to the arbitrator as part of the underlying 110, 112 (Miss.1976) (stating that a contract made by
dispute. an incompetent “may be avoided on the ground of
insanity”). Similarly, when a party contracting with
This court has applied the Prima Paint rule on numerous an incompetent has knowledge of the incompetent's
occasions. See Snap-On Tools Corp., 18 F.3d at 1267-68 condition, the contract “will be *473 rescinded.” Id. at
(submitting fraudulent inducement defense to arbitration 112-13 (emphasis added).
because allegations of fraud did not specifically relate
to the arbitration clause); R.M. Perez & Assoc., Inc., Against this backdrop, I note the grounds on which this
960 F.2d at 538-39 (submitting allegations of fraud in Court will vacate a decision of an arbitrator: (1) the award
obtaining signatures to contract to arbitration because is contrary to public policy, (2) the award is arbitrary and
defense was not specific to the arbitration agreement); capricious, (3) the award fails to draw its essence from
Lawrence v. Comprehensive Business Serv. Co., 833 F.2d the underlying contract, and (4) the award is in manifest
1159, 1162 (5th Cir.1987) (submitting illegality defense disregard of the law. See Williams v. Cigna Fin. Advisors
to arbitration because it did not specifically relate to Inc., 197 F.3d 752, 758, 761-62 (5th Cir.1999). Hence, if the
arbitration clause); Mesa Operating Ltd. Partnership v. facts are as they appear to be on the record before us, I can
Louisiana Intrastate Gas Corp., 797 F.2d 238, 244 (5th conceive of no way in which the contract underlying this
Cir.1986) (submitting claim that contract was void ab action could be enforced against the profoundly retarded
initio to arbitration because parties failed to demonstrate and incompetent Mr. Brown.
that the arbitration agreement was “invalid separately
from the entire contract”). Finally, with regard to the broad statement that “unless
a defense relates specifically to the arbitration agreement,
As in each of these cases, Brown's capacity defense is a it must be submitted to the arbitrator as part of the
defense to his entire agreement with CitiFinancial and not underlying dispute” and the related footnote two, I
a specific challenge to the arbitration clause. Therefore, note that this circuit has not considered the authority
Brown's capacity defense is part of the underlying dispute of other circuits applying the Prima Paint rule to
between the parties which, in light of Prima Paint and its the distinction between voidable contracts and those
progeny, must be submitted to the arbitrator. 2 We need contracts deemed not to have existed. We have decided
not reach the other issues raised by the parties. that the question of whether a contract as a whole was
illegal must be submitted to arbitration. See Lawrence
v. Comprehensive Bus. Servs. Co., 833 F.2d 1159 (5th
Cir.1987); Mesa Operating Ltd. P'ship v. Louisiana
CONCLUSION Intrastate Gas Corp., 797 F.2d 238 (5th Cir.1986). But
we have not yet thoroughly analyzed or squarely decided
For the reasons stated above, we REVERSE the judgment
whether challenges going to the very existence of a
of the district court and REMAND for proceedings
contract must be submitted to arbitration. Other circuits
consistent with this opinion.
have split on this question. See, e.g., Three Valleys Mun.
Water Dist. v. E.F. Hutton & Co., 925 F.2d 1136 (9th
Cir.1991) (no); I.S. Joseph Co. v. Michigan Sugar Co., 803
DENNIS, Circuit Judge, concurring: F.2d 396 (8th Cir.1986) (no); Cancanon v. Smith Barney,
I concur in the judgment of the majority opinion. I Harris, Upham & Co., 805 F.2d 998 (11th Cir.1986) (no);
write separately to note the district court's finding, which Unionmutual Stock Life Ins. Co. v. Beneficial Life Ins. Co.,
the parties apparently do not dispute, that Mr. Brown 774 F.2d 524 (1st Cir.1985) (yes); Par-Knit Mills, Inc. v.
“has been profoundly retarded since birth.” The district Stockbridge Fabrics Co., 636 F.2d 51 (3d Cir.1980) (no).
court also found that the loan agency “required him Because it is not necessary for us to reach that question
to sign the loan agreement containing the arbitration here, the majority opinion's statements thereon are dicta,
clause by printing his name on a piece of paper and in which I do not join.
having him copy it on the appropriate line.” Under
Mississippi law, contracts entered into by incompetent
persons are voidable. See Williams v. Wilson, 335 So.2d

All Citations
304 F.3d 469
Footnotes
1 Brown also argues that arbitration costs render the arbitration clause “substantively unconscionable.” The Supreme Court,
in Green Tree Financial Corp. v. Randolph, 531 U.S. 79, 91-92, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000), explained that
“a party seeking to avoid arbitration on the ground that arbitration would be prohibitively expensive” bears the burden of
showing the likelihood of incurring prohibitive costs. Brown has failed to carry this burden. Brown also suggests that the
arbitration agreement is “procedurally unconscionable” on other grounds. This argument is without merit.
2 The district court determined that the Prima Paint rule applied to defenses which render a contract voidable, but did not
apply to defenses which render a contract void. This distinction is inconsistent with Mesa Operating, which applied the
Prima Paint rule to a defense which, if proven, would have rendered the contract containing the arbitration clause “void
as never having been entered into.” 797 F.2d at 244; see also Lawrence, 833 F.2d at 1162 (following Mesa Operating
and submitting illegality defense to arbitrator).

Principal Investments v. Harrison, 366 P.3d 688 (2016)
2016 WL 166011, 132 Nev. Adv. Op. 2
Saitta, J., concurred with opinion.

366 P.3d 688
Supreme Court of Nevada.
PRINCIPAL INVESTMENTS, INC., d/b/a Rapid

West Headnotes (13)
Cash; Granite Financial Services, Inc., d/b/a Rapid
Cash; FMMR Investments, Inc., d/b/a Rapid
Cash; Prime Group, Inc., d/b/a Rapid Cash; and [1] Alternative Dispute Resolution
Waiver, laches, or estoppel
Advance Group, Inc., d/b/a Rapid Cash, Appellants,
v. Claims of waiver of the right to arbitration
Cassandra HARRISON; Concepcion Quintino; based on active litigation in court are
presumptively for a court, not an arbitrator,
and Mary Dungan, Individually and on behalf
to decide.
of All Persons Similarly Situated, Respondents.
No. 59837.
|
Jan. 14, 2016. [2] Alternative Dispute Resolution
Synopsis
Background: Borrowers, against whom payday loan
Construction
company had received default judgments, brought class
Because arbitration is fundamentally a matter
action against company and its process server, alleging
of contract, whether enforcing an agreement
fraud upon the court, abuse of process, negligent hiring,
to arbitrate or construing an arbitration
supervision, and retention, negligence, civil conspiracy,
clause, courts and arbitrators must give effect
and violation of fair debt collection laws and sought,
to the contractual rights and expectations of
inter alia, declaratory relief deeming default judgments
the parties.
void and uncollectible. The District Court, Clark County,
Elizabeth Goff Gonzalez, J., denied company's motion to Cases that cite this headnote
compel arbitration. Company appealed.

Waiver or Estoppel
Holdings: The Supreme Court, Pickering, J., held that:
The right to enforce an agreement to arbitrate,
like any contract right, can be waived.
[1] claims of waiver of the right to arbitration based on
active litigation in court are presumptively for court to Cases that cite this headnote
decide;
[2] company's arbitration agreements with borrowers did [4] Alternative Dispute Resolution
not provide clear and unmistakable evidence to overcome Evidence
presumption that litigation-conduct waiver of right to Given the strong presumption in favor of
arbitration was issue for court; arbitration, waiver of the right to arbitration
is not to be lightly inferred.
[3] company waived its right to arbitrate; and
[4] company was not entitled to differentiation of
borrowers' claims in context of determining waiver. [5] Alternative Dispute Resolution
Arbitrability of dispute
Affirmed.

2016 WL 166011, 132 Nev. Adv. Op. 2
Issues that are presumptively for the court,

not an arbitrator, to solve involve gateway Cases that cite this headnote
questions of arbitrability, such as whether
the parties are bound by a given arbitration [9] Alternative Dispute Resolution
clause, or whether an arbitration clause in Evidence
a concededly binding contract applies to a
Presumption that courts decide litigation-
particular type of controversy.
conduct waiver of the right to arbitration is
Cases that cite this headnote rooted in presumed party intent and probable
expectations.

Arbitrability of dispute
Because courts presume that the parties intend [10] Alternative Dispute Resolution
courts, not arbitrators, to decide gateway Evidence
questions of arbitrability, these gateway
Silence or ambiguity is resolved against the
questions are for the court to decide, unless
party seeking to overcome the presumption
the parties' agreement or, possibly, conduct,
that courts decide litigation-conduct waiver of
provides clear and unmistakable evidence that
the right to arbitration.
they intended to commit the questions to the
arbitrator in the first instance. Cases that cite this headnote

Payday loan company waived its right
to arbitrate, in class action brought by
Payday loan company's arbitration
borrowers, against whom company had
agreements with its borrowers did not provide
received default judgments, against company
clear and unmistakable evidence to overcome
and its process server, alleging fraud upon
presumption that litigation-conduct waiver
the court, abuse of process, negligent
of right to arbitration was issue for court,
hiring, supervision, and retention, negligence,
not arbitrator, to decide; agreements did not
civil conspiracy, and violation of fair
manifest contrary intent to presumption that
debt collection laws; borrowers claims
waiver was issue for court to decide, had
arose out of and were integrally related
company intended to delegate issue of waiver
to individual collection actions company
to arbitrator, agreements could and should
previously conducted against them.
have been written to say that explicitly, and
litigants would have expected court to decide 1 Cases that cite this headnote
question of waiver.
Cases that cite this headnote [12] Alternative Dispute Resolution

for review
Payday loan company waived for appellate
review claim that Supreme Court should
An issue that is presumptively for the court
differentiate among claims borrowers, against
to decide will be referred to the arbitrator
whom company had received default
for determination only where the parties'
judgments, brought in their class action
arbitration agreement contains clear and
against company and its process server,
unmistakable evidence of such an intent.
alleging fraud upon the court, abuse of

2016 WL 166011, 132 Nev. Adv. Op. 2
process, negligent hiring, supervision, and **1 This is an appeal from an order denying a motion
retention, negligence, civil conspiracy, and to compel arbitration. The district court held that the
violation of fair debt collection laws; company moving party waived its right to arbitrate by litigating
did not make claim to trial court before that collection claims against its borrowers to default judgment
court entered its order denying company's in justice court. We must decide whether the district
second motion to compel arbitration. court erred in addressing waiver, instead of referring the
question to the arbitrator. We hold that litigation-conduct
1 Cases that cite this headnote waiver is presumptively for the court to decide, unless
the arbitration agreement clearly commits the question to
[13] Alternative Dispute Resolution the arbitrator, which the agreements here do not. On the
Suing or participating in suit merits, we uphold the district court's finding of waiver and
therefore affirm.
Payday loan company was not entitled
to differentiation of claims borrowers,
against whom company had received default
judgments, brought, in context of determining I.
whether company waived right to arbitration,
in borrowers' class action against company
A.
and its process server, alleging fraud upon
the court, abuse of process, negligent hiring, Appellant Rapid Cash is a payday loan company
supervision, and retention, negligence, civil that provided short-term, high-interest loans to the
conspiracy, and violation of fair debt named plaintiffs Mary Dungan, Cassandra Harrison,
collection laws; claims concerned, at their
and Concepcion Quintino, among others. 2 The named
core, validity of default judgments company
plaintiffs and other borrowers did not repay their loans,
obtained against borrowers.
prompting Rapid Cash, over a seven-year period, to
1 Cases that cite this headnote file more than 16,000 individual collection actions in
justice court in Clark County, Nevada. Rapid Cash
hired Maurice Carroll, d/b/a On–Scene Mediations, as
its process server. Relying on On–Scene's affidavits
of service, Rapid Cash secured thousands of default
judgments against the named plaintiffs and other
*690 Lewis Roca Rothgerber, LLP, and Daniel F. borrowers who *691 failed to appear and defend the
Polsenberg, Joel D. Henriod, and Ryan T. O'Malley, Las collection lawsuits.
Vegas; Gordon Silver and Mark S. Dzarnoski and William
M. Noall, Las Vegas, for Appellants. At some point, a justice of the peace noticed that
On–Scene's affidavits attested to an improbably high
Kemp, Jones & Coulthard, LLP, and J. Randall Jones, number of same-day receipts and service of process, and
Jennifer C. Dorsey, and Carol L. Harris, Las Vegas; Legal initiated an investigation. The investigation revealed that
Aid Center of Southern Nevada, Inc., and Dan L. Wulz, Carroll and On–Scene had engaged in “sewer service”—
Venicia Considine, and Sophia A. Medina, Las Vegas, for the practice of accepting summonses and complaints for
Respondents. service, failing to serve them, then falsely swearing in
court-filed affidavits that service had been made when
Before the Court En Banc. 1 it was not. Carroll and On–Scene were cited for serving
process without a license, and a cease and desist order
was entered against them. Ultimately, Carroll was charged
OPINION with and convicted of 17 counts of forgery and offering
false instruments.
By the Court, PICKERING, J.:

2016 WL 166011, 132 Nev. Adv. Op. 2
Carroll's criminal convictions involved false affidavits of and us (including “related parties”
service for clients other than Rapid Cash. Nonetheless, identified below) that arises from
Carroll and On–Scene were Rapid Cash's exclusive agent or relates in any way to Services
for service of process in southern Nevada, and the you request or we provide, now,
named plaintiffs sued Rapid Cash, On–Scene, and others in the past or in the future; the
in district court, alleging that Rapid Cash improperly Application (or any prior or future
obtained its default judgments against them and other application); any agreement relating
similarly situated borrowers without their knowledge via to Services (“Services Agreement”);
On–Scene's “sewer service.” The first amended complaint any of our marketing, advertising,
is styled as a class action and asserts claims for fraud solicitations and conduct relating
upon the court, abuse of process, negligent hiring/ to your request for Services; our
supervision/retention, negligence, civil conspiracy, and collection of any amounts you owe;
violation of Nevada's fair debt collection laws. The relief our disclosure of or failure to
requested includes declaratory relief deeming the justice protect any information about you;
court default judgments void and uncollectable; injunctive or the validity, enforceability or
relief; disgorgement, restitution, or a constructive trust for scope of this Arbitration Provision.
funds already collected; forfeiture by Rapid Cash of all “Claim” is to be given the broadest
loan amounts; return of all principal, interest, charges, possible meaning and includes
or fees associated with the loans; punitive damages and claims of every kind and nature,
statutory penalties; and attorney fees and costs. The first including but not limited to, initial
amended complaint disavows claims for individual tort or claims, counterclaims, cross-claims
consequential damages, stating: and third-party claims, and claims
based on any constitution, statute,
**2 This Class action does not seek regulation, ordinance, common law
to, nor will it, actually litigate any rule (including rules relating to
additional claims for compensatory contracts, negligence, fraud or other
damage, which may include but intentional wrongs) and equity. It
not be limited to damage to credit includes disputes that seek relief of
reputation, fear, anxiety, mental any type, including damages and/
and emotional distress, nor damages or injunctive, declaratory or other
arising from wrongful garnishment equitable relief.
or attachment, such as bank fees,
bounced check fees, finance charges The Dungan/Harrison form of agreement specifies that
or interest on bills which would have litigating one claim does not waive arbitration as to other
otherwise been paid, and the like. claims:
Even if all parties have elected

to litigate a Claim in court, you
B. or we may elect arbitration with
respect to any Claim made by a new
Rapid Cash moved to compel arbitration based on the party or any new Claim asserted in
arbitration provisions in its loan agreements, which take that lawsuit, and nothing in that
one of two forms, depending on the date of the loan. The litigation *692 shall constitute a
Dungan/Harrison form of agreement provides that either waiver of any rights under this
party may elect binding arbitration of any “Claim,” and Arbitration Provision.
broadly defines “Claim” as follows:
2. DEFINITION OF “CLAIM.” Quintino's form of agreement differs. It includes a

The term “Claim” means any claim, preliminary “Mediation Agreement,” requiring that
dispute or controversy between you before either party proceeds with arbitration or litigation,
the party must submit all “Claims ... to neutral, individual

2016 WL 166011, 132 Nev. Adv. Op. 2
(and not class) mediation.” If mediation does not resolve Justice Court ... must be resolved consistent with ... the
the dispute, then the “Arbitration Agreement” controls: Arbitration Agreement.”
If you and we are not able Both forms of agreement state that they are “made
to resolve a Claim in mediation, pursuant to a transaction involving interstate commerce”
then you and we agree that such and shall “be governed by the Federal Arbitration Act, 9
Claim will be resolved by neutral, U.S.C. Sections 1–16, as amended,” or the “FAA.” They
binding individual (and not class) also include class-action and class-arbitration waivers.
arbitration. You and we may
not initiate arbitration proceedings The district court denied Rapid Cash's motions to compel
without first complying with the arbitration of the claims asserted in the original and first
Mediation Agreement. amended complaints. It held that Rapid Cash waived its
right to an arbitral forum by bringing collection actions in
The Quintino form of agreement also defines “Claims”
justice court, employing Carroll and On–Scene as its agent
broadly:
for service of process, and obtaining default judgments
**3 “Claims” means any and all allegedly based on On–Scene's falsified affidavits of
claims, disputes or controversies service. Rapid Cash appeals. We have jurisdiction under
that arise under common law, NRS 38.247(1)(a) and 9 U.S.C. § 16(a)(1)(B) (2012), which
federal or state statute or regulation, allow interlocutory appeals from orders denying motions
or otherwise, and that we or to compel arbitration, and affirm.
our servicers or agents have
against you or that you have
against us, our servicers, agents, II.
directors, officers and employees.
“Claims” also includes any and all
claims that arise out of (i) the A.
validity, scope and/or applicability
[1] [2] As the loan documents stipulate, the arbitration
of this Mediation Agreement or the
agreements evidence transactions involving commerce,
Arbitration Agreement appearing
so the Federal Arbitration Act (FAA) applies. See
below, (ii) your application for a
Tallman v. Eighth Judicial Dist. Court, ––– Nev. ––––,
Loan, (iii) the Agreement, (iv) any
359 P.3d 113, 121–22 (2015). Under the FAA, arbitration
prior agreement between you and
agreements “shall be valid, irrevocable, and enforceable,
us, including any prior loans we
save upon such grounds as exist at law or in equity
have made to you[,] or (v) our
for the revocation of any contract.” 9 U.S.C. § 2.
collection of any Loan. “Claims”
This provision expresses “both a liberal federal policy
also includes all claims asserted as
favoring arbitration, and the fundamental principle that
a representative, private attorney
general, member of a class or in any arbitration is a matter of contract.” 3 AT&T Mobility
other representative capacity, and LLC v. Concepcion, 563 U.S. 333, 339, 131 S.Ct. 1740,
all counterclaims, cross-claims and 179 L.Ed.2d 742 (2011) (quotations and internal citations
third party claims. omitted). Because arbitration is fundamentally a matter
of contract, *693 “[w]hether enforcing an agreement
The Quintino agreement specifies that either party may to arbitrate or construing an arbitration clause, courts
“bring a Claim in a small claims or the proper Las and arbitrators must ‘give effect to the contractual rights
Vegas Justice Court, as long as the Claim is within the and expectations of the parties.’ ” Stolt–Nielsen S.A. v.
jurisdictional limits of that court,” without submitting the AnimalFeeds Int'l Corp., 559 U.S. 662, 682, 130 S.Ct. 1758,
claim to mediation or arbitration, but that “[a]ll Claims 176 L.Ed.2d 605 (2010) (quoting Volt Info. Scis., Inc. v.
that cannot be brought in small claims court or Las Vegas Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468,
479, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989)).

2016 WL 166011, 132 Nev. Adv. Op. 2
[5] [6] Despite the FAA's robust pro-arbitration

**4 [3] [4] The right to enforce an agreement to presumption, Moses H. Cone, 460 U.S. at 24–25, 103 S.Ct.
arbitrate, like any contract right, can be waived. But the 927, the Supreme Court has instructed that certain issues
FAA “establishes that, as a matter of federal law, any —the kind that “contracting parties would likely have
doubts concerning the scope of arbitrable issues should expected a court to have decided”—are presumptively for
be resolved in favor of arbitration, whether the problem the court, not the arbitrator, to resolve. Howsam v. Dean
at hand is the construction of the contract language itself Witter Reynolds, Inc., 537 U.S. 79, 83, 123 S.Ct. 588, 154
or an allegation of waiver, delay, or a like defense to L.Ed.2d 491 (2002). These court-committed issues involve
arbitrability.” Moses H. Cone Mem'l Hosp. v. Mercury gateway questions of arbitrability, “such as ‘whether
Constr. Corp., 460 U.S. 1, 24–25, 103 S.Ct. 927, 74 L.Ed.2d the parties are bound by a given arbitration clause,’ or
765 (1983). Given the “strong presumption in favor of ‘whether an arbitration clause in a concededly binding
arbitration[,] ... waiver of the right to arbitration is not to contract applies to a particular type of controversy.’ ”
be lightly inferred.” Coca–Cola Bottling Co. v. Soft Drink BG Grp., 572 U.S. at ––––, 134 S.Ct. at 1206 (quoting
& Brewery Workers Union Local 812, 242 F.3d 52, 57 (2d Howsam, 537 U.S. at 84, 123 S.Ct. 588). Because “courts
Cir.2001) (internal quotations omitted); accord Tallman, presume that the parties intend courts, not arbitrators,
––– Nev. ––––, 359 P.3d at 123 (quoting Clark Cty. v. to decide [gateway questions of] arbitrability,” id., these
Blanchard Constr. Co., 98 Nev. 488, 491, 653 P.2d 1217, gateway questions are for the court to decide, unless
1219 (1982)). Under the FAA, “any doubts concerning the parties' agreement (or, possibly, conduct) provides
whether there has been a waiver are resolved in favor “clear and unmistakable evidence” that they intended to
of arbitration.” Louis Dreyfus Negoce S.A. v. Blystad commit the questions to the arbitrator in the first instance.
Shipping & Trading Inc., 252 F.3d 218, 229 (2d Cir.2001) First Options, 514 U.S. at 944, 115 S.Ct. 1920 (internal
(quoting Leadertex, Inc. v. Morganton Dyeing & Finishing quotation omitted). But the Supreme Court applies an
Corp., 67 F.3d 20, 25 (2d Cir.1995)). exactly opposite set of rules to procedural gateway matters:
“On the other hand, courts presume that the parties
intend arbitrators, not courts, to decide disputes about
the meaning and application of particular procedural
B.
preconditions for the use of arbitration.” BG Grp., 572
We must decide whether Rapid Cash waived its right U.S. at ––––, 134 S.Ct. at 1207. Procedural gateway
to arbitrate the named plaintiffs' equitable, common- matters “include the satisfaction of prerequisites such
law and statutory claims against them by its litigation as time limits, *694 notice, laches, estoppel, and other
activities in justice court. Before we can do so, we must conditions precedent to an obligation to arbitrate.” Id.
address the threshold issue of who decides the question of (internal quotations omitted).
waiver-by-litigation-conduct—the court or the arbitrator?
The answer depends on presumptions the Supreme Court **5 In Howsam, and again in BG Group, the Supreme
has developed to guide division-of-labor determinations Court characterized “waiver” as a procedural gateway
under the FAA and the text of the arbitration agreements question, not a gateway “question of arbitrability,” stating
themselves. See BG Grp., PLC v. Republic of Argentina, that, under the FAA, the arbitrator presumptively “should
572 U.S. ––––, ––––, 134 S.Ct. 1198, 1206–07, 188 L.Ed.2d decide ‘allegation[s] of waiver, delay, or a like defense to
220 (2014) (stating that since arbitration is a matter of arbitrability.’ ” 537 U.S. at 84, 123 S.Ct. 588 (emphasis
contract, “it is up to the parties to determine whether a added) (alteration in original) (quoting Moses H. Cone,
particular matter is primarily for arbitrators or for courts 460 U.S. at 25, 103 S.Ct. 927); BG Grp., 572 U.S. at
to decide.... If the contract is silent on the matter of ––––, 134 S.Ct. at 1207. These pronouncements have
who primarily is to decide ‘threshold’ questions about generated uncertainty in the lower courts as to who
arbitration, courts determine the parties' intent with the decides litigation-conduct waiver. See Thomas J. Lilly, Jr.,
help of presumptions.”); First Options of Chi., Inc. v. Participation in Litigation as a Waiver of the Contractual
Kaplan, 514 U.S. 938, 944–45, 115 S.Ct. 1920, 131 L.Ed.2d Right to Arbitrate: Toward a Unified Theory, 92 Neb. L.
985 (1995). Rev. 86, 100–01 (2013). Before Howsam, most courts held
that, under the FAA, litigation-conduct waiver challenges
were for the court to resolve. Marie v. Allied Home

2016 WL 166011, 132 Nev. Adv. Op. 2
Mortg. Corp., 402 F.3d 1, 11–12 (1st Cir.2005) (noting contractual conditions precedent to arbitration.” Grigsby,
the First Circuit's “long history of deciding such waiver 664 F.3d at 1353 (internal quotation marks omitted).
claims itself” and observing that “[t]his was in accord That Howsam presumed the arbitrator would decide the
with the overwhelming weight of pre-Howsam authority, NASD time-limit bar makes sense: The NASD arbitrator
which held that waiver due to litigation conduct was was “comparatively better able to interpret and to apply”
generally for the court and not for the arbitrator”); see the NASD's procedural rule, so the parties would have
Nev. Gold & Casinos, Inc. v. Am. Heritage, Inc., 121 Nev. expected that issue to go to the arbitrator as the decision-
84, 90, 110 P.3d 481, 485 (2005) (judicially addressing maker with the better comparative expertise. Howsam, 537
litigation-conduct waiver without questioning whether U.S. at 85, 123 S.Ct. 588. 4 But litigation- *695 conduct
the arbitrator should have decided the matter); see also “waiver implicates courts' authority to control judicial
Tallman, ––– Nev. ––––, 359 P.3d at 123 (upholding procedures or to resolve issues ... arising from judicial
order rejecting litigation-conduct waiver claim but noting conduct.” Ehleiter, 482 F.3d at 219. Arbitrators are not
that all parties assumed “that waiver was for the court, comparatively better able than courts to interpret and to
not the arbitrator to decide”). After Howsam, courts apply litigation-conduct waiver defenses, see Grigsby, 664
have divided on who decides litigation-conduct waiver. F.3d at 1354 (stating that a court is “the decisionmaker
Compare Marie, 402 F.3d at 14 (“We hold that the with greater expertise in recognizing and controlling
Supreme Court in Howsam ... did not intend to disturb abusive forum-shopping”), and, thus, it is reasonable to
the traditional rule that waiver by conduct, at least assume that “parties would expect the court to decide
where due to litigation-related activity, is presumptively [litigation-conduct waiver] itself.” Ehleiter, 482 F.3d at
an issue for the court.”), Ehleiter v. Grapetree Shores, 219.
Inc., 482 F.3d 207, 221 (3d Cir.2007) (“[W]aiver of the
right to arbitrate based on litigation conduct remains **6 Litigation-conduct waiver questions commonly arise
presumptively an issue for the court to decide [even] in out of proceedings before the court being asked to
the wake of Howsam.”), and Grigsby & Assocs., Inc. v. compel arbitration. Having the court assess waiver not
M Sec. Inv., 664 F.3d 1350, 1353 (11th Cir.2011) (“[I]t only comports with party expectations but also is more
is presumptively for the courts to adjudicate disputes efficient than reconstructing the litigation history before
about whether a party, by earlier litigating in court, has the arbitrator and deferring the question to the arbitral
waived the right to arbitrate.”), with Nat'l Am. Ins. Co. v. forum, only to have the dispute return if the arbitrator
Transamerica Occidental Life Ins. Co., 328 F.3d 462, 466 finds waiver.
(8th Cir.2003) (summarily holding that Howsam mandates
that the court refer all waiver challenges to the arbitrator, Questions of litigation-conduct waiver are best resolved
even litigation-conduct waiver). by a court that “has inherent power to control its docket
and to prevent abuse in its proceedings (i.e. forum
Howsam considered a procedural rule of the contractually shopping),” which has “more expertise in recognizing
chosen arbitral forum, the National Association of such abuses, and in controlling ... them,” and which
Securities Dealers (NASD), which provided that “no could most efficiently and economically decide the issue
dispute ‘shall be eligible for submission to arbitration ... as “where the issue is waiver due to litigation activity,
where six (6) years have elapsed from the occurrence or by its nature the possibility of litigation remains, and
event giving rise to the ... dispute.’ ” Howsam, 537 U.S. referring the question to an arbitrator would be an
at 81, 123 S.Ct. 588 (quoting NASD Code of Arbitration additional, unnecessary step.”
Procedure § 10304 (1984)). The “waiver” Howsam deemed
the province of the arbitrator, not the court, thus did See Am. Gen. Home Equity, Inc. v. Kestel, 253 S.W.3d 543,
not grow out of litigation conduct but, rather, delay in 551–52 (Ky.2008) (internal footnote omitted) (quoting
initiating arbitration, a procedural matter the NASD rules David LeFevre, Note, Whose Finding Is It Anyway?: The
controlled. The courts that have retained the traditional Division of Labor Between Courts and Arbitrators With
rule that litigation-conduct waivers are for the court Respect to Waiver, 2006 J. Disp. Resol. 305, 313–14
to decide have distinguished Howsam by limiting its (2006)); see UAA of 2000, § 6, cmt. 5, 7 U.L.A., part
waiver pronouncement to the context in which it arose, 1A 28 (2009) (stating that litigation-conduct “[w]aiver
specifically, waiver “arising from non-compliance with is one area where courts, rather than arbitrators, often
make the decision as to enforceability of an arbitration

2016 WL 166011, 132 Nev. Adv. Op. 2
clause,” and noting that “[a]llowing the court to decide to the arbitrator under First Options and its progeny.
this issue of arbitrability comports with the separability See Rent–A–Center, W., Inc. v. Jackson, 561 U.S. 63,
doctrine because in most instances waiver concerns only 66, 130 S.Ct. 2772, 177 L.Ed.2d 403 (2010) (upholding
the arbitration clause itself and not an attack on the district court's referral of substantive unconscionability
underlying contract” and that “[i]t is also a matter of defense to the arbitrator based on a delegation clause that
judicial economy to require that a party, who pursues an sent to the arbitrator questions as to the “applicability,
action in a court proceeding but later claims arbitrability, enforceability or formation of this Agreement including,
be held to a decision of the court on waiver”). but not limited to any claim that all or any part of
this Agreement is void or voidable” (internal quotation
We therefore hold, as the majority of courts have, omitted)). Rapid Cash argues that Quintino's agreement,
that Howsam's reference to “waiver, delay, or a like too, delegates litigation-conduct waiver to the arbitrator,
defense” being for the arbitrator encompasses “defenses since Quintino's waiver challenge amounts to a defense to
arising from non-compliance with contractual conditions the “applicability” of her arbitration agreement. We do
precedent to arbitration, such as the NASD time limit not agree.
rule at issue in that case, [but] not ... claims of waiver
based on active litigation in court.” Ehleiter, 482 F.3d at [8] [9] [10] “An issue that is presumptively for
219 (internal quotations omitted); see Marie, 402 F.3d the court to decide will be referred to the arbitrator
at 14. A party to an arbitration agreement likely would for determination only where the parties' arbitration
expect a court to determine whether the opposing party's agreement contains ‘clear and unmistakable evidence’ of
conduct in a judicial setting amounted to waiver of the such an intent.” Ehleiter, 482 F.3d at 221 (quoting First
right to arbitrate. Thus, even post-Howsam, litigation- Options, 514 U.S. at 944), 115 S.Ct. 1920; see also Rent–
conduct waiver remains a matter presumptively for the A–Center, 561 U.S. at 70 n. 1, 130 S.Ct. 2772. The
court to decide. general language in both forms of Rapid Cash agreements
falls short of the “clear and unmistakable evidence”
required to overcome the presumption that litigation-
conduct waiver is for the court to decide. The presumption
C.
that courts decide litigation-conduct waiver is rooted
[7] We still must consider Rapid Cash's argument that in presumed party intent and probable expectations.
its arbitration agreements provide for the arbitrator to The agreements between Rapid Cash and its borrowers
decide litigation-conduct waiver, notwithstanding any provide specifically for litigation of some claims in some
presumption to the contrary. See First Options, 514 U.S. at courts without loss of the right to arbitrate other claims
943, 115 S.Ct. 1920 (“Just as the arbitrability of the merits in other courts, yet are silent on the issue of who decides
of a dispute depends upon whether the parties agreed on which side of the line such later-asserted claims fall.
to arbitrate that dispute, so the question ‘who has the A corollary of the First Options rule requiring “clear and
primary power to decide arbitrability’ turns upon what unmistakable evidence” of contrary intent to overcome
the parties agreed about that matter.” (internal citations a division-of-labor presumption is the rule that “silence
omitted)). In this regard, the Dungan/Harrison form of or ambiguity” is resolved against the party seeking to
agreement requires arbitration of “any claim, dispute or overcome the presumption. First Options, 514 U.S. at 944–
controversy ... that arises from or relates in any way to ... 45, 115 S.Ct. 1920. Had Rapid Cash intended to delegate
the validity, enforceability or scope of this Arbitration litigation-conduct waiver to the arbitrator, rather than the
Provision,” while the Quintino form of agreement *696 court, the agreements could and should have been written
requires the parties to arbitrate “any and all claims that to say that explicitly. Absent an explicit delegation,
arise out of ... the validity, scope and/or applicability of litigation-conduct waiver remains a matter for the court to
this ... Arbitration Agreement.” (Emphases added.). resolve. See Marie, 402 F.3d at 15 (declining to interpret
agreement delegating “arbitrability” determinations to
**7 Rapid Cash argues that the district court's finding of the arbitrator as “evinc[ing] a clear and unmistakable
litigation-conduct waiver defeats the “enforceability” of intent to have waiver issues decided by the arbitrator” and
its arbitration agreements and so, at minimum, Dungan's holding that “[n]either party should be forced to arbitrate
and Harrison's waiver challenge should have been referred

2016 WL 166011, 132 Nev. Adv. Op. 2
the issue of waiver by conduct without a clearer indication and factual issues as those the party now wants to
in the agreement that they have agreed to do so”). 5 arbitrate results in waiver of the right to arbitrate.”
Doctor's Assocs., Inc. v. Distajo, 107 F.3d 126, 133 (2d
Here, as in Ehleiter, “[l]itigants would expect the court, Cir.1997); see MicroStrategy, Inc. v. Lauricia, 268 F.3d
not an arbitrator, to decide the question of waiver based 244, 250 (4th Cir.2001); Subway Equip. Leasing Corp.
on litigation conduct, and the Agreement ... does not v. Forte, 169 F.3d 324, 328 (5th Cir.1999); Cottonwood
manifest a contrary intent.” 482 F.3d at 222. We thus Fin., Ltd. v. Estes, 339 Wis.2d 472, 810 N.W.2d 852,
“cannot interpret the Agreement's silence regarding who 860–61 (App.2012). The reasoning underlying these
decides the waiver issue here ‘as giving the arbitrators that cases is that litigating one claim is not necessarily
power, for doing so ... [would] force [an] unwilling part[y] inconsistent with seeking to arbitrate another, separate
to arbitrate a matter he reasonably would have thought a claim and does not prejudice rights of the opposing
judge, not an arbitrator, would decide.’ ” Id. (alteration in party that the arbitration agreement protects. See Distajo,
original) (quoting First Options, 514 U.S. at 945, 115 S.Ct. 107 F.3d at 133 (“Finding waiver where a party has
1920). previously litigated an unrelated yet arbitrable dispute
would effectively abrogate an arbitration clause once a
party had litigated any issue relating to the underlying
contract containing the arbitration clause.”). Thus, the
D. franchisor in Distajo did not waive its right to arbitrate its
franchisees' claims for breach of the franchise agreement
**8 [11] We turn to Rapid Cash's contention that
by obtaining eviction orders against its franchisees in state
the district court erred in finding it waived its right to
court because the eviction actions did not prejudice rights
arbitrate. Waiver is not a *697 favored finding and
secured by the arbitration agreement, as required to find
should not be lightly inferred. Coca–Cola Bottling, 242
waiver of arbitration rights under the FAA. 107 F.3d at
F.3d at 57; Clark Cty., 98 Nev. at 491, 653 P.2d at
134 (“[P]rejudice as defined by our [waiver] cases refers
1219. “A party seeking to prove the waiver of a right to
to the inherent unfairness—in terms of delay, expense, or
arbitrate must demonstrate these elements: knowledge of
damage to a party's legal position—that occurs when the
an existing right to compel arbitration; acts inconsistent
party's opponent forces it to litigate an issue and later
with that existing right; and prejudice to the party
seeks to arbitrate that same issue.”). Similarly, the payday
opposing arbitration resulting from such inconsistent
lender in Cottonwood Financial did not waive its right to
acts.” 3 Thomas H. Oehmke, Commercial Arbitration §
compel arbitration of its borrower's counterclaim alleging
50:28, at 28–29 (3d ed. Supp. 2015); see Nev. Gold, 121
violation of the Wisconsin Consumer Act by bringing a
Nev. at 90, 110 P.3d at 485.
collection action in small claims court; the arbitration
agreement provided that a small claims action did not
Rapid Cash knew of its arbitration rights and
waive the right to compel arbitration of other claims and
acknowledges that it waived its right to arbitrate its
the borrower's counterclaim converted the case from a
collection claims by bringing them in justice court. Its
small to a large claims action, triggering the arbitration
point is that the claims the named plaintiffs have asserted
agreement. 810 N.W.2d at 860–61; see Fid. Nat'l Corp. v.
against Rapid Cash in district court are separate and
Blakely, 305 F.Supp.2d 639, 642 (S.D.Miss.2003) (holding
distinct from the collection claims Rapid Cash sued on in
lender's state-court collection action did not waive its right
justice court. Especially since its arbitration agreements
to seek arbitration of counterclaim asserting tort claims
permit it to litigate a collection claim in justice court
associated with the transaction).
without losing the right to arbitrate other, distinct claims,
Rapid Cash sees no inconsistency in enforcing arbitration
**9 This case differs from the cases just cited in one
of the named plaintiffs' claims despite its prior litigation
crucial respect: The claims the named plaintiffs have
in justice court. Rapid Cash also disputes whether the
asserted in district court arise out of, and are integrally
class representatives have made a sufficient showing of
related to, the litigation Rapid Cash conducted in justice
prejudice to justify a finding of waiver.
court. By initiating a collection action in justice court,
Rapid Cash waived its right to arbitrate to the extent
Consistent with the policy disfavoring waiver, caselaw
of inviting its borrower to appear and defend on the
teaches that “only prior litigation of the same legal

2016 WL 166011, 132 Nev. Adv. Op. 2
merits of that claim. The entry of default judgment based of such judgment may vacate such
on a falsified affidavit of service denied the defendant judgment and allow the party or
borrower that invited opportunity to appear and defend. the party's legal representatives to
Allowing the borrower to litigate its claim to set aside the answer to the merits of the original
judgment and be heard on the merits comports with the action,
waiver Rapid Cash initiated. If the judgment Rapid Cash
obtained was the product of fraud or criminal misconduct and that all other claims should be dismissed or sent to
and is unenforceable for that reason, it would be *698 arbitration. Rapid Cash did not make this argument to the
unfairly prejudicial to the judgment debtor to require district court before that court entered its order denying
arbitration of claims seeking to set that judgment aside, Rapid Cash's second motion to compel arbitration, and
to enjoin its enforcement, and otherwise to remediate thus, this argument is not properly before us on appeal.
its improper entry. We recognize that the arbitration See Old Aztec Mine, Inc. v. Brown, 97 Nev. 49, 52, 623
agreements specify that bringing one claim does not result P.2d 981, 983 (1981) (“A point not urged in the trial
in waiver of the right to arbitrate another, but a no- court ... is deemed to have been waived and will not be
waiver clause can itself be waived, see Silver Dollar Club considered on appeal.”). 6 More to the point, while we do
v. Cosgriff Neon Co., 80 Nev. 108, 111, 389 P.2d 923, not pass upon the validity of any of the named plaintiffs'
924 (1964), and should not be applied to sanctify a fraud claims and we recognize that the FAA “requires that we
upon the court allegedly committed by the party who itself rigorously enforce agreements to arbitrate, even if the
elected a litigation forum for its claim. Cf. S & R Co. of result is ‘piecemeal’ litigation,” Dean Witter Reynolds, Inc.
Kingston v. Latona Trucking, Inc., 159 F.3d 80, 86 (2d v. Byrd, 470 U.S. 213, 221, 105 S.Ct. 1238, 84 L.Ed.2d
Cir.1998) (declining to enforce a “no waiver” clause where 158 (1985), we do not accept Rapid Cash's view of their
to do so would hamper a judge's authority to control the separability for waiver purposes. The named plaintiffs'
proceedings and correct any abuse in them); Gen. Elec. claims all concern, at their core, the validity of the
Capital Corp. v. Bio–Mass Tech, Inc., 136 So.3d 698, 703 default judgments Rapid Cash obtained against them in
(Fla.Dist.Ct.App.2014) (holding that an “antiwaiver or justice court, as to which issue the district court correctly
‘no waiver’ provision is not itself determinative and does concluded that Rapid Cash waived its right to an arbitral
not operate as a complete bar to finding a waiver of the forum.
right to arbitration”).
**10 We therefore affirm.
E.
We concur: HARDESTY, DOUGLAS, CHERRY, and
[12] [13] Rapid Cash urges us to differentiate among GIBBONS, JJ.
the claims the named plaintiffs have brought, arguing
that the named plaintiffs have an adequate remedy under
Rule 60(c) of the Nevada Justice Court Rules of Civil SAITTA, J., concurring:
Procedure, which provides: In large part, I agree with the majority's opinion.
However, I disagree with the majority's inclusion as
When a default judgment shall have dicta of two cases, Cottonwood Financial, Ltd. v. Estes,
been taken against any party who 339 Wis.2d 472, 810 N.W.2d 852 (App.2012), and
was not personally served with Fidelity National Corp. v. Blakely, 305 F.Supp.2d 639
summons and complaint, either in (S.D.Miss.2003). The Cottonwood court based its decision
the State of Nevada or in any on its interpretation of the arbitration clause in that
other jurisdiction, and who has not case and did not perform an analysis of whether the
entered a general appearance in the “same legal and factual issues” were at issue in the
action, the court, after notice to the lender's collection action as the borrower's counterclaim.
adverse party, upon motion made Compare Cottonwood Financial, 810 N.W.2d at 860–61,
within six months after the date of with Majority Opinion at 697 (holding that “ ‘only prior
service of written notice of entry litigation of the same legal and factual issues as those

2016 WL 166011, 132 Nev. Adv. Op. 2
the party now wants to arbitrate results in waiver of the claims associated with the transaction). Therefore, I am
puzzled by its inclusion in the majority's opinion.
right to arbitrate.’ ” *699 (quoting Doctor's Assocs., Inc.
v. Distajo, 107 F.3d 126, 133 (2d Cir.1997))). Therefore,
Lastly, I note that the above caselaw originates from the
I believe that Cottonwood is inapposite to the majority's
Wisconsin Court of Appeals and a federal district court in
analysis under the standard it set out in its opinion.
Mississippi. Thus, beyond the issue of their applicability
to the current case, I question their persuasiveness as
In the case of Blakely, I respectfully note that the holding
authority in Nevada. Therefore, although I concur with
in that case directly contradicts the majority's holding
most of the majority's opinion, I do not join with them as
in the current case. Compare Blakely, 305 F.Supp.2d at
to the use of those two cases as dicta.
642 (holding lender's state court collection action did
not waive its right to seek arbitration of counterclaim
asserting tort claims associated with the transaction), with All Citations
Majority Opinion at 698 (holding that lender's state-court
collection action waived its right to seek arbitration of 366 P.3d 688, 2016 WL 166011, 132 Nev. Adv. Op. 2
Footnotes
1 The Honorable Ron D. Parraguirre, Chief Justice, voluntarily recused himself from participation in the decision of this
matter.
2 We refer to appellants collectively as “Rapid Cash,” the name by which they are all alleged to do business.
3 Nevada has adopted the Uniform Arbitration Act of 2000(UAA), see NRS 38.206, which expresses Nevada's similarly
fundamental policy favoring the enforceability of arbitration agreements as written. See NRS 38.219(1); Tallman, –––
Nev. ––––, 359 P.3d at 119 (“As a matter of public policy, Nevada courts encourage arbitration and liberally construe
arbitration clauses in favor of granting arbitration.” (quoting State ex rel. Masto v. Second Judicial Dist. Court, 125 Nev.
37, 44, 199 P.3d 828, 832 (2009))).
4 The Court's quotation of Howsam's waiver language in BG Group, 572 U.S. at ––––, 134 S.Ct. at 1207, is not inconsistent
with the distinction Grigsby and other post-Howsam cases have drawn between waiver by litigation-conduct and waiver
by failure to comply with procedural prerequisites to arbitration. In BG Group, the Supreme Court deemed a foreign
sovereign's local litigation provision the province of the arbitrators because it constituted “a purely procedural requirement
—a claims-processing rule that governs when the arbitration may begin, but not whether it may occur or what its
substantive outcome will be on the issues in dispute.” Id. at ––––, 134 S.Ct. at 1207.
5 Rent–A–Center is not to the contrary. In Rent–A–Center, the party opposing arbitration conceded that the text of the
delegation clause—referring to the arbitrator claims that the arbitration agreement was “void or voidable” and so not
enforceable or applicable—encompassed his substantive unconscionability challenge. See Rent–A–Center, 561 U.S. at
66, 130 S.Ct. 2772 (internal quotation omitted). In this case, by contrast, the parties opposing arbitration hotly contest the
delegation clauses in their agreements, which, unlike the Rent–A–Center clause, stop at “enforceability” and “applicability”
without adding a description of what the term means.
6 A separate proceeding regarding this issue whereby Rapid Cash seeks original writ relief from the district court's orders
partially granting class certification and declining to dismiss certain claims for relief is pending before this court as Principal
Investments, Inc. v. Eighth Judicial District Court, Docket No. 61581.

Smith Barney Shearson, Inc. v. Boone, 838 F.Supp. 1156 (1993)

838 F.Supp. 1156
N.D. Texas, [3] Alternative Dispute Resolution
Wichita Falls Division. Merits of controversy
In determining what claims parties may
SMITH BARNEY SHEARSON, INC. arbitrate, court must not inquire into merits of
v. underlying dispute.
Warren BOONE, Individually and as Trustee
for Watercol Profit Sharing Plan, Dated 1/7/90. Cases that cite this headnote
Civ. A. 7:93–CV–146–K. [4] Alternative Dispute Resolution

| Arbitrability of dispute
Dec. 6, 1993.
Investment company sought declaration that investor's Conditions precedent to arbitration;
claims were not subject to arbitration, and it moved procedural arbitrability
for preliminary injunction barring arbitration of claims. Judicial inquiry is limited to issues of
The District Court, Belew, J., held that American Stock “substantive arbitrability,” which is question
Exchange (AMEX) arbitration rule requiring claims to be of whether or not dispute is covered by
filed within six years from event giving rise to claim was parties' arbitration agreement, and matters
procedural limitation on arbitrability of investor's claims, of procedural arbitrability are to be left to
and thus timeliness of claims was for arbitral, not judicial, arbitrator.
determination.
Complaint denied.
Conditions precedent to arbitration;
West Headnotes (7) procedural arbitrability
Questions as to timeliness of claim subject to
arbitration are procedural issues for arbitral,
[1] Alternative Dispute Resolution not judicial, determination.
Submission to arbitration is matter bound by Cases that cite this headnote
parties' contract, and party cannot be forced
to arbitrate what it has not agreed to arbitrate. [6] Alternative Dispute Resolution
Conditions precedent to arbitration;
procedural arbitrability
Only exception to rule requiring arbitrator
[2] Alternative Dispute Resolution to decide questions as to timeliness of claim
Arbitrability of dispute subject to arbitration is that court may decide
Since there must be forum to determine what procedural arbitrability questions if, and only
parties have agreed to arbitrate, and because if, court can confidently say that claim would
it would be unfair to force party to arbitrate be barred.
the arbitrability issue, courts are body which
decides disputes over what claims parties may Cases that cite this headnote
arbitrate.

Performance, breach, enforcement, and on the basis of their motions, affidavits and a stipulation
contest of agreement of facts. SBS and Boone's dispute solely concerns
Although last disputed investment purchase interpreting American Stock Exchange arbitration rule
took place more than six years before 605 (AMEX R. 605) to determine its effect on Boone's
investor filed arbitration claim, American pending arbitration claims against SBS.
Stock Exchange (AMEX) arbitration rule
requiring claims to be filed within six years Because of the nature of this dispute, the Court
from event giving rise to claim was procedural believes that further evidentiary hearings are unnecessary
limitation on arbitrability of investor's claims, to resolve this matter. See, Fed.R.Civ.P. 43(e) (court
and thus timeliness of claims was for arbitral, may determine matter entirely on the filings) and
not judicial, determination; moreover, it could Fed.R.Civ.P. 78 (court may determine matter without oral
not be said with confidence that claims were argument). Therefore, the Court sua sponte consolidates
time barred without forbidden judicial inquiry its ruling on SBS' Motion for Preliminary Injunction
into underlying merits of claims. with determination of SBS' Complaint for Declaratory
Judgment.
I. BACKGROUND FACTS
Boone opened several stock accounts with SBS 1 in both
Attorneys and Law Firms his name and in the name of the Watercol Profit Sharing
Plan, a retirement plan for his McDonald's franchises.
*1156 Charles Watts Flynn, Susan L. Karamanian, Boone used these accounts to invest in several limited
Bradley W. Foster, Locke Purnell Rain Harrell, Dallas, partnerships that ultimately proved unprofitable and are
TX, for plaintiff. the subject of this litigation. Boone made these purchases
from May 4, 1984 to February 18, 1986. Boone filed his
Tracy Pride Stoneman, Godwin & Carlton, Dallas, TX,
arbitration claim on July 13, 1993, over seven and a half
for defendant.
years after the last transaction.
The Customer Agreement that Boone signed on opening

AMENDED MEMORANDUM OPINION AND his accounts with SBS provided that all disputes arising
ORDER DENYING SMITH BARNEY SHEARSON'S out of his SBS accounts would be arbitrated by Boone's
COMPLAINT FOR DECLARATORY JUDGMENT choice of one of several arbitration bodies listed in the
AND MOTION FOR PRELIMINARY INJUNCTION Customer Agreement. Boone elected to pursue his claims
with the American Stock Exchange (AMEX) and to be
BELEW, District Judge.
bound by its procedural rules.
The Court enters this Amended Memorandum Opinion
and Order to supersede its December 2, 1993 Boone claims that he knew nothing about the nature of
Memorandum Opinion Denying Smith Barney Shearson's limited partnerships at the time he invested in them and
Motion for Preliminary Injunction. that he relied entirely on the assurances SBS employee
Larry Robb that these limited partnerships were risk-
*1157 Pursuant to Fed.R.Civ.P. 65(a)(2), the Court proof and right for the retirement income strategy Boone
sua sponte consolidates Smith Barney Shearson's (SBS) was pursuing.
Motion for Preliminary Injunction with a determination
of the merits of SBS' Complaint for Declaratory Judgment Boone seeks $1,301,000.00 in damages under a variety
for reasons discussed infra. of theories including violation of Texas Deceptive Trade
Practices and Consumer Protection Act; fraud in real
After a hearing on SBS' application for a temporary estate and stock transactions under Tex.Bus. & Com.Code
restraining order, the parties agreed to waive their § 27.01; violation of the Racketeer Influenced and
preliminary injunction hearing and submit their dispute Corrupt Organizations Act (18 U.S.C. §§ 1961–1968);

breach of contract; negligence; breach of fiduciary duty;

common law fraud and misrepresentation; and fraudulent [2] [3] Since there must be a forum to determine just
concealment. what the parties have agreed to arbitrate, the courts are
the body which decides disputes over what claims the
parties may arbitrate, AT & T Technologies, 475 U.S.
II. DISCUSSION at 649, 106 S.Ct. at 1418, quoting, John Wiley & Sons
The dispute SBS and Boone have brought to the Court v. Livingston, 376 U.S. 543, 546–47, 84 S.Ct. 909, 912,
requires the Court to divine which side the Fifth Circuit 11 L.Ed.2d 898 (1964), because it would be unfair to
will take in a dispute that is currently dividing the other force a party to “arbitrate the arbitrability issue.” Litton
Courts of Appeal. Financial Printing Division v. NLRB, 501 U.S. 190, ––––,
111 S.Ct. 2215, 2226, 115 L.Ed.2d 177 (1991), quoting,
SBS asks the Court to enjoin an arbitration panel of the AT & T Technologies, 475 U.S. at 651, 106 S.Ct. at
American Stock Exchange (AMEX) from hearing Boone's 1420. In making this determination, a court must not
complaints. SBS argues that Rule 605 2 of the AMEX inquire into the merits of the underlying dispute. AT & T
Rules precludes this issue from arbitration because the Technologies, 475 U.S. at 649, 106 S.Ct. at 1418; United
events complained of occurred over six years before Boone Steelworkers of America, AFL–CIO v. ASARCO, 970 F.2d
filed his arbitration claim. 1448, 1451 (5th Cir.1992) citing, Oil Chemical Atomic
Workers' International Union, Local 4–447 v. Chevron
The Court's determination of whether Rule 605 is a Chemical Co., 815 F.2d 338, 343 (5th Cir.1987) ( “Local
condition precedent for arbitration eligibility for the 4–447 ”).
Court to decide or whether Rule 605 is a procedural
limitation for the arbitration panel to apply will determine [4] Judicial inquiry is therefore limited to issues of
the outcome of this dispute. substantive arbitrability, the question of whether or
not the dispute is covered by the parties' arbitration
agreement. Matters of procedural arbitrability are to be
*1158 A. PRELIMINARY INJUNCTION left to the arbitrator. John Wiley & Sons, 376 U.S. at 557,
Because the Court is denying SBS' declaratory judgment, 84 S.Ct. at 918.
SBS is obviously not entitled to a preliminary injunction.
Canal Authority of State of Florida v. Callaway, 489 F.2d
567, 572 (5th Cir.1974). Accordingly, the Court DENIES 1. Are Boone's claims Covered
SBS' Motion for Preliminary Injunction. by the Arbitration Agreement?
The Fifth Circuit has drawn a clear line separating judicial
determination of questions of substantive and procedural
B. THE MERITS OF SBS' APPLICATION arbitrability in Local 4–447, 815 F.2d at 340. “Once it is
FOR DECLARATORY JUDGMENT determined that the parties are obligated to submit the
In deciding this issue, the Court must examine the state of subject matter of a dispute to arbitration, ‘procedural’
the law in the Fifth Circuit, in other Circuits and what the questions which grow out of the dispute and bear on
Supreme Court has said in analogous areas to determine its final disposition should be left to the arbitrator.” Id.,
what the proper rule should be. citing, John Wiley & Sons, 376 U.S. at 557, 84 S.Ct. at 918.
[1] It is a settled matter of law that submission to It is clear from Boone's Customer agreement that the
arbitration is a matter bound by the parties' contract—a claims he is making are of the type Boone and SBS agreed
party cannot be forced to arbitrate what it has not agreed to arbitrate. The Agreement requires that “any disputes
to arbitrate. AT & T Technologies v. Communications relating to [Boone's] investments shall be settled by
Workers of America, 475 U.S. 643, 648, 106 S.Ct. 1415, arbitration in accordance with the rules” of the arbitration
1418, 89 L.Ed.2d 648 (1986), citing, Steelworkers v. organization of Boone's choice. SBS' Original Compl.,
Warrior & Gulf, 363 U.S. 574, 582, 80 S.Ct. 1347, 1352, Application for T.R.O. and Mot. for Prelim. Inj., Ex. C.
4 L.Ed.2d 1409 (1960) and Steelworkers v. American SBS concurs—“there is no dispute that this controversy is
Manufacturing Co., 363 U.S. 564, 570–71, 80 S.Ct. 1363, subject to arbitration ... under the Customer Agreement
1364, 4 L.Ed.2d 1432 (1960). which Boone signed.” Pl.'s Resp. to Def.'s Mot. to Dismiss

and Mot. to Compel Arbitration at 3. Accordingly, the question. At issue in Local 4–447 was a provision in
Court finds that Boone's substantive claims arise out of Chevron's arbitration agreement with the union that
his investments with SBS and are substantively arbitrable “[o]nly grievances ... which are processed ... within the
under the provisions of the Customer Agreement. time limits herein provided shall be subject to arbitration.”
Local 4–447, 815 F.2d at 341. In addressing Chevron's
Boone elected, under the terms of the contract, to have an arguments that this timing clause should act as a
arbitration panel of the American Stock Exchange hear substantive limit on the union's claims (because Chevron
this dispute, and any arbitration that occurs will be bound had not agreed to arbitrate untimely claims), the court,
by AMEX's rules, including AMEX R. 605. following John Wiley, 376 U.S. at 557–58, 84 S.Ct. at 918,
stated that, while normally a court should not address
procedural questions, in rare instances a court “could
*1159 2. Is AMEX R. 605 a deny arbitration [ ] if it could confidently be said, not
Procedural or Substantive Bar? only that a claim was strictly ‘procedural’, ... but also
Now the Court turns to the stickier question of whether that it should operate to bar arbitration altogether.” Local
AMEX Rule 605 is a procedural or substantive limitation 4–447 815 F.2d at 341. The court held that because an
on the arbitrability of Boone's claim. arbitrator could find that Chevron had waived its rights to
object to late service by its conduct, the district court had
SBS cites many well reasoned and thorough opinions properly ordered Chevron to arbitration because the trial
from outside the Fifth Circuit in support of its claim judge could not confidently say that the procedural claim
that AMEX 605 is a substantive limitation on Boone's would bar arbitration altogether. Id. at 342 (emphasis in
agreement to arbitrate. 3 SBS includes Shearson Lehman original).
Brothers v. Glazer Scott Investments, CA 3–92–0600–
T, (N.D.Tex.1992) which held, in an order temporarily [5] [6] In light of these decisions, current Fifth Circuit
restraining arbitration of Glazer Scott's claims, that law appears to be that timeliness questions are procedural
New York Stock Exchange Rule 603 4 (NYSE R. 603) issues for arbitral, not judicial, determination. Austin Co.,
is a substantive limitation on arbitration contracts. In 784 F.2d at 1264. The only exception to this rule is that
reaching this decision, the Glazer Scott court recognized a court may decide procedural arbitrability questions if,
that “non-binding authority to the contrary exists,” and only if, the court can confidently say the claim would
referring to, inter alia, Commerce Park at DFW Freeport be barred. Local 4–447 815 F.2d at 340–41, relying on
v. Mardian Construction Co., 729 F.2d 334, 339 n. 5 (5th John Wiley & Sons, 376 U.S. at 557–58, 84 S.Ct. at 918.
Cir.1984) where, according to the Glazer Scott court, the The court may not, however, consider the merits of the
Fifth Circuit had stated, “in dicta, that whether a request underlying dispute in deciding whether the claims are
for arbitration was timely or not is a procedural matter barred. AT & T Technologies, 475 U.S. at 649, 106 S.Ct.
to be resolved by the arbitrator.” Glazer Scott Investments at 1418.
slip op. at 3 n. 1.
[7] The situation in Local 4–447 is analogous to the one
The Glazer Scott court does not appear to have considered before the Court. If proven before the AMEX arbitrators,
post-Commerce Park cases that solidified its rule when Boone's allegations that SBS fraudulently concealed its
it dismissed Commerce Park as dicta. See Local 4–447, wrongdoing could act to waive any objection SBS has
815 F.2d at 341, citing, Local No. 406, Int'l Union of to Boone filing his arbitration claims late, but the Fifth
Operating Engineers, AFL–CIO v. Austin Co., 784 F.2d Circuit has made it clear that this is a question for the
1262, 1264 (5th Cir.1986) (timeliness issues are procedural arbitrators. Additionally, because the Court may not
questions to be answered by the arbitrator, not judicially consider the merits of Boone's claims, the Court *1160
determinable limitations on the substantive scope of cannot confidently determine whether or not Boone's
arbitration). SBS' reliance on Glazer Scott is, therefore, fraudulent concealment claims are valid, i.e. would toll or
poorly placed. waive AMEX R. 605's six year limitation.
A closer examination of Local 4–447 sheds additional Therefore, because the Fifth Circuit considers timeliness
light on the procedural versus substantive limitation questions to be procedural, not substantive, issues and

because this Court cannot confidently say that SBS' This action came on for consideration by the Court,
Honorable David O. Belew, Jr., District Judge, presiding,
procedural timeliness claim clearly bars Boone from
and the issues having been duly heard and considered
proceeding, SBS' Complaint for Declaratory Relief is
and a decision having been rendered by Memorandum
hereby DENIED.
Opinion and Order entered this same day,
As discussed supra SBS' Motion for Preliminary
It is hereby ORDERED and ADJUDGED that Plaintiff
Injunction is also DENIED.
Smith Barney Shearson's Complaint for Declaratory
Judgment is DENIED. This action is hereby terminated
These rulings are made without reference or comment on
and the Clerk of the Court is directed to close this case.
the merits of the underlying dispute between Boone and
SBS. The parties are free to pursue arbitration according
Each party shall pay their own costs of court.
to the Customer Agreement.
IT IS SO ORDERED.
IT IS SO ORDERED.
All Citations
JUDGMENT ON DECISION BY THE COURT
838 F.Supp. 1156
Footnotes
1 For the sake of clarity, the Court will refer to all transactions as if made with Smith Barney Shearson, regardless if made
with SBS or one of its predecessors.
2 AMEX Rule 605 reads:
No dispute, claim or controversy shall be eligible for submission to arbitration in any instance where six (6) years
shall have elapsed from the occurrence or event giving rise to the act or the dispute, claim or controversy. This
section shall not extend applicable statutes of limitations, nor shall it apply to any case which is directed to arbitration
by a court of competent jurisdiction.
2 Am.Stock Ex.Guide (CCH) ¶ 9544 (1989).
3 E.g., PaineWebber, Inc. v. Hofmann, 984 F.2d 1372 (3d Cir.1993); Roney & Co. v. Kassab, 981 F.2d 894 (6th Cir.1992);
and Edward D. Jones & Co. v. Sorrells, 957 F.2d 509 (7th Cir.1992).
4 NYSE R. 603 is identical to AMEX R. 605.

Snap-on Tools Corp. v. Mason, 18 F.3d 1261 (1994)
In determining whether to abstain from

exercising jurisdiction over case, federal court
KeyCite Yellow Flag - Negative Treatment should consider whether state or federal
Distinguished by Will-Drill Resources, Inc. v. Samson Resources Co.,
court has assumed jurisdiction over res;
5th Cir.(La.), November 26, 2003
inconveniences of federal forum; desirability
18 F.3d 1261
of avoiding piecemeal litigation; order in
which jurisdiction was obtained by concurrent
Fifth Circuit.
forums; and whether federal policy is
SNAP–ON TOOLS CORPORATION, involved, and none of these factors are
Plaintiff–Appellant, determinative but, rather, require careful
balancing of important factors as they apply
v.
in given case, with balance heavily weighted in
Barney MASON, Jr. and Sandra
favor of exercise of jurisdiction.
Mason, Defendants–Appellees.
No. 93–7317.
|
April 15, 1994. [3] Federal Courts
Torts in general
Tool manufacturer, which was being sued by nonexclusive Colorado River/Moses H. Cone did not
distributor in state court for torts arising out of require district court to abstain from
distributorship relationship, brought action in federal deciding manufacturer's motion to compel
court to compel arbitration of dispute. The United States arbitration of distributor's tort claims,
District Court for the Southern District of Texas, Samuel although distributor had filed state court
B. Kent, J., abstained. Manufacturer appealed. The Court action against manufacturer and four of its
of Appeals, Frank A. Kaufman, District Judge, sitting present or former employees; distributor's
by designation, held that District Court should not have only claim as to inconvenience of federal
abstained from deciding motion to compel arbitration. forum was that he would suffer increased
costs if federal court asserted jurisdiction
Reversed and remanded. because state court was closer to home,
terms of arbitration agreement suggested
that piecemeal litigation would not result
West Headnotes (3) inasmuch as tort claims all arose out
of business relationship between opposing
parties, although state court action was
[1] Federal Courts filed first, manufacturer had no notice that
Colorado River abstention distributor would repudiate its duty to
Colorado River permits federal courts to arbitrate until state suit was filed, and federal
abstain from exercising their jurisdiction over law provided rule of decision on merits. 9
case where considerations of wise judicial U.S.C.A. § 4.
administration, giving regard to conservation
of judicial resources and comprehensive 90 Cases that cite this headnote
disposition of litigation, so warrant.

[2] Federal Courts
*1262 Stacy Obenhaus, Harold H. Walker, Jr., Gardere
Federal-state relations, questions of state
& Wynne, Dallas, TX, James F. Stern, Michael Bowen,
law, and parallel state proceedings
Foley & Lardner, Milwaukee, WI, for plaintiff-appellant.

fiduciary duty, and negligent and intentional infliction of

Frank W. Mitchell, G.P. Hardy, III, Houston, TX, for emotional distress.
defendants-appellees.
In response to the state court complaint Snap-on and
Appeal from the United States District Court for the
its co-defendants filed a general denial and a motion to
Southern District of Texas.
stay proceedings in the state court pending arbitration. 1
Before HIGGINBOTHAM and WIENER, Circuit On October 5, 1992, Snap-on sent a written demand for
Judges, and KAUFMAN, * District Judge. arbitration to the Masons to which the Masons did not
respond. On February 12, 1993, Snap-on filed a petition
Opinion and complaint in the United States District Court for the
Southern District of Texas to compel arbitration pursuant
FRANK A. KAUFMAN, District Judge: to section 4 of the Federal Arbitration Act (“FAA” or
On January 24, 1989, Barney Mason entered into a “the Act”), 9 U.S.C. § 4. 2 Snap-on invoked the diversity
written Dealer Agreement with Snap–On, pursuant to jurisdiction of the district court on the basis of complete
which Mason became a non-exclusive distributor of diversity of citizenship between Snap-on and the Masons.
various Snap-on tools. The Dealer Agreement includes The four non-diverse co-defendants in the state court
the following provision governing arbitration of disputes action are not plaintiffs in the federal court action and are
between the parties: not parties to the arbitration agreement.
RESOLUTION OF DISPUTES— The Masons responded to the petition to compel

ARBITRATION. Any controversy arbitration with a motion to dismiss. On April 30, 1993,
or dispute arising out of or relating the district court granted the Masons' motion to dismiss
to this Agreement, or breach thereof
on abstention grounds. 3 The district court gave primarily
including, but not limited to, any
five reasons for its grant of the motion, stating that:
claim by the Dealer relating to
(1) in order to determine whether Snap-on is entitled to
termination of this Agreement by
arbitration the court would have to hold a trial, a course
the Company or any other claim
of action it did not want to pursue; (2) there was no reason
against an employee, officer or
why Snap-on should not pursue its arbitration claim in
director of the Company, shall
the state court; (3) Snap-on had likely filed the motion to
be submitted to final and binding
compel arbitration because it had missed the thirty day
arbitration as the sole and exclusive
deadline for filing a petition of removal; (4) a plaintiff's
remedy for any such controversy or
choice of forum is entitled to deference; and (5) Snap-on
dispute. Any request for arbitration
was motivated to file its federal claim because it feared
shall be filed in writing within six
the pro-plaintiff orientation of the state court. Snap-on
(6) months following the alleged
appeals the district court's dismissal.
breach; otherwise, the right to any
remedy shall be deemed forever
“In enacting the Federal Arbitration Act, Congress
waived and lost.
declared a national policy in favor of arbitration,”
Municipal Energy Agency of Mississippi v. Big Rivers Elec.
On September 9, 1992, Barney and his wife, Sandra Corp., 804 F.2d 338, 342 (5th Cir.1986) (citing Southland
Mason, served Snap-on with a petition which they had Corp. v. Keating, 465 U.S. 1, 104 S.Ct. 852, 79 L.Ed.2d 1
filed in the District Court for Matagorda County, Texas, (1984)). “[C]ongress' clear intent, in the Arbitration Act,
against Snap-on and four of its present or former *1263 [was] to move the parties to an arbitrable dispute out
employees. Snap-on is a Delaware corporation with of court and into arbitration as quickly and easily as
its principal place of business in Wisconsin; the four possible.” Moses H. Cone Memorial Hospital v. Mercury
individual-employee defendants and the Masons are all Construction Corp., 460 U.S. 1, 22, 103 S.Ct. 927, 940, 74
citizens of Texas. In the state court complaint, the Masons L.Ed.2d 765 (1983).
allege fraudulent inducement into the dealership contract,
fraud during the executory time of the contract, breach of

*1264 In its opinion granting the motion to dismiss,

the district court noted the federal policy in favor Moses H. Cone, 460 U.S. at 14, 103 S.Ct. at 936 (emphasis
of arbitration, but declined nonetheless to enforce the added) (quoting Colorado, 424 U.S. at 813, 96 S.Ct. at
arbitration agreement. “We review de novo the district 1244) (quoting County of Allegheny v. Frank Mashuda Co.,
court's decision not to compel arbitration.” Catholic 360 U.S. 185, 188–89, 79 S.Ct. 1060, 1062–63, 3 L.Ed.2d
Diocese of Brownsville v. A.G. Edwards & Sons, Inc., 919 1163 (1959)). Colorado River permits federal courts to
F.2d 1054, 1056 (5th Cir.1990). abstain from exercising their jurisdiction over a case
where “considerations of ‘[w]ise judicial administration,
The district court's decision conflicts with the Supreme giving regard to conservation of judicial resources and
Court's decision in Moses H. Cone, 460 U.S. 1, 103 comprehensive disposition of litigation’ ” so warrant.
S.Ct. 927, 74 L.Ed.2d 765 (1983). In Moses H. Cone, Colorado River, 424 U.S. at 817, 96 S.Ct. at 1246 (quoting
a hospital filed a state court suit against a construction Kerotest Mfg. Co. v. C–O–Two Fire Equip. Co., 342 U.S.
contractor and an architect raising a number of claims 180, 183, 72 S.Ct. 219, 221, 96 L.Ed. 200 (1952)).
against the contractor arising out of the construction
contract between the hospital and the contractor and also [2] The considerations discussed in Colorado River, and/
contending that the contractor had, by not proceeding or in Moses H. Cone, include the following: (1) whether
timely, lost its right to arbitrate. That contract contained the state or federal court has assumed jurisdiction over the
a broadly worded arbitration provision. In the state res; (2) the inconveniences of the federal forum; (3) the
court suit, the hospital included several claims against an desirability of avoiding piecemeal litigation; and (4) the
architect who was involved in the construction project, order in which jurisdiction was obtained by the concurrent
but who was not a party to the disputed contract. forums. Moses H. Cone, 460 U.S. at 16, 103 S.Ct. at
The contractor mailed a demand for arbitration to the 937 (citing Colorado River, 424 U.S. at 818–820, 96 S.Ct.
hospital the same day the hospital's complaint was served at 1246–1248). In Moses H. Cone the Supreme Court
upon the contractor. The hospital then obtained an ex added an additional factor to the balance—(5) whether
parte injunction from the state court prohibiting the a federal policy is involved. Id. 460 U.S. at 23, 103 S.Ct.
contractor from taking any steps toward arbitration. at 941. None of these factors are determinative; rather,
After the contractor objected, that stay was dissolved they require “a careful balancing of the important factors
and the contractor filed an action in federal district as they apply in a given case, with the balance heavily
court seeking an order compelling arbitration under § 4 weighted in favor of the exercise of jurisdiction.” Moses
of the FAA. After the district court stayed the federal H. Cone, 460 U.S. at 16, 103 S.Ct. at 937.
proceedings before it, the Fourth Circuit, on appeal by
the contractor, reversed and directed the district court to Applying these considerations to the facts before it, the
order arbitration. The Supreme Court affirmed. Court in Moses H. Cone concluded that the exceptional
circumstances test of Colorado River was not met, and that
[1] In so doing, Justice Brennan noted the principles of therefore abstention was inappropriate. Id. 460 U.S. at
abstention set forth in Colorado River Water Conservation 19, 103 S.Ct. at 938 (“[T]he first two factors mentioned
District v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 in Colorado River are *1265 not present here.... The
L.Ed.2d 483 (1976): remaining factors—avoidance of piecemeal litigation, and
the order in which jurisdiction was obtained by the
“Abstention from the exercise of federal jurisdiction is concurrent forums—far from supporting the stay, actually
the exception, not the rule. ‘The doctrine of abstention, counsel against it.”).
under which a District Court may decline to exercise
or postpone the exercise of its jurisdiction, is an [3] A careful review of the five factors enunciated in
extraordinary and narrow exception to the duty of a Moses H. Cone reveals that the district court should have
District Court to adjudicate a controversy properly ordered arbitration in this case. 4 As in Moses H. Cone,
before it. Abdication of the obligation to decide cases can the first factor, regarding the res, has no bearing on the
be justified under this doctrine only in the exceptional facts of the instant case. The second factor, inconvenience
circumstances where the order to the parties to repair of the federal forum, while a relevant consideration,
to the State Court would clearly serve an important does not support abstention here. The Masons argue
countervailing interest.’ ”

that they will suffer increased costs if the federal court result in the hospital being forced to resolve its dispute
asserts jurisdiction over this case because the state court against the architect in a different forum than its dispute
is closer to their home. They provide no other evidence of against the contractor,
inconvenience; both the federal suit and any arbitration
will likely occur in Texas, where the Masons reside. “That misfortune ... is not the
More specifically, at least some increased cost appears result of any choice between the
to have arisen from the Masons' resistance to arbitration federal and state courts; it occurs
and their litigating in two court systems, in a manner because the relevant federal *1266
hardly in accord with the Supreme Court's approach that, law requires piecemeal resolution
“[c]ontracts to arbitrate are not to be avoided by allowing when necessary to give effect to
one party to ignore the contract and resort to the courts. an arbitration agreement. Under
Such a course could lead to prolonged litigation, one of the Arbitration Act, an arbitration
the very risks the parties, by contracting for arbitration, agreement must be enforced
sought to eliminate.” Southland Corp. v. Keating, 465 U.S. notwithstanding the presence of
1, 7, 104 S.Ct. 852, 856, 79 L.Ed.2d 1 (1984). other persons who are parties to the
underlying dispute but not to the
The Masons rely most heavily on the third factor, the arbitration agreement.”
avoidance of piecemeal litigation. They contend that
460 U.S. at 20, 103 S.Ct. at 939.
the tort claims alleged in their state court suit are not
arbitrable under the contract and therefore will have to
With regard to the fourth factor, concerning which forum
be litigated in a separate forum. Further, they assert that
first acquired jurisdiction over the action, the Masons
some of the parties will not participate in the arbitration,
assert that because the state court suit was filed first, that
namely Sandra Mason and the individual co-defendants,
court should retain jurisdiction. The district court also
none of whom were parties to the arbitration agreement,
relied on the priority in filing in its reasoning. However,
again resulting in some claims being litigated in another
the Supreme Court in Moses H. Cone characterized
forum.
as “mechanical” a similar argument in that case and
noted that in the arbitration context, such an argument
The terms of the arbitration agreement suggest that,
“disregards the obvious reason for the ... priority in filing.
practically speaking, piecemeal litigation may well not
An indispensable element of [the contractor's] cause of
result. The arbitration agreement mandates arbitration
action under § 4 for an arbitration order is the Hospital's
of claims for breach of the Dealer Agreement as well
refusal to arbitrate.... That refusal did not occur until less
as for claims “arising out of or relating to” the Dealer
than a day before the Hospital filed its state suit.” Id. at
Agreement. Because the tort claims all arise out of
21, 103 S.Ct. at 939. See also Municipal Energy Agency v.
the business relationship between the opposing parties,
Big Rivers Elec. Corp., 804 F.2d 338, 344 (5th Cir.1986).
it appears that they are arbitrable under the terms of
the agreement. The arbitration agreement also provides
In this case, Snap-on had no notice that the Masons would
that Barney Mason must arbitrate not only claims
repudiate their apparent duty to arbitrate until the state
against Snap-on, but also claims against any “employee,
court suit was filed, and therefore, there is no reason why
officer or director” of Snap-on. Thus Barney Mason's
Snap-on should be expected to have filed the within suit
claims against the Snap-on employees may be subject to
before that date. That the state of Texas may have some
arbitration, even though those defendants are not parties
interest in maintaining jurisdiction over this litigation has
to the agreement. Further, according to Snap-on, the
no bearing in a case such as this one, where the federal
individual co-defendants may be willing to participate in
policy favoring arbitration prevails “notwithstanding any
the arbitration proceeding.
state substantive or procedural policies to the contrary.”
Moses H. Cone, 460 U.S. at 24, 103 S.Ct. at 941.
However, even if some piecemeal litigation does result,
Moreover, we note that when the district court chose to
that sometimes is the inevitable result of a congressional
abstain, the state court had not substantially proceeded
policy strongly favoring arbitration. The Supreme Court
towards disposition of the case. In Moses H. Cone, Justice
in Moses H. Cone noted that although arbitration could
Brennan commented that “the federal suit was running

well ahead of the state suit at the very time that the District to request arbitration within six weeks of the Masons'
Court decided to refuse to adjudicate the case.” 460 U.S. written notice to Snap-on that Snap-on had violated the
at 22, 103 S.Ct. at 940. contract. The Masons assert that they provided written
notice to Snap-on on January 23, 1992, that Snap-on was
As to the fifth Moses H. Cone factor, whether federal law in breach of the contract. Although the district court did
controls the case, the Masons contend that because state not consider this argument, and we therefore have no
law governs the underlying dispute, their claims against factual record with regard to this matter, even if we assume
Snap-on should be heard in state court. However, in this arguendo that the Masons' factual assertion is correct,
federal case—concerning only whether the case should be their waiver claim lacks merit.
submitted to arbitration under § 4 of the FAA—federal
law provides the rule of decision on the merits. Id. at 24, “[F]ifth Circuit precedent places a ‘heavy burden’ on
103 S.Ct. at 941. The basic issue presented in this suit, a party claiming waiver of arbitration rights.” Storey
as in Moses H. Cone, is “the arbitrability of the dispute” v. Shearson–American Express, 928 F.2d 159, 163 (5th
between the opposing parties, and federal law governs that Cir.1991) (quoting Frye v. Paine, Webber, Jackson
issue whether it is raised in federal or state court. Id. at 24, & Curtis, Inc., 877 F.2d 396, 398 (5th Cir.1989)).
103 S.Ct. at 941. “Accordingly, we indulge a presumption against finding
waiver.” Walker v. J.C. Bradford & Co., 938 F.2d 575, 577
Despite the obvious applicability of Moses H. Cone (5th Cir.1991). Herein, the Masons' waiver contention is
to the facts of the instant case, the Masons present based upon the arbitration clause of the agreement which
several additional arguments with which they attempt in pertinent part provides: “Any request for arbitration
to distinguish this case from Moses H. Cone. In shall be filed in writing within six (6) months following
that context, they contend that the individual state the alleged breach; otherwise, the right to any remedy
defendants are indispensable parties to the within case shall be deemed forever waived and lost.” From Snap-
under Fed.R.Civ.P. 19 and that the presence of all of on's perspective, there was no possible breach of the dealer
them destroys diversity jurisdiction. 5 Without diversity agreement to arbitrate until the Masons sought to avoid
jurisdiction, the federal courts would have no subject arbitration and filed their suit in state court. Under the
agreement, a party who alleges a breach must request
matter jurisdiction over this case. 6 According *1267 to
arbitration within six months. The plain language of the
the Masons, the co-defendants are indispensable because
agreement, as well as common sense, reveals that the
“any resolution by arbitration does not adjudicate all
agreement does not require an arbitration request to be
issues of law and fact between the Masons and all potential
made upon notice of an alleged breach, only upon an
defendants.”
actual breach. By filing its request for arbitration within
one month of the Masons' state court filing, Snap-on
Under Rule 19(a)(1), joinder is required if “in the person's
absence complete relief cannot be accorded among those complied with the dealer agreement. 7 The fact that the
already parties.” This is essentially what the Masons are breach alleged by the Masons may have occurred more
contending. However, such a contention merely re-states than six months before Snap-on requested arbitration
the “piecemeal litigation” argument which the Supreme cannot under any commonsense interpretation of the
Court rejected in Moses H. Cone. In Moses H. Cone, arbitration clause bar Snap-on of the right to arbitrate
the existence of the state suit against the architect did since Snap-on had no way of knowing what the Masons
not make the architect “indispensable” to the federal would do until they did it.
court suit. While the Supreme Court recognized that
any suit against the architect would necessarily take Finally, the Masons argue that they were fraudulently
place in another forum if the architect did not consent induced to enter the dealership agreement and they
to arbitration, nonetheless, that result did not warrant proffer certain facts concerning such alleged inducement.
abstention. Id. at 19–21, 103 S.Ct. at 938–940. However, the merits of the underlying dispute are for the
arbitrator to consider, not for this Court or the district
In a further attempt to demonstrate “exceptional court. Under § 4 of the FAA, the federal district court
circumstances” warranting abstention, the Masons claim ascertains only whether the arbitration clause covers the
that Snap-on waived its right to arbitration by failing allegations at issue. “If the dispute is within the scope of

the arbitration clause, the court may not delve further into inducement of the contract generally.” Prima Paint, 388
U.S. at 404, 87 S.Ct. at 1806. As in Prima Paint and Mesa
the merits of the dispute.” *1268 Municipal Energy, 804
Operating, the defendants in this case have “not argued
F.2d at 342 (citing City of Meridian v. Algernon Blair, Inc.,
that the agreement to arbitrate is invalid separately from
721 F.2d 525, 528 (5th Cir.1983)).
the entire contract. Thus the arbitration provision remains
separate and enforceable....” Mesa Operating, 797 F.2d at
The fact that the Masons make general allegations
244.
of fraud does not alter this analysis. In Prima Paint
Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395,
In sum, the Masons have not demonstrated “exceptional
87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967), the Supreme
circumstances” which support abstention; rather, Moses
Court “held that, under section 4 of the FAA, the
H. Cone makes clear that in this case, as in most cases, a
‘making’ of an agreement to arbitrate was not called into
“liberal federal policy favoring arbitration” prevails, and
question by the allegation that the entire contract was
abstention is unwarranted. 460 U.S. at 24, 103 S.Ct. at
fraudulently induced. Therefore, the Court concluded, the
941. In the light of the foregoing discussion, we reverse the
fraudulent inducement question was properly resolved by
district court and remand with direction to that court to
an arbitrator rather than a court.” Mesa Operating Ltd.
enter an appropriate order compelling arbitration.
Partnership v. Louisiana Intrastate Gas Corp., 797 F.2d
238, 244 (5th Cir.1986) (citing Prima Paint, 388 U.S. at
REVERSED AND REMANDED.
403–04, 87 S.Ct. at 1805–1806); see also Municipal Energy,
804 F.2d at 342. Only if the allegation of fraud goes
specifically to the making of the agreement to arbitrate All Citations
must a district court address the merits of the fraud claim.
The district court does not address “claims of fraud in the 18 F.3d 1261
Footnotes
* District Judge of the District of Maryland, sitting by designation.
1 The Masons have not responded in the state court to Snap-on's motion to stay the state court proceedings. As of the
date of the district court's dismissal, the state court had taken no action with regard to either the complaint or the motion
to stay. Shortly before arguments were heard in this appeal, the state court granted Snap-on's motion for a stay pursuant
to § 3 of the FAA and sua sponte ordered Barney Mason to arbitrate.
9 U.S.C. § 3 provides:
under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied
that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on
application of one of the parties stay the trial of the action until such arbitration has been had in accordance with
the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.
2 Section 4 provides in pertinent part:
arbitration may petition any United States district court which, save for such agreement, would have jurisdiction under
Title 28, in a civil action ... of the subject matter of a suit arising out of the controversy between the parties, for an
order directing that such arbitration proceed in the manner provided for in such agreement.
9 U.S.C. § 4.
3 On April 8, 1993, at a Scheduling Conference, the district court directed Snap-on to file a formal motion to compel
arbitration by April 30, 1993, and to file an opposition to the motion to dismiss by May 14, 1993. Snap-on filed its motion
to compel arbitration on April 30, 1993, the same day the district court issued its Order granting the Masons' motion to
dismiss. In its Order, the district court expressly forbade the parties from filing anything further in this case in the district
court.
4 The district court's decision cannot be sustained on the basis that determining whether Snap-on is entitled to arbitrate
would require a “full-fledged trial,” since in FAA suits, the federal courts conduct “an expeditious and summary hearing,
with only restricted inquiry into factual issues” bearing on the making of the arbitration agreement. Moses, 460 U.S. at
22, 103 S.Ct. at 940.

Further, the district court's position that Snap-on may have been trying to get into federal court after failing timely to
remove is not valid. Snap-on could not remove the state court case to federal court in any event because the presence
of the co-defendants destroys diversity. 28 U.S.C. §§ 1332, 1441.
Finally, the district court's assumption that Snap-on could have brought its suit in state court may or may not be soundly
based. This is because the Supreme Court has expressed reticence on this issue, by noting that although states courts
must grant stays pursuant to § 3 of the FAA, “[i]t is less clear ... whether the same is true of an order to compel arbitration
under § 4 of the Act.” Moses H. Cone, 460 U.S. at 26, 103 S.Ct. at 942 (noting the “probable inadequacy of the state-
court proceeding to protect [the] rights” of the party seeking arbitration).
5 Under Rule 19, joinder is required if:
(1) in the person's absence complete relief cannot be accorded among those already parties, or (2) the person claims
an interest relating to the subject of the action and is so situated that the disposition of the action in the person's
absence may (i) as a practical matter impair or impede the person's ability to protect that interest or (ii) leave any
of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent
obligations by reason of the claimed interest.
“When joinder of someone described in Rule 19(a) is not feasible [because it will deprive the court of subject matter
jurisdiction], the court must examine ... Rule 19(b) to determine whether the action may go forward in his absence or
must be dismissed....” 7 Charles A. Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 1604,
at 41 (1986). Because in this case joinder is not required under 19(a), see infra, it is unnecessary for this court, in this
appeal, to go on to address the 19(b) standards.
6 Although the Arbitration Act creates a body of substantive federal law governing arbitration agreements, it does not
provide a basis for federal question jurisdiction. “[T]here must be diversity of citizenship or some other independent basis
for federal jurisdiction before [an order compelling arbitration] can issue.” Moses, 460 U.S. at 25 n. 32, 103 S.Ct. at 942
n. 32.
7 We acknowledge that questions of waiver go to the substantive merits of the petition to compel arbitration, i.e., whether
the claim is arbitrable. Because the district court abstained from addressing the merits, we could remand this case to
the district court to reconsider the petition in the light of this Court's guidance. However, where abstention is clearly
unwarranted, as it appears to be in this case, the appellate court should consider the merits itself and move this litigation
along. See Burns v. Watler, 931 F.2d 140, 147 (1st Cir.1991).

Southland Corp. v. Keating, 465 U.S. 1 (1984)
104 S.Ct. 852, 79 L.Ed.2d 1

Overruling Recognized by Cohen v. DirecTV, Inc., Cal.App. 2 Dist.,
September 18, 2006
104 S.Ct. 852 [1] Federal Courts
Supreme Court of the United States Validity of state constitution or statutes
Judgment of California Supreme Court
SOUTHLAND CORPORATION, et al., Appellants that claims asserted under state Franchise
v. Investment Law were not arbitrable and that
Richard D. KEATING et al. the state law did not contravene Federal
Arbitration Act was immediately appealable
No. 82–500. and the court would determine whether
| the federal act preempted the state law. 9
Argued Oct. 4, 1983. U.S.C.A. §§ 1 et seq., 2; U.S.C.A. Const. Art.
| 6, cl. 2; West's Ann.Cal.Corp.Code §§ 31000 et
Decided Jan. 23, 1984. seq., 31512; 28 U.S.C.A. § 1257(2).
Individual actions and class action by convenience store 46 Cases that cite this headnote
franchisees were brought against franchisor alleging,
among other things, fraud, breach of contract and
violation of disclosure requirements of the California [2] Alternative Dispute Resolution
Franchise Investment Law. The Superior Court, Alameda As ousting jurisdiction of or precluding
County, Robert H. Kroninger, J., ordered arbitration of resort to courts
all claims except those based on the statute. The California Contracts to arbitrate are not to be avoided by
Court of Appeal, 109 Cal.App.3d 784, 167 Cal.Rptr. 481, allowing one party to ignore the contract and
reversed as regards the statutory claim. The California resort to the courts. 9 U.S.C.A. § 2.
Supreme Court, 31 Cal.3d 584, 183 Cal.Rptr. 360, 645
P.2d 1192, held that statutory claims were not arbitrable,
and appeal was taken. The Supreme Court, Chief Justice
Burger, held that: (1) the court had jurisdiction to [3] Federal Courts
decide whether federal arbitration act preempted state law Validity of state constitution or statutes
voiding arbitration clause; (2) since it did not affirmatively Federal Courts
appear that request for class certification was drawn in Review of state courts
question on federal grounds the court lacked appellate
Where it was not contended in California
jurisdiction to resolve that question as a matter of federal
courts and those courts did not decide
law; and (3) provision of state law requiring judicial
whether state law imposition of class
consideration of claims brought under that law directly
actions procedures for arbitration under
conflicts with the Federal Arbitration Act and violates the
franchise agreement was preempted by
supremacy clause.
Federal Arbitration Act, the class action
arbitration issue was not directly appealable
Appeal dismissed in part and judgment reversed in part.
to the United States Supreme Court under
statute providing for appeal from state court
Justice Stevens, filed an opinion concurring in part and
when validity of challenged state statute is
dissenting in part.
sustained as not in conflict with federal law,
notwithstanding appealability of ruling that
Justice O'Connor filed a dissenting opinion, in which
provision of state franchise act precluding
Justice Rehnquist joined.
arbitration did not violate the federal act.
West's Ann.Cal.Corp.Code §§ 31000 et seq.,
31512; 9 U.S.C.A. § 2; 28 U.S.C.A. § 1257(2).

104 S.Ct. 852, 79 L.Ed.2d 1
limitation on the power of federal courts but is

272 Cases that cite this headnote a necessary qualification on a statute intended
to apply in state and federal courts. 9 U.S.C.A.
[4] Commerce § 2.
Arbitration
Provision of California Franchise Investment
Law requiring judicial consideration of claims
brought under the statute and precluding [8] Alternative Dispute Resolution
enforceability of contract to arbitrate such Mode and course of proceedings in
claims conflicts with United States arbitration general
as regards transactions involving commerce Although Federal Arbitration Act preempts
and violates the supremacy clause. West's state law that withdraws power to enforce
Ann.Cal.Corp.Code § 31512; 9 U.S.C.A. § 2; arbitration agreements that are enforceable
U.S.C.A. Const. Art. 6, cl. 2. under the Federal Act, provision of Federal
Act that the federal rules apply in proceedings
329 Cases that cite this headnote to arbitration is not applicable in state court
proceedings. 9 U.S.C.A. §§ 2, 4.
Arbitration favored; public policy [9] Alternative Dispute Resolution
Right to Enforcement and Defenses in
Commerce
General
Arbitration
A party may assert general contract defenses
In enacting provision of federal arbitration
such as fraud to avoid enforcement of an
act that an arbitration provision is valid and
arbitration agreement. 9 U.S.C.A. § 2.
irrevocable the Congress declared a national
policy favoring arbitration and withdrew 87 Cases that cite this headnote
power of the states to require a judicial forum
for resolution of claims which the contracting
parties agreed to resolve by arbitration. 9
U.S.C.A. § 2.
453 Cases that cite this headnote **853 *1 Syllabus *
Appellant Southland Corp. (hereafter appellant) is the

[6] Commerce owner and franchisor of 7-Eleven convenience stores.
Arbitration Appellees are 7-Eleven franchisees. Each franchise
Federal Arbitration Act rests on the authority agreement between appellant and appellees contains
of Congress to enact substantive rules under a clause requiring arbitration of any controversy or
the commerce clause. 9 U.S.C.A. § 1 et seq.; claim arising out of or relating to the agreement or
U.S.C.A. Const. Art. 1, § 8, cl. 3. breach thereof. Several of the appellees filed individual
actions against appellant in California Superior Court,
78 Cases that cite this headnote alleging fraud, misrepresentation, breach of contract,
breach of fiduciary duty, and violation of the disclosure
requirements of the California Franchise Investment Law.
[7] Commerce
These actions were consolidated with a subsequent class
Arbitration
action filed by another appellee making substantially the
The “involving commerce” requirement of
same claims. Appellant moved to compel arbitration of
Federal Arbitration Act is not an inexplicable
the claims pursuant to the contract. The Superior Court

104 S.Ct. 852, 79 L.Ed.2d 1
granted the motion as to all claims except those based (a) In enacting § 2 of the federal Act, Congress declared
on the Franchise Investment Law, and did not pass on a national policy favoring arbitration and withdrew the
appellees' request for class certification. The California power of the states to require a judicial forum for the
Court of Appeal reversed the trial court's refusal to resolution of claims that the contracting parties agreed
compel arbitration of the claims under the Franchise to resolve by arbitration. That Act, resting on Congress'
Investment Law, construing the arbitration clause to authority under the Commerce Clause, creates a body of
require arbitration of such claims and holding that the federal substantive law that is applicable in both state
Franchise Investment Law did not invalidate arbitration and federal courts. Moses H. Cone Memorial Hospital v.
agreements and that if it rendered such agreements Mercury Construction Corp., 460 U.S. 1, 103 S.Ct. 927,
involving commerce unenforceable, it would conflict with 74 L.Ed.2d 765 (1983). To confine the Act's scope to
§ 2 of the United States Arbitration Act, which provides arbitrations sought to be enforced in federal courts would
that “a contract evidencing a transaction involving frustrate what Congress intended to be a broad enactment.
commerce to settle by arbitration a controversy ... Pp. 858 – 860.
arising out of such contract or transaction ... shall be
valid, irrevocable, and enforceable, *2 save upon such (b) If Congress, in enacting the Arbitration Act, had
grounds as exist at law or in equity for the revocation intended to create a procedural rule applicable only in
of any contract.” The court also directed the trial federal courts it would not have limited the Act to
court to conduct class certification proceedings. The contracts “involving commerce.” Section 2's “involving
California Supreme Court reversed the **854 ruling commerce” requirement is not to be viewed as an
that claims asserted under the Franchise Investment Law inexplicable limitation on the power of the federal courts
are arbitrable, interpreting § 31512 of that Law—which but as a necessary qualification on a statute intended to
renders void any provision purporting to bind a franchisee apply in state as well as federal courts. P. 860.
to waive compliance with any provision of that Law—to
require judicial consideration of claims brought under that (c) The California Supreme Court's interpretation of §
statute and holding that the statute did not contravene 31512 would encourage and reward forum shopping. This
the federal Act. The court remanded the case to the Court will not attribute to *3 Congress the intent to
trial court for consideration of appellees' request for class create a right to enforce an arbitration contract and yet
certification. make that right dependent on the particular forum in
which it is asserted. Since the overwhelming proportion
Held: of civil litigation in this country is in the state courts,
Congress could not have intended to limit the Arbitration
1. This Court has jurisdiction under 28 U.S.C. § 1257(2) Act to disputes subject only to federal -court jurisdiction.
to decide whether the United States Arbitration Act pre- In creating a substantive rule applicable in state as well
empts § 31512 of the California statute. Cox Broadcasting as federal courts, Congress intended to foreclose state
Corp. v. Cohn, 420 U.S. 469, 95 S.Ct. 1029, 43 L.Ed.2d 328 legislative attempts to undercut the enforceability of
(1975). To delay review of a state judicial decision denying arbitration agreements. Pp. 860 – 861.
enforcement of an arbitration contract until the state
litigation has run its course would defeat the core purpose Appeal dismissed in part; 31 Cal.3d 584, 183 Cal.Rptr.
of the contract. On the other hand, since it does not 360, 645 P.2d 1192, reversed in part and remanded.
affirmatively appear that the request for class certification
was “drawn in question” on federal grounds, this Court is
without jurisdiction to resolve this question as a matter of Attorneys and Law Firms
federal law under § 1257(2). Pp. 856 – 858.
Mark J. Spooner argued the case for appellants. With him
on the briefs were Peter K. Bleakley and Martin H. Kresse.
2. Section 31512 of the California statute directly conflicts
with § 2 of the United States Arbitration Act and hence John F. Wells argued the cause for appellees. With him on
violates the Supremacy Clause. Pp. 858 – 861. the brief were Lise A. Pearlman and Fonda Karelitz.*

104 S.Ct. 852, 79 L.Ed.2d 1
* A brief of amici curiae was filed by Simon H. Trevas for Appellees are 7-Eleven franchisees. Between September
the Securities Division of the State of Washington et al. 1975 and January 1977, several appellees filed individual
actions against Southland in California Superior
Mark J. Spooner argued the case for appellants. With him
Court alleging, among other things, fraud, oral
on the briefs were Peter K. Bleakley and Martin H. Kresse.
misrepresentation, breach of contract, breach of fiduciary
John F. Wells argued the cause for appellees. With him on duty, and violation of the disclosure requirements of the
the brief were Lise A. Pearlman and Fonda Karelitz.* California Franchise Investment Law, Cal.Corp.Code §
31000 et seq. (West 1977). Southland's answer, in all but
* A brief of amici curiae was filed by Simon H. Trevas for one of the individual actions, included the affirmative
the Securities Division of the State of Washington et al. defense of failure to arbitrate.
Opinion In May 1977, appellee Keating filed a class action against

Southland on behalf of a class that assertedly includes
Chief Justice BURGER delivered the opinion of the
approximately 800 California franchisees. Keating's
Court.
principal claims were substantially the same as those
We noted probable jurisdiction to consider (a) whether the asserted by the other franchisees. After the various actions
California Franchise Investment Law, which invalidates were consolidated, Southland petitioned to compel
certain arbitration agreements covered by the Federal arbitration of the claims in all cases, and appellees moved
Arbitration Act, violates the Supremacy Clause and (b) for class certification.
whether arbitration under the Federal Act is impaired
when a class action **855 structure is imposed on the The Superior Court granted Southland's motion to
process by the state courts. compel arbitration of all claims except those claims based
on the Franchise Investment Law. The court did not pass
on appellees' request for class certification. Southland
appealed from the order insofar as it excluded from
I
arbitration the claims based on the California statute.
Appellant The Southland Corporation is the owner and Appellees filed a petition for a writ of mandamus or
franchisor of 7-Eleven convenience stores. Southland's prohibition in the California *5 Court of Appeal arguing
standard franchise agreement provides each franchisee that the arbitration should proceed as a class action.
with a license to use certain registered trademarks, a lease
or sublease of a convenience store owned or leased by The California Court of Appeal reversed the trial
Southland, inventory *4 financing, and assistance in court's refusal to compel arbitration of appellees' claims
advertising and merchandising. The franchisees operate under the Franchise Investment Law. 109 Cal.App.3d
the stores, supply bookkeeping data, and pay Southland 784, 167 Cal.Rptr. 481 (1980). That court interpreted
a fixed percentage of gross profits. The franchise the arbitration clause to require arbitration of all
agreement also contains the following provision requiring claims asserted under the Franchise Investment Law,
arbitration: and construed the Franchise Investment Law not to
invalidate such agreements to arbitrate. 1 Alternatively,
“Any controversy or claim arising the court concluded that if the Franchise Investment
out of or relating to this Agreement Law rendered arbitration agreements involving commerce
or the breach thereof shall be unenforceable, it would conflict with § 2 of the Federal
settled by arbitration in accordance Arbitration Act, 9 U.S.C. § 2 (1976), and therefore be
with the Rules of the American invalid under the Supremacy Clause. 167 Cal.Rptr. at
Arbitration Association ... and 493–494. The Court of Appeal also determined that
judgment upon any award rendered there was no “insurmountable obstacle” to conducting
by the arbitrator may be entered an arbitration on a classwide basis, and issued a writ
in any court having jurisdiction of mandate directing the trial court to conduct class
thereof.” certification proceedings. Id., at 492.

104 S.Ct. 852, 79 L.Ed.2d 1
[1] [2] The judgment of the California Supreme

The California Supreme Court, by a vote of 4–2, reversed Court with respect to this claim is reviewable under
the ruling that claims asserted under the Franchise Cox Broadcasting, supra. Without immediate review of
Investment Law are arbitrable. 31 Cal.3d 584, 183 the California holding by this Court there may be no
Cal.Rptr. 360, 645 P.2d 1192 (1982). The California opportunity to pass on the federal issue and as a result
Supreme Court interpreted the Franchise Investment Law “there would remain in effect the unreviewed decision
to require judicial consideration of claims brought under of the State Supreme Court” holding that the California
**856 that statute and concluded that the California statute does not conflict with the Federal Arbitration Act.
statute did not contravene the federal Act. Id., at 604, 183 Id., at 485, 95 S.Ct., at 1041. On the other hand, reversal
Cal.Rptr., at 371–372, 645 P.2d, at 1203–1204. The court *7 of a state court judgment in this setting will terminate
also remanded the case to the trial court for consideration litigation of the merits of this dispute.
of appellees' request for classwide arbitration.
Finally, the failure to accord immediate review of the
*6 We postponed consideration of the question of decision of the California Supreme Court might “seriously
jurisdiction pending argument on the merits. 459 U.S. erode federal policy.” Plainly the effect of the judgment
1101, 103 S.Ct. 721, 74 L.Ed.2d 948 (1983). We reverse in of the California court is to nullify a valid contract made
part and dismiss in part. by private parties under which they agreed to submit all
contract disputes to final, binding arbitration. The federal
Act permits “parties to an arbitrable dispute [to move]
out of court and into arbitration as quickly and easily as
II
possible.” Moses H. Cone Memorial Hospital v. Mercury
Construction Corp., ––– U.S. ––––, ––––, 103 S.Ct. 927,
A 940, 74 L.Ed.2d 765 (1983).
Jurisdiction of this Court is asserted under 28 U.S.C. Contracts to arbitrate are not to be avoided by allowing
§ 1257(2) which provides for an appeal from a final one party to ignore the contract and resort to the courts.
judgment of the highest court of a state when the validity Such a course could lead to prolonged litigation, one of
of a challenged state statute is sustained as not in the very risks the parties, by contracting for arbitration,
conflict with federal law. Here Southland challenged the sought to eliminate. In The Bremen v. Zapata Off-Shore
California Franchise Investment Law as it was applied to Co., 407 U.S. 1, 12, 92 S.Ct. 1907, 1914, 32 L.Ed.2d
invalidate a contract for arbitration made pursuant to the 513 (1972), we noted that the contract fixing a particular
Federal Arbitration Act. Appellee argues that the action forum for resolution of all disputes
of the California Supreme Court with respect to this claim
is not a “final judgment or decree” within the meaning of “was made in an arm's-length
§ 1257(2). negotiation by experienced and
sophisticated businessmen, and
Under Cox Broadcasting Corp. v. Cohn, 420 U.S. 469, 482– absent some compelling and
483, 95 S.Ct. 1029, 1039–1040, 43 L.Ed.2d 328 (1975), countervailing reason it should be
judgments of state courts that finally decide a federal honored by the parties and enforced
issue are immediately appealable when “the party seeking by the courts.”
review here might prevail [in the state court] on the merits
on nonfederal grounds, thus rendering unnecessary review The Zapata court also noted that
of the federal issue by this Court, and where reversal of
“the forum clause was a vital part of the agreement, and
the state court on the federal issue would be preclusive of
it would be unrealistic to think that the parties did not
any further litigation on the relevant cause of action....”
conduct their negotiations, including fixing the **857
In these circumstances, we have resolved the federal issue
monetary terms, with the consequences of the forum
“if a refusal immediately to review the state-court decision
clause figuring prominently in their calculations.” Id.,
might seriously erode federal policy.” Id., at 483, 95 S.Ct.,
at 14, 92 S.Ct., at 1915.
at 1040.

104 S.Ct. 852, 79 L.Ed.2d 1
For us to delay review of a state judicial decision denying jurisdiction to resolve this question as a matter of federal
enforcement of the contract to arbitrate until the state law under 28 U.S.C. § 1257(2). See Bailey v. Anderson, 326
court litigation has run its course would defeat the core U.S. 203, 207, 66 S.Ct. 66, 68, 90 L.Ed. 3 (1945).
purpose of *8 a contract to arbitrate. We hold that
the Court has jurisdiction to decide whether the Federal
Arbitration Act preempts § 31512 of the California
*10 III
Franchise Investment Law.
[4] The California Franchise Investment Law provides:
“Any condition, stipulation or provision purporting

B
to bind any person acquiring any franchise to waive
[3] That part of the appeal relating to the propriety compliance with any provision of this law or any rule or
of superimposing class action procedures on a contract order hereunder is void.” Cal.Corp.Code § 31512 (West
arbitration raises other questions. Southland did not 1977).
contend in the California courts that, and the State courts
The California Supreme Court interpreted this statute to
did not decide whether, State law imposition class action
require judicial consideration of claims brought under
procedures was preempted by federal law. When the
the State statute and accordingly refused to enforce the
California Court of Appeal directed Southland to address
parties' contract to arbitrate such claims. So interpreted
the question whether state or federal law controlled the
the California Franchise Investment Law directly conflicts
class action issue, Southland responded that State law did
with § 2 of the Federal Arbitration Act and violates the
not permit arbitrations to proceed as class actions, that
Supremacy Clause.
the Federal Rules of Civil Procedure were inapplicable,
and that requiring arbitrations to proceed as class actions
[5] In enacting § 2 of the federal Act, Congress declared
“could well violate the [federal] constitutional guaranty
a national policy favoring arbitration and withdrew the
of procedural due process.” 2 Southland did not claim in power of the states to require a judicial forum for the
the Court of Appeal that if State law required class action resolution of claims which the contracting parties agreed
procedures, it would conflict with the federal Act and thus to resolve by arbitration. The Federal Arbitration Act
violate the Supremacy Clause. provides:
In the California Supreme Court, Southland argued that “A written provision in any maritime transaction or a
California law applied but that neither the contract to contract evidencing a transaction involving commerce
arbitrate nor State law authorized class action procedures to settle by arbitration a controversy thereafter arising
to govern arbitrations. Southland also contended that out of such contract or transaction, or the refusal
the Federal Rules were inapplicable in State proceedings. to perform the whole or any part thereof, or an
Southland pointed out that although California law agreement in writing to submit to arbitration an existing
provided a basis for class action procedures, the Judicial controversy arising out of such a contract, transaction,
Council of California acknowledged “the incompatibility or refusal, shall be valid, irrevocable, and enforceable,
of class actions and arbitration.” Petition for Hearing save upon such grounds as exist at law or in equity for
at 23. It does not appear that Southland opposed class the revocation of any contract.” 9 U.S.C. § 2 (1976).
procedures on federal grounds in the *9 California
Congress has thus mandated the enforcement of
Supreme Court. 3 Nor does the record show that the
arbitration agreements.
California Supreme Court passed upon the question
whether superimposing class action procedures on a
We discern only two limitations on the enforceability
contract arbitration was contrary to the federal Act. 4 of arbitration provisions governed by the Federal
Arbitration *11 Act: they must be part of a written
**858 Since it does not affirmatively appear that the maritime contract or a contract “evidencing a transaction
validity of the State statute was “drawn in question”
involving commerce” 5 and such clauses may be revoked
on federal grounds by Southland, this Court is without
upon “grounds as exist at law or in equity for the

104 S.Ct. 852, 79 L.Ed.2d 1
revocation of any contract.” We see nothing in the Act applicable in state and federal court. Moses H. Cone
indicating that the broad principle of enforceability is began with a petition for an order to compel arbitration.
subject to any additional limitations under State law. The District Court stayed the action pending resolution
of a concurrent state court suit. In holding that the
[6] The Federal Arbitration Act rests on the authority of District Court had abused its discretion, we found no
Congress to enact substantive rules under the Commerce showing of exceptional circumstances justifying the stay
Clause. In Prima Paint Corp. v. Flood & Conklin and recognized “the presence of federal-law issues” under
Manufacturing Corp., 388 U.S. 395, 87 S.Ct. 1801, 18 the federal Act as “a major consideration weighing against
L.Ed.2d 1270 (1967), the Court examined the legislative surrender [of federal jurisdiction].” Id., at ––––, 103 S.Ct.,
history of the Act and concluded that the statute “is based at 942. We thus read the underlying issue of arbitrability
upon ... the incontestable federal foundations of ‘control to be a question of substantive federal law: “Federal law
over interstate commerce and over admiralty.’ ” Id., at in the terms of the Arbitration Act governs that issue in
405, 87 S.Ct., at 1806 (quoting H.R.Rep. No. 96, 68th either state or federal court.” Id., at ––––, 103 S.Ct., at 941.
Cong., 1st Sess. 1 (1924)). The contract in Prima Paint,
as here, contained an arbitration clause. One party in that Although the legislative history is not without
case alleged that the other had committed fraud in the ambiguities, there are strong indications that Congress
inducement of the contract, although not of arbitration had in mind something more than making arbitration
clause in particular, and sought to have the claim of agreements enforceable only in the federal courts. The
fraud adjudicated in federal court. The Court held that, House Report plainly suggests the more comprehensive
notwithstanding a contrary state rule, consideration of a objectives:
claim of fraud in the inducement of a contract “is for the
arbitrators and not for the courts,” id., at 400, 87 S.Ct., at “The purpose of this bill is to make valid and
1804. The Court relied for this holding on Congress' broad enforcible agreements for arbitration contained in
power to fashion substantive rules under the Commerce contracts involving *13 interstate commerce or within
the jurisdiction or admiralty, or which may be the
Clause. 6
subject of litigation in the Federal courts.” H.R.Rep.
No. 96, 68th Cong., 1st Sess. 1 (1924) (Emphasis added.)
**859 At least since 1824 Congress' authority under
the Commerce Clause has been held plenary. Gibbons
This broader purpose can also be inferred from the reality
v. Ogden, 22 U.S. 1, 196, 9 Wheat. 1, 196, 6 L.Ed. 23
that Congress would be less likely to address a problem
(1824). In the words of Chief Justice Marshall, *12 the
whose impact was confined to federal courts than a
authority of Congress is “the power to regulate; that is, to
problem of large significance in the field of commerce. The
prescribe the rule by which commerce is to be governed.”
Arbitration Act sought to “overcome the rule of equity,
Ibid. The statements of the Court in Prima Paint that
that equity will not specifically enforce any arbitration
the Arbitration Act was an exercise of the Commerce
agreement.” Hearing on S. 4214 Before a Subcomm. of the
Clause power clearly implied that the substantive rules of
Senate Comm. on the Judiciary, 67th Cong., 4th Sess. 6
the Act were to apply in state as well as federal courts.
(1923) ( “Senate Hearing”) (remarks of Sen. Walsh). The
As Justice Black observed in his dissent, when Congress
House Report accompanying the bill stated:
exercises its authority to enact substantive federal law
under the Commerce Clause, it normally creates rules “[t]he need for the law arises from ... the jealousy of
that are enforceable in state as well as federal courts. the English courts for their own jurisdiction.... This
Prima Paint, 388 U.S., at 420, 87 S.Ct., at 1814 (Black, J., jealousy survived for so lon[g] a period that the principle
dissenting). became firmly embedded in the English common law
and was adopted with it by the American courts. The
In Moses H. Cone Memorial Hospital v. Mercury courts have felt that the precedent was too strongly
Construction Corp., ––– U.S., at ––––, –––– n. 32, 103 fixed to be overturned without legislative enactment....”
S.Ct., at 942 n. 32, we reaffirmed our view that the H.R.Rep. No. 96, supra, 1–2 (1924).
Arbitration Act “creates a body of federal substantive
law” and expressly stated what was implicit in Prima Surely this makes clear that the House Report
Paint, i.e., the substantive law the Act created was contemplated a broad reach of the Act, unencumbered

104 S.Ct. 852, 79 L.Ed.2d 1
by state law constraints. As was stated in Metro courts, but as a necessary *15 qualification on a statute
Industrial Painting Corp. v. Terminal Construction Corp., intended to apply in state and federal courts.
287 F.2d 382, 387 (CA2 1961) (Lumbard, Chief Judge,
concurring), “the purpose of the act was to assure those Under the interpretation of the Arbitration Act urged by
who desired arbitration and whose contracts related to Justice O'CONNOR, claims brought under the California
interstate commerce that their expectations would not Franchise Investment Law are not arbitrable when they
be undermined by federal judges, or ... by state courts are raised in state court. Yet it is clear beyond question
or legislatures.” Congress also showed its awareness that if this suit had been brought as a diversity action in
of the widespread unwillingness of **860 state courts a federal district court, the arbitration clause would have
to enforce arbitration agreements, e.g., Senate Hearing, been enforceable. 7 Prima Paint, supra. The interpretation
supra, at 8, and that *14 such courts were bound by state given to the Arbitration Act by the California Supreme
laws inadequately providing for Court would therefore encourage and reward forum
shopping. We are unwilling to attribute to Congress
“technical arbitration by which, if you agree to arbitrate
the intent, in drawing on the comprehensive powers of
under the method provided by the statute, you have an
the Commerce Clause, to create a right to enforce an
arbitration by statute[;] but [the statutes] ha[d] nothing
arbitration contract and yet make the right dependent
to do with validating the contract to arbitrate.” Ibid.
for its enforcement on the particular forum in which it is
The problems Congress faced were therefore twofold: asserted. And since the overwhelming proportion of all
the old common law hostility toward arbitration, and civil litigation in this country is in the state courts, 8 we
the failure of state arbitration statutes to mandate cannot believe Congress intended to limit the Arbitration
enforcement of arbitration agreements. To confine the Act to disputes subject only to federal **861 court
scope of the Act to arbitrations sought to be enforced in jurisdiction. 9 Such an interpretation would frustrate
federal courts would frustrate what we believe Congress Congressional *16 intent to place “[a]n arbitration
intended to be a broad enactment appropriate in scope to agreement ... upon the same footing as other contracts,
meet the large problems Congress was addressing. where it belongs.” H.R.Rep. No. 96, supra, 1.
[7] Justice O'CONNOR argues that Congress viewed [8] [9] In creating a substantive rule applicable in state
the Arbitration Act “as a procedural statute, applicable
as well as federal courts, 10 Congress intended to foreclose
only in federal courts.” Post, at 865. If it is correct that
state legislative attempts to undercut the enforceability
Congress sought only to create a procedural remedy in the
federal courts, there can be no explanation for the express of arbitration agreements. 11 We hold that § 31512 of
limitation in the Arbitration Act to contracts “involving the California Franchise Investment Law violates the
commerce.” 9 U.S.C. § 2. For example, when Congress has Supremacy Clause.
authorized this Court to prescribe the rules of procedure
in the federal Courts of Appeals, District Courts, and
bankruptcy courts, it has not limited the power of the *17 IV
Court to prescribe rules applicable only to causes of action
involving commerce. See, e.g., 28 U.S.C. §§ 2072, 2075, The judgment of the California Supreme Court denying
2076 (1976). We would expect that if Congress, in enacting enforcement of the arbitration agreement is reversed;
the Arbitration Act, was creating what it thought to be a as to the question whether the Federal Arbitration Act
procedural rule applicable only in federal courts, it would precludes a class action arbitration and any other issues
not so limit the Act to transactions involving commerce. not raised in the California courts, no decision by this
On the other hand, Congress would need to call on the Court would be appropriate at this time. As to the latter
Commerce Clause if it intended the Act to apply in state issues, the case is remanded for further proceedings not
courts. Yet at the same time, its reach would be limited to inconsistent with this opinion.
transactions involving interstate commerce. We therefore
view the “involving commerce” requirement in § 2, not It is so ordered.
as an inexplicable limitation on the power of the federal

104 S.Ct. 852, 79 L.Ed.2d 1
The limited objective of the Federal Arbitration Act was

to abrogate the general common law rule against specific
Justice STEVENS, concurring in part and dissenting in
enforcement of arbitration agreements, S.Rep. No. 536,
part.
68th Cong., 1st Sess., 2–3 (1924), and a state statute which
The Court holds that an arbitration clause that is
merely codified the general common law rule—either
enforceable in an action in a federal court is equally
directly by employing the prior doctrine of revocability
enforceable if the action is brought in a state court. I agree
or indirectly by declaring all such agreements void—
with that conclusion. Although Justice O'CONNOR'S
would be preempted by the Act. However, beyond this
review of the legislative history of the Federal Arbitration
conclusion, which seems compelled by the language of § 2
Act demonstrates that the 1925 Congress that enacted
and case law concerning the Act, it is by no means clear
**862 the statute viewed the statute as essentially
that Congress intended entirely to displace State authority
procedural in nature, I am persuaded that the intervening
in this field. Indeed, while it is an understatement to say
developments in the law compel the conclusion that the
that “the legislative history of the ... Act ... reveals little
Court has reached. I am nevertheless troubled by one
awareness on the part of Congress that *19 state law
aspect of the case that seems to trouble none of my
might be affected,” it must surely be true that given the
colleagues.
lack of a “clear mandate from Congress as to the extent to
which state statutes and decisions are to be superseded, we
For me it is not “clear beyond question that if this
must be cautious in construing the act lest we excessively
suit had been brought as a diversity action in a Federal
encroach on the powers which Congressional policy, if
District Court, the arbitration clause would have been
not the Constitution, would reserve to the states.” Metro
enforceable.” Ante, at 860. The general rule prescribed by
Industrial Painting Corp. v. Terminal Construction Co., 287
§ 2 of the Federal *18 Arbitration Act is that arbitration
F.2d 382, 386 (CA2 1961) (Lumbard, C.J., concurring).
clauses in contracts involving interstate transactions are
enforceable as a matter of federal law. That general
The textual basis in the Act for avoiding such
rule, however, is subject to an exception based on “such
encroachment is the provision of § 2 which provides that
grounds as exist at law or in equity for the revocation of
arbitration agreements are subject to revocation on such
any contract.” I believe that exception leaves room for the
grounds as exist at law or in equity for the revocation
implementation of certain substantive state policies that
of any contract. The Act, however, does not define what
would be undermined by enforcing certain categories of
grounds for revocation may be permissible, and hence
arbitration clauses.
it would appear that the judiciary must fashion the
limitations as a matter of federal common law. Cf. Textile
The exercise of State authority in a field traditionally
Workers v. Lincoln Mills, 353 U.S. 448, 77 S.Ct. 912, 1
occupied by State law will not be deemed preempted by
L.Ed.2d 972 (1957). In doing so, we must first recognize
a federal statute unless that was the clear and manifest
that as the “ ‘saving clause’ in § 2 indicates, the purpose
purpose of Congress. Ray v. Atlantic Richfield Co., 435
of Congress in 1925 was to make arbitration agreements
U.S. 151, 157, 98 S.Ct. 988, 994, 55 L.Ed.2d 179 (1978);
as enforceable as other contracts, but not more so.” Prima
see generally, Hamilton, The Federalist, No. 32, 300
Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395,
(Van Doren Ed.1945). Moreover, even where a federal
404 n. 12, 87 S.Ct. 1801, 1806 n. 12, 18 L.Ed.2d 1270
statute does displace State authority, it “rarely occupies
(1967); see also, H.R.Rep. No. 96, 68th Cong., 1st Sess.
a legal field completely, totally excluding all participation
1 (1924). The existence of a federal statute enunciating
by the legal systems of the states.... Federal legislation,
a substantive **863 federal policy does not necessarily
on the whole, has been conceived and drafted on an
require the inexorable application of a uniform federal
ad hoc basis to accomplish limited objectives. It builds
rule of decision notwithstanding the differing conditions
upon legal relationships established by the states, altering
which may exist in the several States and regardless of
or supplanting them only so far as necessary for the
the decisions of the States to exert police powers as they
special purpose.” P. Bator, P. Mishkin, D. Shapiro, & H.
deem best for the welfare of their citizens. Cf. Wallis v.
Wechsler, Hart and Wechsler's The Federal Courts and
Pan American Petroleum Corp., 384 U.S. 63, 69, 86 S.Ct.
the Federal System 470–471 (2d ed. 1973).
1301, 1304, 16 L.Ed.2d 369 (1966); see generally, Wilson
v. Omaha Indian Tribe, 442 U.S. 653, 671–672, 99 S.Ct.

104 S.Ct. 852, 79 L.Ed.2d 1
2529, 2539–2540, 61 L.Ed.2d 153 (1979); United States that all such agreements are valid *21 irrespective of
v. Kimbell Foods, Inc., 440 U.S. 715, 99 S.Ct. 1448, 59 their purpose or effect. See generally, Paramount Famous
L.Ed.2d 711 (1979); Clearfield Trust Co. v. United States, Lasky Corp. v. United States, 282 U.S. 30, 51 S.Ct. 42, 75
318 U.S. 363, 63 S.Ct. 573, 87 L.Ed. 838 (1943). Indeed, L.Ed. 145 (1930) (holding arbitration agreement void as a
the lower courts generally look to State law regarding restraint of trade).
questions of formation of the arbitration agreement under
§ 2, see, e.g., Comprehensive Merchandising Cat. *20 Inc. We should not refuse to exercise independent judgment
v. Madison Sales Corp., 521 F.2d 1210 (CA7 1975), which concerning the conditions under which an arbitration
is entirely appropriate so long as the state rule does not agreement, generally enforceable under the Act, can be
conflict with the policy of § 2. held invalid as contrary to public policy simply because
the source of the substantive law to which the arbitration
A contract which is deemed void is surely revocable agreement attaches is a State rather than the Federal
at law or in equity, and the California legislature has Government. I find no evidence that Congress intended
declared all conditions purporting to waive compliance such a double standard to apply, and I would not lightly
with the protections of the Franchise Disclosure Act, impute such an intent to the 1925 Congress which enacted
including but not limited to arbitration provisions, void the Arbitration Act.
as a matter of public policy. Given the importance to the
State of franchise relationships, the relative disparity in A state policy excluding wage claims from arbitration,
the bargaining positions between the franchisor and the cf. Merrill Lynch, Pierce, Fenner & Smith v. Ware, 414
franchisee, and the remedial purposes of the California U.S. 117, 94 S.Ct. 383, 38 L.Ed.2d 348 (1973), or a state
Act, I believe this declaration of State policy is entitled to policy of providing special protection for franchisees, such
respect. as that expressed in California's Franchise Investment
Law, **864 can be recognized without impairing the
Congress itself struck a similar balance in § 14 of the basic purposes of the federal statute. Like the majority of
Securities Act of 1933, 15 U.S.C. § 77n, and did not the California Supreme Court, I am not persuaded that
find it necessary to amend the Federal Arbitration Act. Congress intended the pre-emptive effect of this statute
Rather, this Court held that the Securities Act provision to be “so unyielding as to require enforcement of an
invalidating arbitration agreements in certain contexts agreement to arbitrate a dispute over the application of a
could be reconciled with the general policy favoring regulatory statute which a state legislature, in conformity
enforcement of arbitration agreements. Wilko v. Swan, with analogous federal policy, has decided should be left
346 U.S. 427, 74 S.Ct. 182, 98 L.Ed. 168 (1953). Repeals to judicial enforcement.” App. to Juris. Statement 18a.
by implication are of course not favored, and we did
not suggest that Congress had intended to repeal or Thus, although I agree with most of the Court's
modify the substantive scope of the Arbitration Act reasoning and specifically with its jurisdictional holdings,
in passing the Securities Act. Instead, we exercised I respectfully dissent from its conclusion concerning the
judgment, scrutinizing the policies of the Arbitration enforceability of the arbitration agreement. On that issue,
Act and their applicability in the special context of the I would affirm the judgment of the California Supreme
remedial legislation at issue, and found the Arbitration Court.
Act inapplicable. We have exercised such judgment in
other cases concerning the scope of the Arbitration Act,
and have focused not on sterile generalization, but rather
Justice O'CONNOR with whom Justice REHNQUIST
on the substance of the transaction at issue, the nature
joins, dissenting.
of the relationship between the parties to the agreement,
Section 2 of the Federal Arbitration Act (FAA), 9 U.S.C.
and the purpose of the regulatory scheme. See, e.g., Scherk
§ 2, provides that a written arbitration agreement “shall be
v. Alberto-Culver Co., 417 U.S. 506, 94 S.Ct. 2449, 41
valid, irrevocable, *22 and enforceable, save upon such
L.Ed.2d 270 (1974), rev'g, 484 F.2d 611 (CA7 1973); see
grounds as exist at law or in equity for the revocation of
also, id., 484 F.2d, at 615–620 (Stevens, Circuit Judge,
dissenting). Surely the general language of the Arbitration any contract.” 1 § 2 does not, on its face, identify which
Act that arbitration agreements are valid does not mean judicial forums are bound by its requirements or what

104 S.Ct. 852, 79 L.Ed.2d 1
procedures govern its enforcement. The FAA deals with to arbitrate a contract dispute is outcome-determinative
these matters in §§ 3 and 4. § 3 provides: —i.e. “substantive”—and therefore a matter normally
governed by state law in federal diversity cases.
“If any suit or proceeding be brought in any of the **865 Bernhardt gave rise to concern that the FAA
courts of the United States upon any issue referable to could thereafter constitutionally be applied only in federal
arbitration ... the court ... shall on application of one court cases arising under federal law, not in diversity
of the parties stay the trial of the action until such
cases. 4 In Prima Paint v. Flood & Conklin, 388 U.S.
arbitration has been had in accordance with the terms
395, 404–405, 87 S.Ct. 1801, 1806–1807, 18 L.Ed.2d 1270
of the agreement....” 2 (1967), we addressed that concern, and held that the
§ 4 specifies that a party aggrieved by another's refusal to FAA may constitutionally be applied to proceedings in a
arbitrate
federal diversity court. 5 The FAA covers only contracts
“may petition any United States district court which, involving interstate commerce or maritime affairs, and
save for such agreement, would have jurisdiction under Congress “plainly has the power to legislate” in that area.
Title 28, in a civil action or in admiralty of the 388 U.S., at 405, 87 S.Ct., at 1807.
subject matter ... for an order directing that such
arbitration proceed in the manner provided for in such *24 Nevertheless, the Prima Paint decision “carefully
avoided any explicit endorsement of the view that the
agreement....” 3
Arbitration Act embodied substantive policies that were
to be applied to all contracts within its scope, whether
Today, the Court takes the facial silence of § 2 as a
sued on in state or federal courts.” P. Bator, P. Mishkin,
license to declare that state as well as federal courts
D. Shapiro, & H. Wechsler, Hart and Wechsler's The
must apply § 2. In addition, though this is not spelled
Federal Courts and the Federal System 731–732 (2d ed.
out in the opinion, the Court holds that in enforcing
this newly-discovered federal right state courts must 1973). 6 Today's case is the first in which this Court has
follow procedures specified in § 3. The Court's decision had occasion to determine whether the FAA applies to
is impelled by an understandable desire to encourage the state court proceedings. One statement on the subject did
use of arbitration, but it utterly fails to recognize *23 the appear in Moses H. Cone Memorial Hospital v. Mercury
clear congressional intent underlying the FAA. Congress Construction Corp., 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d
intended to require federal, not state, courts to respect 765 (1983), but that case involved a federal, not a state,
arbitration agreements. court proceeding; its dictum concerning the law applicable
in state courts was wholly unnecessary to its holding.
I
II
The FAA (originally the “United States Arbitration Act”)
was enacted in 1925. As demonstrated below, infra, at The majority opinion decides three issues. First, it holds
865 – 868, Congress thought it was exercising its power that § 2 creates federal substantive rights that must be
to dictate either procedure or “general federal law” in enforced by the state courts. Second, though the issue
federal courts. The issue presented here is the result of is not raised in this case, the Court states, ante, at 861,
three subsequent decisions of this Court. n. 9, that § 2 substantive rights may not be the basis
for invoking federal court jurisdiction under 28 U.S.C. §
In 1938 this Court decided Erie Railroad Co. v. Tompkins, 1331. Third, the Court reads § 2 to require state courts
304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188. Erie denied the to enforce § 2 rights using procedures that mimic those
federal government the power to create substantive law specified for federal courts by FAA §§ 3 and 4. The first
solely by virtue of the Article III power to control federal of these conclusions is unquestionably wrong as a matter
court jurisdiction. Eighteen years later the Court decided of statutory construction; the second appears to be an
Bernhardt v. Polygraphic Co., 350 U.S. 198, 76 S.Ct. attempt to limit the damage done by the first; the third is
273, 100 L.Ed. 199 (1956). Bernhardt held that the duty unnecessary and unwise.

104 S.Ct. 852, 79 L.Ed.2d 1
procedure, a rule therefore applicable only in the federal

courts. 11
*25 A
If characterizing the FAA as procedural was not enough,
One rarely finds a legislative history as unambiguous as the draftsmen of the Act, the House Report, and the early
the FAA's. That history establishes conclusively that the commentators all flatly stated that the Act was intended
1925 Congress viewed the FAA as a procedural statute, to affect only federal court proceedings. Mr. Cohen,
applicable only in federal courts, derived, Congress the American Bar Association member who drafted the
believed, largely from the federal power to control the bill, assured two congressional subcommittees in joint
jurisdiction of the federal courts. hearings:
In 1925 Congress emphatically believed arbitration to “Nor can it be said that the Congress of the United
be a matter of “procedure.” At hearings on the Act States, directing its own courts ..., would infringe upon
congressional subcommittees were told: “The theory on *27 the provinces or prerogatives of the States....
which you do this is that you have the right to tell the [T]he question of the enforcement relates to the law
of remedies and not to substantive law. The rule must
Federal courts how to proceed.” 7 **866 The House
be changed for the jurisdiction in which the agreement
Report on the FAA stated: “Whether an agreement for
is sought to be enforced.... There is no disposition
arbitration shall be enforced or not is a question of
therefore by means of the Federal bludgeon to force
procedure....” 8 On the floor of the House Congressman an individual State into an unwilling submission to
Graham assured his fellow members that the FAA
arbitration enforcement.” 12
“does not involve any new principle of law except The House Report on the FAA unambiguously stated:
to provide a simple method ... in order to give “Before [arbitration] contracts could be enforced in the
enforcement.... It creates no new legislation, grants no Federal courts ... this law is essential. The bill declares that
new rights, except a remedy to enforce an agreement in such agreements shall be recognized **867 and enforced
commercial contracts and in admiralty contracts.” 9 by the courts of the United States.” 13
*26 A month after the Act was signed into law the
American Bar Association Committee that had drafted Yet another indication that Congress did not intend
and pressed for passage of the federal legislation wrote: the FAA to govern state court proceedings is found
in the powers *28 Congress relied on in passing the
“The statute establishes a procedure in the Federal Act. The FAA might have been grounded on Congress's
courts for the enforcement of arbitration agreements.... powers to regulate interstate and maritime affairs, since
A Federal statute providing for the enforcement of the Act extends only to contracts in those areas. There
arbitration agreements does relate solely to procedure are, indeed, references in the legislative history to the
in the Federal courts.... [W]hether or not an arbitration corresponding federal powers. More numerous, however,
agreement is to be enforced is a question of the law are the references to Congress's pre-Erie power to
of procedure and is determined by the law of the prescribe “general law” applicable in all federal courts. 14
jurisdiction wherein the remedy is sought. That the At the congressional hearings, for example: “Congress
enforcement of arbitration contracts is within the law of rests solely upon its power to prescribe the jurisdiction and
procedure as distinguished from substantive law is well
duties of the Federal courts.” 15 And in the House Report:
settled by the decisions of our courts.” 10
Since Bernhardt, a right to arbitration has been “The matter is properly the subject of Federal action.
characterized as “substantive,” and that holding is not Whether an agreement for arbitration shall be enforced
challenged here. But Congress in 1925 did not characterize or not is a question of procedure to be determined by
the FAA as this Court did in 1956. Congress believed the law court in which the proceeding is brought and
that the FAA established nothing more than a rule of

104 S.Ct. 852, 79 L.Ed.2d 1
not one of substantive law to be determined by the law

Nothing in the Prima Paint majority opinion contradicts
of the forum in which the contract is made....” 16
this statement.
Plainly, a power derived from Congress's Article III
control over federal court jurisdiction would not by any
The Prima Paint majority gave full but precise effect
flight of fancy permit Congress to control proceedings in
to the original congressional intent—it recognized that
state courts.
notwithstanding the intervention of Erie the FAA's
restrictive focus on maritime and interstate contracts
*29 The foregoing cannot be dismissed as “ambiguities”
permits its application in federal diversity courts. Today's
in the legislative history. It is accurate to say that the entire
decision, in contrast, glosses over both the careful crafting
history contains only one ambiguity, and that appears in
of Prima Paint and the historical reasons that made Prima
the single sentence of the House Report cited by the Court
Paint necessary, and gives the FAA a reach far broader
ante, at 859. That ambiguity, however, is definitively
resolved elsewhere in the same House Report, see supra, than Congress intended. 19
at 857, and throughout the rest of the legislative history.
*31 III
B
Section 2, like the rest of the FAA, should have no
The structure of the FAA itself runs directly contrary to application whatsoever in state courts. Assuming, to the
the reading the Court today gives to § 2. §§ 3 and 4 are contrary, that § 2 does create a federal right that the state
the implementing provisions of the Act, and they expressly courts must enforce, state courts should nonetheless be
apply only to federal courts. § 4 refers to the “United States allowed, at least in the first instance, to fashion their own
district court[s],” and provides that it can be invoked only procedures for enforcing the right. Unfortunately, the
in a court that has jurisdiction **868 under Title 28 of Court seems to direct that the arbitration clause at issue
the United States Code. As originally enacted, § 3 referred, here must be specifically enforced; apparently no other
in the same terms as § 4, to “courts [or court] of the United means of enforcement is permissible. 20
States.” 17 There has since been a minor amendment in §
4's phrasing, but no substantive change in either section's **869 It is settled that a state court must honor
federally created rights and that it may not unreasonably
limitation to federal courts. 18
undermine them by invoking contrary local procedure.
“[T]he assertion of Federal rights, when plainly and
*30 None of this Court's prior decisions has
reasonably made, is not to be defeated under the name of
authoritatively construed the Act otherwise. It bears
local practice.” Brown v. Western R., 338 U.S. 294, 299,
repeating that both Prima Paint and Moses H. Cone
70 S.Ct. 105, 108, 94 L.Ed. 100 (1949). But absent specific
involved federal court litigation. The applicability of the
direction from Congress the state courts have always been
FAA to state court proceedings was simply not before
permitted to apply their own reasonable procedures when
the Court in either case. Justice Black would surely be
enforcing federal rights. Before we undertake to read a
surprised to find either the majority opinion or his dissent
set of complex and mandatory procedures into § 2's brief
in Prima Paint cited by the Court today, as both are, ante,
and general language, we should at a minimum allow
at 858, 859. His dissent took pains to point out:
state courts and legislatures a chance to develop their
“The Court here does not hold ... that the body of own methods for enforcing the new federal rights. Some
federal substantive law created by federal judges under might choose to award compensatory or punitive damages
the Arbitration Act is required to be applied by state for the violation of an arbitration agreement; some
courts. A holding to that effect—which the Court seems might award litigation costs to the party who remained
to leave up in the air—would flout the intention of the willing to arbitrate; some might affirm the “validity and
framers of the Act.” 388 U.S., at 424, 87 S.Ct., at 1816 enforceability” *32 of arbitration agreements in other
(Black, J., dissenting) (footnotes omitted). ways. Any of these approaches could vindicate § 2 rights
in a manner fully consonant with the language and
background of that provision. 21

104 S.Ct. 852, 79 L.Ed.2d 1
misapprehension of federal law. The state court should

The unelaborated terms of § 2 certainly invite flexible determine, at least in the first instance, what procedures it
enforcement. At common law many jurisdictions were will follow to vindicate the newly articulated federal rights.
hostile to arbitration agreements. Kulukundis Shipping Compare Missouri ex rel. Southern R. v. Mayfield, 340
Co. v. Amtorg Trading Corp., 126 F.2d 978, 982– U.S. 1, 5, 71 S.Ct. 1, 3, 95 L.Ed. 3 (1950).
984 (CA2 1942). That hostility was reflected in two
different doctrines: “revocability,” which allowed parties
to repudiate arbitration agreements at any time before
IV
the arbitrator's award was made, and “invalidity” or
“unenforceability,” equivalent rules 22 that flatly denied The Court, ante, at 860 – 861, rejects the idea of requiring
any remedy for the failure to honor an arbitration the FAA to be applied only in federal courts partly out of
agreement. In contrast, common law jurisdictions that concern with the problem of forum shopping. The concern
enforced arbitration agreements did so in at least three is unfounded. Because the FAA makes the federal courts
different ways—through actions for damages, actions for equally accessible to both parties to a dispute, no forum
specific enforcement, or by enforcing sanctions imposed shopping would be possible even if we gave the FAA a
by trade and commercial associations on members who construction *34 faithful to the congressional intent. In
violated arbitration agreements. 23 In 1925 a forum controversies involving incomplete diversity of citizenship
allowing any one of these remedies would have been there is simply no access to federal court and therefore
thought to recognize the “validity” and “enforceability” no possibility of forum shopping. In controversies with
of arbitration clauses. complete diversity of citizenship the FAA grants federal
court access equally to both parties; no party can gain
This Court has previously rejected the view that state any advantage by forum shopping. Even when the party
courts can adequately protect federal rights only if “such resisting arbitration initiates an action in state court, the
courts in enforcing the Federal right are to be treated opposing party can invoke FAA § 4 and promptly secure a
as Federal courts and subjected pro hac vice to [federal] federal court order to compel arbitration. See, e.g., Moses
limitations....” Minneapolis & St. Louis R. v. Bombolis, 241 H. Cone, supra.
U.S. 211, 221, 36 S.Ct. 595, 598, 60 L.Ed. 961 (1916). As
explained by Professor Hart, Ironically, the FAA was passed specifically to rectify
forum shopping problems created by this Court's decision
*33 “The general rule, bottomed deeply in belief in Swift v. Tyson, 41 U.S. 1, 16 Pet. 1, 10 L.Ed. 865
in the importance of state control of state judicial (1842). 25 By 1925 several major commercial states had
procedure, is that federal law takes the state courts passed state arbitration laws, but the federal courts
as it finds them.... Some differences in remedy and
refused to enforce those laws in diversity cases. 26 The
procedure are inescapable if the different governments
drafters of the FAA might have anticipated Bernhardt
are to retain a measure of independence in deciding
by legislation and required federal diversity courts to
how justice should be administered. If the differences
adopt the arbitration law of the state in which they sat.
become so conspicuous as to affect advance calculations
But they deliberately chose a different approach. As was
of outcome, and so to induce an undesirable shopping
between forums, the remedy does not lie in the sacrifice pointed out at congressional hearings, 27 an additional
of the independence of either government. It lies rather goal of the Act was to make arbitration agreements
in provision by the federal government, confident of the enforceable even in federal courts located in states that
justice of its own procedure, **870 of a federal forum had no arbitration law. The drafters' plan for maintaining
reasonable harmony between state and federal practices
equally accessible to both litigants.” 24
was not to bludgeon states into compliance, but rather
to adopt a uniform federal law, patterned after New
In summary, even were I to accept the majority's reading
of § 2, I would disagree with the Court's disposition of York's path-breaking state statute, 28 and simultaneously
this case. After articulating the nature and scope of the to press for passage of coordinated *35 state legislation.
federal right it discerns in § 2, the Court should remand The key language of the Uniform Act for Commercial
to the state court, which has acted, heretofore, under a

104 S.Ct. 852, 79 L.Ed.2d 1
Arbitration was, accordingly, identical to that in § 2 of the FAA in a federal court proceeding as a valid exercise
of Congress's Commerce Clause and Admiralty powers.
FAA. 29
Today the Court discovers a federal right in FAA § 2
that the state courts must enforce. Apparently confident
**871 In summary, forum shopping concerns in
that state courts are not competent to devise their own
connection with the FAA are a distraction that do
procedures for protecting the newly discovered federal
not withstand scrutiny. The Court ignores the drafters'
right, the Court summarily prescribes a specific procedure,
carefully devised plan for dealing with those problems.
found nowhere in § 2 or its common law origins, that the
state courts are to follow.
V *36 Today's decision is unfaithful to congressional

intent, unnecessary, and, in light of the FAA's antecedents
Today's decision adds yet another chapter to the FAA's and the intervening contraction of federal power,
already colorful history. In 1842 this Court's ruling in inexplicable. Although arbitration is a worthy alternative
Swift v. Tyson, 41 U.S. 1, 16 Pet. 1, 10 L.Ed. 865 (1842), set to litigation, today's exercise in judicial revisionism goes
up a major obstacle to the enforcement of state arbitration too far. I respectfully dissent.
laws in federal diversity courts. In 1925 Congress sought
to rectify the problem by enacting the FAA; the intent
was to create uniform law binding only in the federal All Citations
courts. In Erie (1938), and then in Bernhardt (1956), this
Court significantly curtailed federal power. In 1967 our 465 U.S. 1, 104 S.Ct. 852, 79 L.Ed.2d 1
decision in Prima Paint upheld the application of the
Footnotes
convenience of the reader. See United States v. Detroit Lumber Co., 200 U.S. 321, 337, 26 S.Ct. 282, 287, 50 L.Ed. 499.
1 Cal.Corp.Code § 31512 provides: “Any condition, stipulation or provision purporting to bind any person acquiring any
franchise to waive compliance with any provision of this law or any rule or order hereunder is void.”
2 Supplemental Memorandum of Points and Authorities in Opposition to Petition for Writs of Mandate or Prohibition at
19–25.
3 The question Southland presented to the state Supreme Court was “[w]hether a court may enter an order compelling a
private commercial arbitration governed by the Federal Arbitration Act ... to proceed as a class action even though the
terms of the parties' arbitration agreement do not provide for such a procedure.” Southland argued that (1) the decision
of the Court of Appeal “is in conflict with the decisions of other Courts of Appeal in this State,” Petition for Hearing at 3; (2)
class actions would delay and complicate arbitration, increase its cost, and require judicial supervision, “considerations
[which] strongly militate against the creation of class action arbitration procedures,” id., at 22; and (3) there was no basis
in law for class actions. According to appellants, the Federal Rules of Civil Procedure did not apply in California courts.
Id., at 23. Southland thus relied, not on federal law, but on California law in opposing class action procedures.
4 The California Supreme Court cited “[a]nalogous authority” supporting consolidation of arbitration proceedings by federal
courts. E.g., Compania Espanola de Petroleos, S.A. v. Nereus Shipping, S.A., 527 F.2d 966, 975 (CA2 1975), cert. denied,
426 U.S. 936, 96 S.Ct. 2650, 49 L.Ed.2d 387 (1976); In re Czarnikow-Rionda Co., 512 F.Supp. 1308, 1309 (SDNY 1981).
This, along with support by other state courts and the California legislature for consolidation of arbitration proceedings
permitted the court to conclude that class action proceedings were authorized: “It is unlikely that the state Legislature in
adopting the amendment to the Arbitration Act authorizing consolidation of arbitration proceedings, intended to preclude
a court from ordering classwide arbitration in an appropriate case. We conclude that a court is not without authority to do
so.” 31 Cal.3d, at 613, 183 Cal.Rptr., at 377, 645 P.2d, at 1209. The California Supreme Court thus ruled that imposing
a class action structure on the arbitration process was permissible as a matter of state law.
5 We note that in defining “commerce” Congress declared that “nothing herein contained shall apply to contracts of
employment of seamen, railroad employees, or any other class or workers engaged in foreign or interstate commerce.”
9 U.S.C. § 1 (1976).

104 S.Ct. 852, 79 L.Ed.2d 1
6 The procedures to be used in an arbitration are not prescribed by the federal Act. We note, however, that Prima Paint,
supra, considered the question of what issues are for the courts and what issues are for the arbitrator.
7 Appellees contend that the arbitration clause, which provides for the arbitration of “any controversy or claim arising out of
or relating to this Agreement or the breach hereof,” does not cover their claims under the California Franchise Investment
Law. We find the language quoted above broad enough to cover such claims. Cf. Prima Paint, supra, 388 U.S., at 403–
404, 406, 87 S.Ct., at 1805–1806, 1807 (finding nearly identical language to cover a claim that a contract was induced
by fraud).
8 It is estimated that 2% of all civil litigation in this country is in the federal courts. Administrative Office of the United
States Court, Annual Report of the Director 3 (1982) (206,000 filings in federal district court in twelve months ending June
30, 1982, excluding bankruptcy filings); Flango, Advance Report—The Latest State Court Caseload Data, State Court
Journal, p. 18 (Winter 1983) (approximately 13,600,000 civil filings during comparable period, excluding traffic filings).
9 While the Federal Arbitration Act creates federal substantive law requiring the parties to honor arbitration agreements,
it does not create any independent federal-question jurisdiction under 28 U.S.C. § 1331 (1976) or otherwise. Moses H.
Cone, 460 U.S., at –––– n. 32, 103 S.Ct., at 942 n. 32. This seems implicit in the provisions in § 3 for a stay by a “court in
which such suit is pending” and in § 4 that enforcement may be ordered by “any United States district court which, save for
such agreement, would have jurisdiction under Title 28, in a civil action or in admiralty of the subject matter of a suit arising
out of the controversy between the parties.” Ibid.; Prima Paint, supra, 388 U.S., at 420 and n. 24, 87 S.Ct., at 1814 (Black,
J., dissenting); Krauss Bros. Lumber Co. v. Louis Bossert & Sons, Inc., 62 F.2d 1004, 1006 (CA2 1933) (L. Hand, J.)
10 The contention is made that the Court's interpretation of § 2 of the Act renders §§ 3 and 4 “largely superfluous.” Post, at
869, n. 20. This misreads our holding and the Act. In holding that the Arbitration Act preempts a state law that withdraws
the power to enforce arbitration agreements, we do not hold that §§ 3 and 4 of the Arbitration Act apply to proceedings in
state courts. Section 4, for example, provides that the Federal Rules of Civil Procedure apply in proceedings to compel
arbitration. The Federal Rules do not apply in such state court proceedings.
11 The California Supreme Court justified its holding by reference to our conclusion in Wilko v. Swan, 346 U.S. 427, 74 S.Ct.
182, 98 L.Ed. 168 (1953), that arbitration agreements are nonbinding as to claims arising under the federal Securities
Act of 1933. 31 Cal.3d at 602, 183 Cal.Rptr. at 370, 645 P.2d at 1202–1203. The analogy is unpersuasive. The question
in Wilko was not whether a state legislature could create an exception to § 2 of the Arbitration Act, but rather whether
Congress, in subsequently enacting the Securities Act, had in fact created such an exception.
Justice STEVENS dissents in part on the ground that § 2 of the Arbitration Act permits a party to nullify an agreement
to arbitrate on “such grounds as exist at law or in equity for the revocation of any contract.” We agree, of course, that
a party may assert general contract defenses such as fraud to avoid enforcement of an arbitration agreement. We
conclude, however, that the defense to arbitration found in the California Franchise Investment Law is not a ground
that exists at law or in equity “for the revocation of any contract” but merely a ground that exists for the revocation of
arbitration provisions in contracts subject to the California Franchise Investment Law. Moreover, under this dissenting
view, “a state policy of providing special protection for franchisees ... can be recognized without impairing the basic
purposes of the federal statute.” Post, at 866. If we accepted this analysis, states could wholly eviscerate Congressional
intent to place arbitration agreements “upon the same footing as other contracts,” H.R.Rep. No. 96, supra, 1, simply by
passing statutes such as the Franchise Investment Law. We have rejected this analysis because it is in conflict with the
Arbitration Act and would permit states to override the declared policy requiring enforcement of arbitration agreements.
1 9 U.S.C. § 2.
2 9 U.S.C. § 3 (emphasis added).
3 9 U.S.C. § 4 (emphasis added). § 9, which addresses the enforcement of arbitration awards, is also relevant. “If no court
is specified in the agreement of the parties, then such application may be made to the United States court in and for the
district within which such award was made....” 9 U.S.C. § 9 (emphasis added).
4 Justice Frankfurter made precisely this suggestion in Bernhardt. 350 U.S., at 208, 76 S.Ct., at 279 (Frankfurter, J.,
concurring).
5 Two circuits had previously addressed the problem. Robert Lawrence Co. v. Devonshire Fabrics, Inc., 271 F.2d 402
(CA2 1959), cert. granted 362 U.S. 909, 80 S.Ct. 682, 4 L.Ed.2d 618, dismissed pursuant to stipulation of counsel, 364
U.S. 801, 81 S.Ct. 27, 5 L.Ed.2d 37 (1960); American Airlines, Inc. v. Louisville & Jefferson County Air Bd., 269 F.2d
811 (CA6 1959).
6 In Robert Lawrence, supra, the Second Circuit had flatly announced—in dictum, of course—that the FAA was “a
declaration of national law equally applicable in state or federal courts.” 271 F.2d, at 407. One Justice in Prima Paint
was prepared to adopt wholesale the Second Circuit's more broadly written opinion. 388 U.S., at 407, 87 S.Ct., at 1807

104 S.Ct. 852, 79 L.Ed.2d 1
(Harlan, J., concurring). But the Prima Paint majority opinion did not do so. In these circumstances, the majority opinion
speaks loudly by its complete silence regarding the Act's applicability to state courts.
7 Arbitration of Interstate Commercial Disputes, Hearing on H.R. 646 and S. 1005 before the Joint Committee of
Subcommittees on the Judiciary, 68th Cong., 1st Sess. 17 (1924) (hereinafter Joint Hearing) (statement of Mr. Cohen,
American Bar Association). See also, Sales and Contracts to Sell in Interstate and Foreign Commerce, and Federal
Commercial Arbitration, Hearing Before a Subcommittee of the Senate Committee on the Judiciary, 67th Cong., 4th Sess.
2 (1923) (hereinafter Senate Hearing).
8 H.R.Rep. No. 96, 68th Cong., 1st Sess. 1 (1924). To similar effect, the Senate Report noted that the New York statute,
after which the FAA was patterned, had been upheld against constitutional attack the previous year in Red Cross Line
v. Atlantic Fruit Co., 264 U.S. 109, 44 S.Ct. 274, 68 L.Ed. 582 (1924). S.Rep. No. 536, 68th Cong., 1st Sess. 3 (1924).
In Red Cross Justice Brandeis based the Court's approval of the New York statute on the fact that the statute effected
no change in the substantive law.
9 65 Cong.Rec. 1931 (1924).
10 Committee on Commerce, Trade and Commercial Law, The United States Arbitration Law and its Application, 11 A.B.A.J.
153, 156 (1925). See also Cohen & Dayton, The New Federal Arbitration Law, 12 Va.L.Rev. 265, 275–276 (1926).
11 That Congress chose to apply the FAA only to proceedings related to commercial and maritime contracts does not
suggest that the Act is “substantive.” Cf. Fed.Rule Civ.Proc. 81; Fed.Rule Evid. 1101; Fed.Rule Crim.Proc. 54.
12 Joint Hearing 39–40 (emphasis added). “The primary purpose of the statute is to make enforcible in the Federal courts
such agreements for arbitration....” Id., at 38 (statement of Mr. Cohen). See also Senate Hearing 2 (“The bill follows the
lines of the New York arbitration law applying it to fields wherein there is Federal jurisdiction”).
13 H.R.Rep. No. 96, supra, at 1. Commentators writing immediately after passage of the Act uniformly reached the same
conclusion. The A.B.A. Committee that drafted the legislation wrote: “So far as the present law declares simply the policy
of recognizing and enforcing arbitration agreements in the Federal courts it does not encroach upon the province of
the individual states.” Committee on Commerce, Trade and Commercial Law, supra, at 155. See also Cohen & Dayton,
supra, at 276–277; Baum & Pressman, The Enforcement of Commercial Arbitration Agreements in the Federal Courts,
8 N.Y.U.L.Quart.Rev. 428, 459 (1931). Williston wrote: “Inasmuch as arbitration acts are deemed procedural, the United
States Act applies only to the federal courts....” 6 S. Williston & G. Thompson, A Treatise on the Law of Contracts 5368
(Rev. ed. 1938).
More recent students of the FAA uniformly and emphatically reach the same conclusion. Prima Paint, supra, 388 U.S.,
at 424, 87 S.Ct., at 1816 (Black, J., dissenting); Note, 73 Harv.L.Rev. 1382 (1960); Note, Erie, Bernhardt, and § 2 of the
United States Arbitration Act: A Farrago of Rights, Remedies, and a Right to a Remedy, 69 Yale L.J. 847, 863 (1960);
Note, Scope of the United States Arbitration Act in Commercial Arbitration: Problems in Federalism, 58 Nw.U.L.Rev.
468, 492 (1963).
14 For my present purpose it is enough to recognize that Congress relied at least in part on its Article III power over the
jurisdiction of the federal courts. See Prima Paint, 388 U.S., at 405, and n. 13, 87 S.Ct., at 1807, n. 13 (majority opinion);
id., at 416–420, 87 S.Ct., at 1812–1814 (Black, J., dissenting).
15 Joint Hearing 38. See also id., at 17, 37–38.
16 H.R.Rep. No. 96, supra, at 1. Immediately after the FAA's enactment the A.B.A. drafters of the Act wrote:
“[The FAA] rests upon the constitutional provision by which Congress is authorized to establish
and control inferior Federal courts. So far as congressional acts relate to procedure in the Federal
courts, they are clearly within the congressional power.”
Committee on Commerce, Trade and Commercial Law, supra, at 156. Numerous other commentators writing shortly
after the FAA's passage, as well as more recently, have made similar statements. See, e.g., Cohen & Dayton, supra,
at 275; Baum & Pressman, supra, at 430–431; Note, 73 Harv.L.Rev., at 1383; Note, 58 Nw.U.L.Rev., at 481.
17 The use of identical language in both sections was natural: § 3 applies when the party resisting arbitration initiates the
federal court action; § 4 applies to actions initiated by the party seeking to enforce an arbitration provision. Phrasing the
two sections differently would have made no sense.
18 In 1954, as a purely clerical change, Congress inserted “United States district court” in § 4 as a substitute for “court of the
United States.” Both House and Senate Reports explained: “ ‘United States district court’ was substituted for ‘court of the
United States' because, among Federal courts, such a proceeding would be brought only in a district court.” H.R.Rep.
No. 1981, 83d Cong., 2d Sess. 8 (1954); S.Rep. No. 2498, 83d Cong., 2d Sess. 9 (1954).
Even without this history, § 3's “courts of the United States” is a term of art whose meaning is unmistakable. State
courts are “in” but not “of” the United States. Other designations of federal courts as the courts “of” the United States

104 S.Ct. 852, 79 L.Ed.2d 1
are found, for example, in 28 U.S.C. § 2201 (declaratory judgments); Fed.Rule Evid. 501; and the Norris LaGuardia
Act, 29 U.S.C. § 104, see Boys Markets, Inc. v. Retail Clerks Union, 398 U.S. 235, 247, 90 S.Ct. 1583, 1590, 26 L.Ed.2d
199 (1970) (Brennan, J.). References to state and federal courts together as courts “in” or “within” the United States
are found in the Supremacy Clause (“Judges in every state”); 11 U.S.C. § 306; 22 U.S.C. § 2370(e)(2); and 28 U.S.C.
§ 1738. See also W. Sturges, Commercial Arbitration and Awards § 480, p. 937 (1930).
19 The Court suggests, ante, at 859, that it is unlikely that Congress would have created a federal substantive right that
the state courts were not required to enforce. But it is equally rare to find a federal substantive right that cannot be
enforced in federal court under the jurisdictional grant of 28 U.S.C. § 1331. Yet the Court states, ante, at 861, n. 9, that
the FAA must be so construed. The simple answer to this puzzle is that in 1925 Congress did not believe it was creating
a substantive right at all.
20 If my understanding of the Court's opinion is correct, the Court has made § 3 of the FAA binding on the state courts.
But as we have noted, supra, at 8–9, § 3 by its own terms governs only federal court proceedings. Moreover, if § 2,
standing alone, creates a federal right to specific enforcement of arbitration agreements §§ 3 and 4 are, of course, largely
superfluous. And if § 2 implicitly incorporates §§ 3 and 4 procedures for making arbitration agreements enforceable
before arbitration begins, why not also § 9 procedures concerning venue, personal jurisdiction, and notice for enforcing
an arbitrator's award after arbitration ends? One set of procedures is of little use without the other.
21 See Note, 69 Yale L.J., at 864–865; Note, 73 Harv.L.Rev., at 1385; Note, 58 Nw.U.L.Rev., at 493.
22 See J. Cohen, Commercial Arbitration and the Law 53–252 (1918); W. Sturges, supra, at §§ 15–17 (discussing
“revocability”); id., § 22 (treating as equivalent different courts' declarations that arbitration agreements were “contrary to
public policy,” “invalid,” “not binding upon the parties,” “unenforceable,” or “void”). See also Note, 73 Harv.L.Rev., at 1384.
23 See W. Sturges, supra, at §§ 22–24.
24 Hart, The Relations Between State and Federal Law, 54 Colum.L.Rev. 489, 508 (1954). See generally P. Bator, P.
Mishkin, D. Shapiro, & H. Wechsler, supra, at 567–573.
25 See Joint Hearing 16 (statement of Mr. Cohen, A.B.A.); Senate Hearing 2. See also Cohen & Dayton, supra, at 275–
276; Sturges & Murphy, Some Confusing Matters Relating to Arbitration under the United States Arbitration Act, 17 L.
& Contemp.Prob. 580, 590 (1952).
26 See, e.g., Atlantic Fruit Co. v. Red Cross Line, 276 Fed. 319 (SDNY 1921), aff'd, 5 F.2d 218 (CA2 1924); Lappe v. Wilcox,
14 F.2d 861 (NDNY 1926).
27 Joint Hearing 35.
28 See S.Rep. No. 536, supra, at 3.
29 The Uniform Act tracked the “valid, irrevocable, and enforceable” language of § 2. See 47 A.B.A.Reps. 318 (1922). It was
also hoped that other states might pattern their arbitration statutes directly after the federal Act. See, e.g., Joint Hearing
28. By 1953 it was reported that arbitration statutes “quite similar” to the FAA had been enacted in twelve other states.
Kochery, The Enforcement of Arbitration Agreements in the Federal Courts: Erie v. Tompkins, 39 Corn.L.Q. 74, 76, n.
7 (1953). See also Ludwig Mowinckels Rederi v. Dow Chemical Co., 25 N.Y.2d 576, 584–585, 307 N.Y.S.2d 660, 666,
255 N.E.2d 774, 778 (1970).

Southwind Group, Inc. v. Landwehr, 188 S.W.3d 730 (2006)
188 S.W.3d 730 West Headnotes (24)

Eastland.
SOUTHWIND GROUP, INC., Appellant, Review
v. If the Texas Arbitration Act (TAA) applies,
Jesstin R. LANDWEHR and a party must seek relief, from a trial court's
Joyce Landwehr, Appellees. order denying a motion to compel arbitration,
In re Southwind Group, Inc. through an interlocutory appeal. V.T.C.A.,
Civil Practice & Remedies Code § 171.001 et
Nos. 11–05–00247–CV, 11–05–00324–CV. seq.
|
Feb. 2, 2006. Cases that cite this headnote
Synopsis
[2] Mandamus
Background: Employer sued former employee and his
Civil Proceedings Other Than Actions
wife, seeking to recover $32,000 that it allegedly had
loaned to defendants in connection with their purchase If the Federal Arbitration Act (FAA) applies,
of home in Texas, and seeking a resulting trust on a party must seek relief, from a trial court's
the home. Defendants counterclaimed for breach of order denying a motion to compel arbitration,
employment agreement. The 104th District Court, Taylor through a mandamus proceeding. 9 U.S.C.A.
County, Lee Hamilton, J., denied employer's motion § 1 et seq.
to compel arbitration of the counterclaims. Employer
brought interlocutory appeal and petitioned for writ of
mandamus.
and Rules of Court
Holdings: The Court of Appeals, Terry McCall, J., held
that: Commerce
Arbitration
[1] arbitration clause of employment agreement was The Federal Arbitration Act (FAA) extends
governed by Texas Arbitration Act rather than Federal to any contract affecting interstate commerce
Arbitration Act, and thus, interlocutory appeal rather as far as the Commerce Clause of the United
than mandamus was appropriate method for employer to States Constitution will reach. U.S.C.A.
seek relief from trial court's order; Const. Art. 1, § 8, cl. 3; 9 U.S.C.A. § 1 et seq.
[2] employer did not substantially invoke the judicial 1 Cases that cite this headnote
process, as element for waiver of right to arbitration; and
[3] even assuming employer substantially invoked the Constitutional and Statutory Provisions
judicial process, employee was not prejudiced. and Rules of Court
Commerce
Arbitration
Reversed and remanded with instructions; petition denied.
The Federal Arbitration Act (FAA) does
not require a substantial effect on interstate
commerce; it requires only that commerce be

involved or affected. U.S.C.A. Const. Art. 1, regarding the existence or scope of an

§ 8, cl. 3; 9 U.S.C.A. § 1 et seq. agreement are resolved in favor of arbitration.

Review Evidence
Mandamus If a party seeking arbitration carries its
Modification or Vacation of Judgment or initial burden of proving that an arbitration
Order agreement exists and that the claims asserted
Arbitration clause of employment agreement fall within the scope of the agreement, the
for employer's director of operations was burden shifts to the party resisting arbitration
governed by Texas Arbitration Act (TAA) to present evidence on its defenses to the
rather than Federal Arbitration Act (FAA), arbitration agreement.
and thus, employer's method for seeking relief
from trial court's order denying employer's
motion to compel arbitration of employee's
claims of breach of employment agreement [9] Alternative Dispute Resolution
was through interlocutory relief rather Waiver or Estoppel
than mandamus; neither the employment The standard for determining waiver of the
agreement, nor the employment, nor right to arbitration is the same under the
employer's business operations in any way Texas Arbitration Act (TAA) and the Federal
involved or affected interstate commerce. 9 Arbitration Act (FAA). 9 U.S.C.A. § 1 et seq.;
U.S.C.A. § 1 et seq.; V.T.C.A., Civil Practice V.T.C.A., Civil Practice & Remedies Code §
& Remedies Code § 171.001 et seq. 171.001 et seq.
Cases that cite this headnote 3 Cases that cite this headnote

Validity Scope and Standards of Review
Alternative Dispute Resolution Whether a party has waived its right to
Disputes and Matters Arbitrable Under arbitrate presents a question of law that is
Agreement reviewed de novo.
A party seeking to compel arbitration must
first prove that an arbitration agreement exists Cases that cite this headnote
and that the claims asserted fall within the
scope of the agreement. [11] Alternative Dispute Resolution
Evidence
Because public policy favors arbitration, there
is a strong presumption against finding that a
[7] Alternative Dispute Resolution party has waived its right to arbitration, and
Construction in Favor of Arbitration the burden to prove waiver is thus a heavy one.
Evidence 3 Cases that cite this headnote
The law presumes the existence of an

arbitration agreement, and any doubts [12] Alternative Dispute Resolution
Evidence

Any doubts regarding waiver of the right process with respect to employee's arbitrable
to arbitration are resolved in favor of counterclaim for breach of employment
arbitration. agreement, and thus, employer did not
waive its contractual right to arbitration of
Cases that cite this headnote counterclaim.

Waiver or Estoppel
Waiver of the right to arbitration may be [18] Alternative Dispute Resolution
express or implied, but it must be intentional. Suing or Participating in Suit
Courts will not find that a party has waived
1 Cases that cite this headnote its right to enforce an arbitration clause by
merely taking part in litigation, unless it has
[14] Alternative Dispute Resolution substantially invoked the judicial process to its
Suing or Participating in Suit opponent's detriment.
Whether waiver of the right to arbitration 2 Cases that cite this headnote
occurs depends on the individual facts and
circumstances of each case.
2 Cases that cite this headnote Suing or Participating in Suit
Substantially invoking the judicial process
[15] Alternative Dispute Resolution may occur, as element for waiver of right
Waiver or Estoppel to arbitration, when the party seeking
arbitration actively tried, but failed, to achieve
A party does not waive arbitration merely by
a satisfactory result in litigation before turning
delay; instead, the party urging waiver must
to arbitration, and examples include moving
establish that any delay resulted in prejudice.
for summary judgment or otherwise seeking
2 Cases that cite this headnote final judicial resolution of the dispute but
failing to receive satisfactory result.

Waiver of the right to arbitration will be found
only when: (1) the party seeking arbitration
has substantially invoked the judicial process,
A party substantially invokes the judicial
and (2) the party opposing arbitration suffers
process, as element for waiver of right to
actual prejudice as a result.
arbitration, by taking specific and deliberate
4 Cases that cite this headnote actions after a suit has been filed that are
inconsistent with the right to arbitrate.

Employer, by participating in discovery,
seeking continuance of trial setting, asking
trial court to reset the case for trial, and filing
Employer, by filing action against employee
response to employee's motion for summary
raising a claim that was not subject to
judgment on employer's non-arbitrable claim,
arbitration under employment agreement,
did not substantially invoke the judicial
did not substantially invoke the judicial

process, as element for waiver of right movant's actions or movant's delay in seeking
to arbitration, with respect to employee's to compel arbitration.
arbitrable counterclaim for breach of
employment agreement. 3 Cases that cite this headnote
[22] Alternative Dispute Resolution Attorneys and Law Firms

*733 Billy W. Boone, Abilene, for appellant.
A party does not substantially invoke the
judicial process, as element for waiver of John R. Saringer, Wagstaff, Alvis, Stubbeman, Seamster
right to arbitration, merely by participating & Longacre, Abilene, for appellees.
in discovery; however, pursuing extensive
discovery may substantially invoke the Panel consists of WRIGHT, C.J., and McCALL, J., and
judicial process. STRANGE, J.

OPINION
TERRY McCALL, Justice.
Even assuming that employer substantially Southwind Group, Inc. challenges the trial court's
invoked the judicial process, as element for order denying its motion to compel arbitration of
waiver of right to arbitration, with respect Jesstin R. Landwehr and Joyce Landwehr's breach of
to employee's claim of breach of employment employment agreement claims. Southwind has brought an
agreement, employee did not establish he was interlocutory appeal pursuant to the Texas Arbitration
prejudiced, as additional element for waiver; Act (TAA) 1 and a petition for writ of mandamus
employee did not identify any discovery
pursuant to the Federal Arbitration Act (FAA). 2 The
obtained by employer in trial court that
primary issue in these proceedings is whether Southwind
employer would not have been entitled to
waived its right to arbitrate the Landwehrs' claims.
receive in arbitration, and employee did not
We conclude that the TAA applies to the employment
present any evidence of expenses, relating to
agreement and that Southwind did not waive its right to
litigation of employee's claim in trial court,
arbitration. Therefore, in Cause No. 11–05–00247–CV, we
that employee would not have incurred in
reverse the trial court's order and remand the cause with
arbitration.
instructions that the trial court enter an order compelling
1 Cases that cite this headnote arbitration of the Landwehrs' claims. Because the FAA
does not apply to the employment agreement, we deny
Southwind's petition for writ of mandamus in Cause No.
[24] Alternative Dispute Resolution 11–05–00324–CV.
In determining whether non-moving party
was prejudiced by moving party's conduct
Background Facts
in substantially invoking the judicial process
before bringing motion to compel arbitration, Southwind and Jesstin R. Landwehr entered into an
so that moving party waived the right to employment agreement on October 30, 2001, whereby
arbitration, courts focus on such things as: Southwind employed Jesstin as its director of operations.
(1) movant's access to information that is The employment agreement provided that Jesstin would
not discoverable in arbitration, and (2) non- work at Southwind's offices in Abilene, Texas, and that he
movant's incurring costs and fees due to would receive a base compensation of $50,000 per year,

plus any commissions earned. The employment agreement in seeking arbitration and by substantially invoking the
contained the following arbitration provision: judicial process. After a hearing, the trial court denied
Southwind's motion to compel arbitration.
9.04. Arbitration Provisions. Any
claim or controversy that arises out
of or relates to this Agreement,
or the breach of this Agreement, Which Act Applies?
shall be settled by arbitration in
[1] [2] The employment agreement does not provide
accordance with the rules of the
whether the TAA or the FAA applies. If the TAA applies,
American Arbitration Association.
a party must seek relief from a trial court's order denying
Judgment upon the award rendered
a motion to compel arbitration through an interlocutory
may *734 be entered in any court
appeal. If the FAA applies, a party must seek relief from
of competent jurisdiction.
the trial court's order through a mandamus proceeding.
In re Educ. Mgmt. Corp., 14 S.W.3d 418, 425 (Tex.App.-
The Landwehrs moved from Arkansas to Texas in Houston [14th Dist.] 2000, orig. proceeding); Russ Berrie
connection with Jesstin's employment with Southwind. In and Co. v. Gantt, 998 S.W.2d 713, 714–15 (Tex.App.-
2002, Jesstin left his employment with Southwind, and the El Paso 1999, no pet.). Southwind argues that the TAA
Landwehrs moved back to Arkansas. applies, but it has filed a petition for writ of mandamus in
the event the FAA applies. The Landwehrs do not assert
On July 17, 2002, Southwind filed suit against the that the FAA applies.
Landwehrs seeking to recover $32,000 that it allegedly
had loaned to the Landwehrs in connection with their [3] [4] [5] The FAA extends to any contract affecting
purchase of a home in Abilene, Texas. Southwind also interstate commerce as far as the Commerce Clause
sought to establish a resulting trust on the Landwehrs'
of the United States Constitution 3 will reach. In re
home. On November 13, 2002, the Landwehrs filed
FirstMerit Bank, N.A., 52 S.W.3d 749, 754 (Tex.2001);
their original counterclaim alleging that Southwind had
In re L & L Kempwood Assocs., L.P., 9 S.W.3d 125,
breached its employment agreement with Jesstin. The
127 (Tex.1999). The FAA does not require a substantial
Landwehrs sought to recover not only Jesstin's annual
effect on interstate commerce; it requires only that
salary of $50,000 plus benefits for the remaining term of
commerce be involved or affected. In re Merrill Lynch
the agreement, but also additional damages.
Trust Co., 123 S.W.3d 549, 553 (Tex.App.-San Antonio
2003, orig. proceeding). In this case, Jesstin performed
The record demonstrates that the parties exchanged
his employment responsibilities for Southwind in Abilene,
written discovery and took depositions. The case also
Texas. The record does not show that the employment
received a number of trial settings. The record also shows
agreement, Jesstin's employment with Southwind, or
that the Landwehrs moved for summary judgment on
Southwind's business operations in any way involved or
Southwind's claims against them, Southwind responded to
affected interstate commerce. *735 Because the record
their motion, and the trial court denied the motion.
does not show that the employment agreement involved or
affected interstate commerce, we conclude that the TAA
On June 1, 2005, Southwind filed its motion to stay and
applies. We deny Southwind's request for mandamus relief
compel arbitration of the Landwehrs' claims pursuant to
pursuant to the FAA.
the TAA. Southwind did not seek to compel arbitration
of its claims against the Landwehrs. Southwind asserted
that the Landwehrs' claims fell within the scope of
the arbitration provision in the employment agreement. Southwind's Right to Arbitrate the Landwehrs' Claims
The Landwehrs filed a response to Southwind's motion
to compel arbitration. The Landwehrs did not argue [6] [7] A party seeking to compel arbitration must
that their claims did not fall within the scope of first prove that an arbitration agreement exists and
the arbitration provision. Instead, they argued that that the claims asserted fall within the scope of the
Southwind had waived its right to arbitration by its delay agreement. In re Oakwood Mobile Homes, Inc., 987
S.W.2d 571, 573 (Tex.1999)(orig.proceeding). The law

presumes the existence of an arbitration agreement, by delay; instead, the party urging waiver must establish
and any doubts regarding the existence or scope of an that any delay resulted in prejudice. Prudential Secs., Inc.
agreement are resolved in favor of arbitration. In re v. Marshall, 909 S.W.2d 896, 898 (Tex.1995). Waiver will
FirstMerit Bank, N.A., 52 S.W.3d at 753. Section 9.04 be found only when (1) the party seeking arbitration has
of the employment agreement provided that any claims substantially invoked the judicial process and (2) the party
arising out of a breach of the agreement would be settled opposing arbitration suffers actual prejudice as a result. In
by arbitration. In their counterclaim, the Landwehrs re Bruce Terminix Co., 988 S.W.2d at 704; Williams Indus.,
alleged that Southwind had breached the employment Inc., 110 S.W.3d at 135.
agreement. The Landwehrs' claims fall within the scope
of the arbitration agreement. Southwind met its burden
of establishing that an arbitration agreement exists and Substantially Invoking the Judicial Process
that the Landwehrs's claims fall within the scope of the [17] [18] [19] [20] The Landwehrs argue that
agreement. Southwind substantially invoked the judicial *736
process by conducting discovery, by seeking a continuance
of the trial setting, and by asking the trial court to
reset the case for trial. Courts will not find that a
Waiver Defense to Arbitration party has waived its right to enforce an arbitration
clause by merely taking part in litigation unless it has
[8] If a party seeking arbitration carries its initial
substantially invoked the judicial process to its opponent's
burden, the burden shifts to the party resisting arbitration
detriment. In re Bruce Terminix Co., 988 S.W.2d at
to present evidence on its defenses to the arbitration
704. Substantially invoking the judicial process may
agreement. Williams Indus., Inc. v. Earth Dev. Sys. Corp.,
occur when the party seeking arbitration actively tried,
110 S.W.3d 131, 134 (Tex.App.-Houston [1st Dist.] 2003,
but failed, to achieve a satisfactory result in litigation
no pet.). The Landwehrs' sole defense to arbitration is that
before turning to arbitration. Williams Indus., Inc., 110
Southwind waived its right to arbitrate their claims.
S.W.3d at 135. Examples include moving for summary
judgment or otherwise seeking a final judicial resolution
[9] [10] [11] [12] The standard for determining waiver
of the dispute but failing to receive a satisfactory result.
of the right to arbitration is the same under both the
In re Bruce Terminix Co., 988 S.W.2d at 704; In re
TAA and the FAA. Brown v. Anderson, 102 S.W.3d 245,
Winter Park Constr., Inc., 30 S.W.3d 576, 579 (Tex.App.-
250 (Tex.App.-Beaumont 2003, pet. denied); Sedillo v.
Texarkana 2000, orig. proceeding). Substantially invoking
Campbell, 5 S.W.3d 824, 826 (Tex.App.-Houston [14th
the judicial process has also been defined as taking specific
Dist.] 1999, no pet.). Whether a party has waived its
and deliberate actions after a suit has been filed that are
right to arbitrate presents a question of law that we
inconsistent with the right to arbitrate. Sedillo, 5 S.W.3d
review de novo. In re Oakwood Mobile Homes, Inc., 987
at 827. The Sedillo court held that a party substantially
S.W.2d at 574; Williams Indus., Inc., 110 S.W.3d at 136.
invoked the judicial process by seeking a discharge of
Because public policy favors arbitration, there is a strong
claims in the bankruptcy court before seeking arbitration
presumption against finding that a party has waived its
of the claims. Sedillo, 5 S.W.3d at 827.
right to arbitration; the burden to prove waiver is thus
a heavy one. In re Bruce Terminix Co., 988 S.W.2d 702,
[21] In this case, Southwind filed suit against the
704–05 (Tex.1998)(orig.proceeding); EZ Pawn Corp. v.
Landwehrs seeking to recover $32,000 that it allegedly
Mancias, 934 S.W.2d 87, 89 (Tex.1996)(orig.proceeding).
had loaned to the Landwehrs in connection with
Any doubts regarding waiver are resolved in favor of
their purchase of a home. Neither Southwind nor the
arbitration. In re Bruce Terminix Co., 988 S.W.2d at 705.
Landwehrs contend that Southwind's affirmative claims
for relief fall within the scope of the arbitration provision.
[13] [14] [15] [16] Waiver may be express or implied,
Southwind did not substantially invoke the judicial
but it must be intentional. EZ Pawn Corp., 934 S.W.2d
process by filing suit on its nonarbitrable claims.
at 89; Williams Indus., Inc., 110 S.W.3d at 135. Whether
waiver occurs depends on the individual facts and
The Landwehrs filed their counterclaim for breach of
circumstances of each case. Williams Indus., Inc., 110
the employment agreement. Southwind did not move
S.W.3d at 135. A party does not waive arbitration merely
for summary judgment or otherwise seek a final judicial

resolution of the Landwehrs' claims before moving the

trial court to compel arbitration. The Landwehrs filed Actual Prejudice
a motion for summary judgment on Southwind's claims, [23] [24] Even if Southwind's actions had substantially
and Southwind responded to the motion. Southwind did invoked the judicial process, the Landwehrs did not meet
not substantially invoke the judicial process by responding their heavy burden of showing that they were prejudiced
to the Landwehrs' motion for summary judgment for at by those actions. In determining the prejudice issue,
least two reasons. First, the Landwehrs' motion covered courts focus on such things as (1) the movant's access to
Southwind's nonarbitrable claims. Second, Southwind did information that is not discoverable in arbitration and (2)
not file a motion for summary judgment seeking a judicial the opponent's incurring costs and fees due to the movant's
resolution of any claims. Southwind merely responded to actions or delay. Williams Indus., Inc., 110 S.W.3d at
the Landwehrs' motion for summary judgment. 135. The Landwehrs claim that they incurred substantial
litigation costs and expenses as a result of Southwind's
[22] A party does not substantially invoke the judicial delay in moving to compel arbitration.
process merely by participating in discovery. In re Bruce
Terminix Co., 988 S.W.2d at 704; In re Nasr, 50 S.W.3d In Section 9.04 of the employment agreement, the parties
23, 27 (Tex.App.-Beaumont 2001, orig. proceeding). agreed to arbitrate under the rules of the American
However, pursuing extensive discovery may substantially Arbitration Association. Those rules permit the arbitrator
invoke the judicial process. Nationwide of Bryan, Inc. v. to allow discovery. See In re Bruce Terminix Co., 988
Dyer, 969 S.W.2d 518, 522 (Tex.App.-Austin 1998, no S.W.2d at 704–05; Williams Indus., Inc., 110 S.W.3d
pet.). Southwind and the Landwehrs exchanged written at 140. The Landwehrs did not identify any discovery
discovery and took depositions before Southwind sought obtained by Southwind in the trial court that Southwind
to compel arbitration. The record shows that Southwind would not have been entitled to receive in arbitration. The
sent the Landwehrs a request for disclosure, a request Landwehrs did not present any evidence of the expenses
for admissions, and two requests for production. The relating to litigation of their claims in the trial court.
record does not contain copies of the written discovery The record does not demonstrate that the Landwehrs
or the depositions. Without copies of the discovery, the incurred any expenses in litigating their claims that they
record does not demonstrate the extent of the discovery would not have incurred in arbitration. The record does
undertaken by the parties or the extent of discovery related not establish that the Landwehrs were prejudiced by
to the Landwehrs' claims. Thus, the record does not show Southwind's actions.
that Southwind engaged in extensive discovery related to
the Landwehrs' claims. The trial court erred in denying Southwind's motion to
compel arbitration of the Landwehrs' claims. We sustain
The discovery in this case is similar to the discovery Southwind's issue in Cause No. 11–05–00247–CV.
in Nasr. The Nasr court held that the party seeking
arbitration did *737 not substantially invoke the judicial
process by participating in discovery. In re Nasr, 50
S.W.3d at 27. Likewise, we find that Southwind did not This Court's Ruling
substantially invoke the judicial process by participating
In Cause No. 11–05–00247–CV, we reverse the trial court's
in discovery.
order and remand the cause with instructions for the
trial court to compel arbitration of the Landwehrs' claims
Southwind moved for a continuance of a trial setting
against Southwind. In Cause No. 11–05–00324–CV, we
and requested a new trial setting. These actions did not
deny Southwind's petition for writ of mandamus.
seek a resolution of the merits of the Landwehrs' claims.
Southwind did not try to obtain a satisfactory result on
the Landwehrs' claims in the trial court before moving All Citations
to compel arbitration. Southwind did not substantially
invoke the judicial process. 188 S.W.3d 730

Footnotes
1 TEX. CIV. PRAC. & REM.CODE ANN. §§ 171.001–.098 (Vernon 2005).
2 9 U.S.C. §§ 1–16.
3 U.S. CONST. art. I, § 8, cl. 3.

Suburban Leisure Center, Inc. v. AMF Bowling Products, Inc., 468 F.3d 523 (2006)

468 F.3d 523 Pursuant to the Federal Arbitration Act
United States Court of Appeals, (FAA),the Court of Appeals construes an
Eighth Circuit. arbitration clause resolving any doubts in
favor of arbitration. 9 U.S.C.A. § 1 et seq.
SUBURBAN LEISURE CENTER, INC., Appellee,
v. 2 Cases that cite this headnote
AMF BOWLING PRODUCTS, INC.; AMF
Billiards & Games, LLC, Appellants. [3] Alternative Dispute Resolution
No. 06-1865.
The Court of Appeals may not deny a
|
party's request to arbitrate an issue unless
Submitted: Oct. 20, 2006.
it may be said with positive assurance that
|
the arbitration clause is not susceptible of an
Filed: Nov. 17, 2006.
Synopsis
Background: Franchisee brought action in state court
against franchisor alleging that it was entitled to damages
from the cancellation of the parties' oral franchise [4] Alternative Dispute Resolution
agreement. Following removal, the United States District Contractual or Consensual Basis
Court for the Eastern District of Missouri, Donald J. A party cannot be required to submit to
Stohr, J., 2006 WL 680964, denied franchisor's motion to arbitration any dispute which he has not
dismiss or in the alternative to compel arbitration and stay agreed so to submit.
proceedings. Franchisor appealed.
[Holding:] The Court of Appeals, Shepherd, Circuit Judge, [5] Alternative Dispute Resolution
held that dispute regarding franchise agreement was not Construction
subject to arbitration clause contained in subsequent e- Under Virginia law, oral franchise agreement
commerce agreement between the parties. was independent of, collateral to, and not
inconsistent with subsequent e-commerce
agreement between franchisor and franchisee,
Affirmed. and thus, pursuant to the “collateral contract
doctrine,” the e-commerce agreement's
arbitration clause was not attributable
West Headnotes (8) to the oral franchise agreement through
the e-commerce agreement's merger clause;
e-commerce agreement, which required
[1] Alternative Dispute Resolution franchisee to install and service franchisor's
Scope and Standards of Review products sold from franchisor's website, did
The Court of Appeals reviews de novo the not address franchisee's ability to promote or
district court's denial of a motion to compel sell franchisor's products, the subject of the
arbitration based on contract interpretation. prior oral franchise agreement.
[2] Alternative Dispute Resolution [6] Evidence

Completeness of Writing and

Presumption in Relation Thereto; Opinion
Integration
SHEPHERD, Circuit Judge.
Under Virginia law, parol evidence
is inadmissible to vary, contradict, AMF Bowling Products, Inc. and AMF Billiards &
add to, or explain the terms of Games LLC (collectively “AMF”) appeals from an
a complete, unambiguous, unconditional order of the district court 1 denying its motion to
written instrument. dismiss or in the alternative to compel arbitration and
stay proceedings with regard to claims brought by
Suburban Leisure Center, Inc. (“Suburban”) after AMF
terminated its oral franchise agreement with Suburban.
[7] Evidence We possess jurisdiction of this appeal pursuant to the
Contracts in General Federal Arbitration Act (“FAA”), 9 U.S.C. § 16(a)(1)
Under Virginia law, a merger clause does (C), providing that “[a]n appeal may be taken from ...
not prohibit the admission of parol evidence *525 an order ... denying an application ... to compel
which does not contradict or vary the terms of arbitration....” For the reasons discussed below, we
the contract. affirm.
I.
[8] Evidence
Prior and Contemporaneous Collateral For the purpose of ruling on AMF's motion to dismiss
Agreements or in the alternative to compel arbitration, the district
court assumed the truth of the allegations in Suburban's
Under Virginia law, the parol evidence rule
complaint. With the limited purpose of reviewing the
does not exclude parol proof of a prior
district court's ruling, we, too, view Suburban's allegations
or contemporaneous oral agreement that
as true. See Palcko v. Airborne Express, Inc., 372
is independent of, collateral to and not
F.3d 588, 597 (3d Cir.2004) (stating that a motion to
inconsistent with the written contract, and
compel arbitration is generally treated as a motion to
which would not ordinarily be expected
dismiss for failure to state a claim upon which relief
to be embodied in the writing, and thus
can be granted); cf. Manion v. Nagin, 394 F.3d 1062,
a merger clause gives rise to no more
1065 (8th Cir.2005) (viewing factual allegations as true
than a presumption that all the parties'
for purposes of motion to dismiss). Accordingly, the
prior agreements merged into the written
following facts are undisputed for purposes of this appeal.
agreement.
Suburban distributes indoor and outdoor lawn and leisure
Cases that cite this headnote equipment, and AMF manufactures pool tables and pool
table accessories. The parties entered into an oral franchise
agreement, whereby they agreed that Suburban would
have the right use the AMF trade name, trademark, or
Attorneys and Law Firms service mark in order to sell AMF's line of pool tables
and related accessories from Suburban's stores located in
*524 Vincint Keady, argued, St. Louis, MO, for the St. Louis, Missouri region. Subsequently, the parties
appellant. executed a written E-Commerce Dealer Agreement (“e-
commerce agreement”), in which Suburban agreed to
Matthew S. McBride, argued, St. Louis, MO, for appellee. provide delivery and installation of AMF's products sold
by AMF via its website to customers in Suburban's
Before MELLOY, BENTON and SHEPHERD, Circuit
specified areas.
Judges.

With regard to the e-commerce agreement, Section 14 of this appeal is also governed by the FAA, 9 U.S.C. §
provides that “[t]he determination of any dispute or claim 1 et seq., because the e-commerce agreement “involved
arising under the Agreement or any invoice or agreement interstate commerce.” Amchem Prods., Inc. v. Newport
executed pursuant to this Agreement will be settled by News Circuit Court Asbestos Cases, 264 Va. 89, 563 S.E.2d
binding arbitration in Richmond, Virginia.” Further, 739, 743 (2002).
Section 15 states that the e-commerce “[a]greement
constitutes the entire agreement between the parties and [2] [3] [4] Pursuant to the FAA, we construe the
supercedes all prior agreement[s], oral and written.” arbitration clause resolving any doubts in favor of
Finally, Section 15 goes on to state that the e-commerce arbitration. Am. Recovery Corp. v. Computerized Thermal
agreement “will be construed in accordance with the Imaging, Inc., 96 F.3d 88, 92 (4th Cir.1996) (citing Moses
laws of Virginia without regard to their conflict of laws H. Cone Mem'l Hosp. v. Mercury Constr. Co., 460 U.S. 1,
provisions.” 24-25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)). “Thus, we
may not deny a party's request to arbitrate an issue ‘unless
On August 25, 2005, AMF sent a termination letter it may be said with positive assurance that the arbitration
stating that Suburban would be “required to cease clause is not susceptible of an interpretation that covers
promoting” AMF's line of pool tables and accessories the asserted dispute.’ ” Id. (quoting United Steelworkers
within sixty days. The letter made no mention of the of Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574,
e-commerce agreement. Suburban filed suit in Missouri 582-83, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960)). However,
state court alleging that it was entitled to damages from a “party cannot be required to submit to arbitration
the cancellation of the oral franchise agreement without any dispute which he has not agreed so to submit.”
the requisite notice pursuant to Missouri Revised Statute Amchem Prods., Inc., 563 S.E.2d at 743 (quoting United
section 407.405 as well as recoupment for improvements Steelworkers of Am., 363 U.S. at 582, 80 S.Ct. 1347).
it had made to its stores in reliance on the oral franchise When determining whether a contractual dispute exists
agreement. See Mo. Ann. Stat. § 407.405 (West 2001). that is subject to arbitration, Virginia courts examine
Pursuant to 28 U.S.C. § 1441, AMF removed the matter the contract's language and apply the commonwealth's
to federal court. Upon removal, AMF filed a motion substantive contract law. Id.
to dismiss or in the alternative to compel arbitration
and stay proceedings pursuant to the FAA, 9 U.S.C. § [5] On appeal, AMF contends that the e-commerce
3. Because the district court found that the e-commerce agreement's merger clause incorporates and subsumes
agreement did not address Suburban's ability to promote the oral franchise agreement such that the e-commerce
or sell AMF's products, it concluded that Suburban's agreement is the sole agreement between the parties
underlying claims did not arise under the e-commerce necessitating arbitration of the present dispute. “[A]
agreement. Accordingly, the district court denied AMF's ‘merger clause’ (sometimes an ‘integration’ or ‘entire
motion to compel arbitration of the dispute. AMF appeals agreement’ clause) ... ‘merges' prior negotiations into the
the district court's order. writing. A typical clause includes a recital that the writing
‘contains the entire agreement of the parties.’ ” 2 E. Allan
Farnsworth, Farnsworth on Contracts § 7.3 (3d ed.2004);
see, e.g., Prospect Dev. Co., Inc. v. Bershader, 258 Va.
II.
75, 515 S.E.2d 291, 296 (1999) (observing that a contract
[1] We review de novo the district court's denial of contained an “integration clause” stating “that in the
a motion to compel arbitration based on contract absence of an amendment in writing, the contract contains
interpretation. *526 Nitro Distrib., Inc. v. Alticor, Inc., the final and entire agreement between the parties”);
453 F.3d 995, 998 (8th Cir.2006). As both Missouri Spotsylvania County Sch. Bd. v. Seaboard Surety Co.,
and Virginia recognize the validity of the choice of laws 243 Va. 202, 415 S.E.2d 120, 126 (1992) (noting that “a
provision contained in the e-commerce agreement, we merger clause in the contract stated that the document
apply the law of Virginia to resolve this appeal. See Paul ‘represent[ed] the entire and integrated agreement between
Bus. Sys., Inc. v. Canon U.S.A., Inc., 240 Va. 337, 397 the parties' ”).
S.E.2d 804, 807 (1990); Kagan v. Master Home Prods.
Ltd., 193 S.W.3d 401, 407 (Mo.Ct.App.2006). Resolution

[6] [7] Merger clauses “purport to contractually require discussed Shevel's and stated that its “focus then was
on whether parol evidence was admissible in the face of
application of the parol evidence rule to the parties'
a [contract] silent on the subject matter of an alleged
agreement.” 11 Richard A. Lord, Williston on Contracts
separate agreement yet stating that it was the complete
§ 33:21 (4th ed.1999). In Virginia, “parol evidence ... is
agreement of the parties. We said such evidence was
inadmissible to vary, contradict, add to, or explain the
admissible.” J.E. Robert Co. v. J. Robert Co., Inc. of
terms of a complete, unambiguous, unconditional written
Virginia, 231 Va. 338, 343 S.E.2d 350, 353 (1986).
instrument.” (Shevel's Inc.-Chesterfield v. Se. Assocs., Inc.,
228 Va. 175, 320 S.E.2d 339, 343 (1984)). However, a
This case involves two distinct agreements between
merger “clause does not prohibit the admission of parol
Suburban and AMF. Suburban and AMF initially
evidence which does not contradict or vary the terms of
entered into the oral franchise agreement providing for
the ... contract....” Prospect Dev. Co., Inc., 515 S.E.2d
Suburban's promotion and sale of AMF products from
at 296. In this case, as the district court found, the e-
Suburban's stores. Subsequently, the parties executed the
commerce agreement does not address Suburban's ability
written e-commerce agreement, which required Suburban
to promote or sell AMF's products, which is the subject
to install and service AMF products sold by AMF through
of the prior oral franchise agreement. Accordingly, the
its website to its customers. Therefore, the oral franchise
prior oral agreement necessarily does not seek *527
agreement addresses a contractual relationship between
to contradict or supplement the subsequent e-commerce
the parties that is not covered in any manner by the
agreement that addresses a different subject, AMF's
e-commerce agreement. As a result, the oral franchise
selling its own product from the AMF website. Thus, these
agreement is “independent of, collateral to, and not
facts do not implicate the parol evidence rule.
inconsistent with” the e-commerce agreement within the
meaning of Shevel's. See Shevel's, 320 S.E.2d at 343. Thus,
[8] Further, the e-commerce agreement does not
the parties did not intend for the e-commerce agreement
extinguish the prior oral franchise agreement because
to be their sole agreement such that the merger clause does
it constitutes an independent agreement under the
not subsume the prior oral franchise agreement pursuant
“collateral contract doctrine.” Because “the parol
to Virginia's “collateral contract doctrine.” Because the
evidence rule does not exclude parol proof of a prior
agreements are independent of each other, the e-commerce
or contemporaneous oral agreement that is independent
agreement's arbitration language cannot be attributed
of, collateral to and not inconsistent with the written
to the oral franchise agreement, even construing the
contract, and which would not ordinarily be expected to
language in favor of arbitration. Accordingly, Suburban
be embodied in the writing,” a merger clause gives rise
has not agreed to arbitrate its claims in the underlying suit.
to no more than a presumption that all the parties' prior
agreements merged into the written agreement. Shevel's,
320 S.E.2d at 343 (quoting Pierce v. Plogger, 223 Va.
116, 286 S.E.2d 207, 209 (1982)). The Virginia Supreme III.
Court refers to this exception to the parol evidence rule as
the “collateral contract doctrine.” Id. The Shevel's Court We conclude that the district court did not err in denying
determined that this doctrine required the admission of a AMF's motion to dismiss or in the alternative to compel
prior oral agreement into evidence, despite a merger clause arbitration and stay proceedings, and affirm.
in the parties' subsequent written agreement, because the
prior oral agreement was a “different agreement” that
All Citations
did not seek “to vary or explain” the subsequent written
agreement. Id. In a later case, the Virginia Supreme Court 468 F.3d 523
Footnotes
1 The Honorable Donald J. Stohr, United States District Judge for the Eastern District of Missouri.

Subway Equipment Leasing Corp. v. Forte, 169 F.3d 324 (1999)

Declined to Follow by Schuster v. Prestige Senior Management, L.L.C.,
Wash.App. Div. 3, April 28, 2016
169 F.3d 324 [1] Alternative Dispute Resolution
United States Court of Appeals, Scope and standards of review
Fifth Circuit. Court of Appeals reviews the issue of whether
a party's conduct amounts to a waiver of
SUBWAY EQUIPMENT LEASING CORPORATION; arbitration de novo.
Subway Restaurants, Inc., Plaintiffs–Appellants,
Bonnie FORTE, wife of/and; Charles N. Forte;
Selena Rankins, wife of/and; Frank R. Rankins; [2] Federal Courts
Dorothy Sims, wife of/and; Earl Sims, Jr., Estoppel and waiver
Defendants–Counter Claimants–Appellees, Factual findings underlying a district court's
v. waiver of arbitration determination are
Doctor's Associates, Inc., doing business reviewed for clear error.
as Subway; Frederick A. DeLuca,
Counter Defendants–Appellants.
Earl Sims; Subway Development of
Louisiana, Inc.; Subway Management
Evidence
Group of Louisiana, Plaintiffs–Appellees,
v. There is a strong presumption against waiver
of arbitration; accordingly, a party alleging
Doctor's Associates, Inc.; Frederick DeLuca;
waiver of arbitration must carry a heavy
Subway Restaurants, Inc., Defendants–Appellants.
burden.
No. 97–31236.
|
March 24, 1999.
Sandwich shop franchisees brought action against Suing or participating in suit
franchisor and related entities. The United States District
Party only invokes the judicial process, as
Court for the Eastern District of Louisiana, Patrick E.
required to establish waiver of arbitration,
Carr, J., denied defendants' motion for a stay pending
to the extent it litigates a specific claim it
arbitration, and they appealed. The Court of Appeals, E.
subsequently seeks to arbitrate.
Grady Jolly, Circuit Judge, held that: (1) franchisor did
not invoke judicial process, so as to waive arbitration, 71 Cases that cite this headnote
when affiliated entities sued franchisees for breach of
equipment and real estate leases; (2) franchisor did
not invoke judicial process by allegedly encouraging
affiliates to file involuntary bankruptcy petitions against
franchisees; and (3) Federal Arbitration Act (FAA) Sandwich shop franchisor did not invoke
required stay to extend to claims against franchisor's judicial process, so as to waive arbitration of
affiliates. franchisees' claims under franchise agreement,
when affiliated entities sued the franchisees for
Reversed and remanded. breach of equipment and real estate leases;
affiliates' actions involved claims different for
the one franchisor sought to arbitrate.


[6] Alternative Dispute Resolution *325 Edward Wood Dunham, Wiggins & Dana,
Suing or participating in suit New Haven, CT, for Plaintiffs–Appellants and Counter
Sandwich shop franchisor did not invoke Defendants–Appellants.
a judicial process to the prejudice of its
franchisees, so as to waive arbitration of James C. Ferguson, Ferguson & Associates, Baton Rouge,
franchisees' claims under franchise agreement, LA, David Maxwell Duree, Reinert & Duree, St. Louis,
by allegedly encouraging its affiliates to MO, for Plaintiffs–Appellees and Defendants–Counter
file involuntary bankruptcy petitions against Claimants–Appellees.
franchisees to delay arbitration, where
Appeals from the United States District Court for the
franchisees never challenged arbitrator's
Eastern District of Louisiana.
decision to hold arbitration in abeyance
pending bankruptcy proceeding, and there Before JOLLY, DUHÉ and EMILIO M. GARZA,
was no showing that franchisor desired Circuit Judges.
to resolve the arbitrable dispute through
litigation. Opinion
35 Cases that cite this headnote E. GRADY JOLLY, Circuit Judge:
Doctor's Associates, Inc. (“DAI”) and companies

[7] Alternative Dispute Resolution associated with DAI appeal a district court ruling denying
Suing or participating in suit their motion for a stay pending arbitration. The district
To invoke the judicial process, as required court held that DAI and its associates had invoked
to waive arbitration, the waiving party must the judicial process thereby creating a significant delay
do more than call upon unrelated litigation that prejudiced the opposing parties and that DAI had
to delay an arbitration proceeding; the party therefore waived its right to arbitration. Because DAI has
must, at the very least, engage in some overt not invoked the judicial process with respect to the claim
act in court that evinces a desire to resolve it wishes to arbitrate and because there is no evidence that
the arbitrable dispute through litigation rather the opposing parties have been prejudiced by any delay,
than arbitration. we reverse.
I
Particular cases This case involves a franchisor-franchisee relationship
Federal Arbitration Act (FAA) required stay gone sour. Subway, the chain sandwich shop, sells
pending arbitration of franchisees' claims franchises through DAI. Earl and Dorothy Sims and
against sandwich shop franchisor to extend various other partners (“the franchisees”), ran four
to franchisees' claims against franchisor's Subway franchises in the 1980's. Earl Sims was also
affiliates, although affiliates were not parties a Subway Development Agent (“D.A.”) for the Baton
to arbitration agreement, where franchisees' Rouge area and, on a temporary basis, for the New
claims were based entirely on their rights Orleans area. The franchisees' agreements with DAI,
under franchise agreement, which contained contained broad arbitration clauses. Earl Sims's D.A.
arbitration clause. 9 U.S.C.A. § 3. contract with DAI contained a similar arbitration clause.
28 Cases that cite this headnote The franchisees subletted real estate and leased equipment
from DAI's affiliated companies, Subway Restaurants,

Inc. (“SRI”) and Subway Sandwich Shops (“SSS”), both In the interim, the franchisees had filed two lawsuits of
of which leased real estate, and Subway Equipment their own. In July 1989, they filed a suit in the District
Leasing (“SEL”), which leased store equipment. The Court for East Baton Rouge Parish for damages against
franchisees' real estate subleases and the equipment leases DAI, DeLuca, and SSS. That case was stayed while
did not contain arbitration clauses. the bankruptcy case was pending and, after discharge,
the state granted DAI's motion to stay the matter
In March 1988, Earl Sims, much to his displeasure, was pending arbitration. In February of 1990, Sims sued
replaced by another D.A. in the New Orleans area. In May DAI and DeLuca in the Orleans Parish District Court.
of 1988, he filed an arbitration demand with the American DAI removed the suit to federal court, where it was
Arbitration Association (“AAA”), claiming that DAI consolidated with the 1988 federal case.
had breached the D.A. agreement. Subsequently, the
franchisees defaulted on their real estate and equipment The consolidated case was stayed pursuant to the
leases. Shortly thereafter, the litigation began in earnest. bankruptcy proceedings. At approximately the same time,
pursuant to a letter sent by counsel for DAI, the AAA
In November 1988, SEL and SRI sued the franchisees in decided to hold Earl Sims's arbitration in abeyance
United States District Court for the Eastern District of until the bankruptcy proceedings were resolved. Sims
Louisiana to recover amounts due under the equipment apparently did not object to the arbitration proceeding
and real estate contracts for one of the franchises being held in abeyance. When the bankruptcy proceedings
(“the 1988 federal case”). The claims made by SEL concluded in 1996, the franchisees moved to restore their
and SRI were under their respective contracts with the actions in the consolidated case to the active docket. After
franchisees, for which there were no arbitration clauses. the district court reopened the franchisees' actions, DAI
The franchisees responded by filing what they styled as a filed a demand for arbitration with the AAA and moved to
counterclaim against DAI and Frederick DeLuca, one of stay the litigation pending arbitration. The district court
DAI's principals. Although neither DAI nor DeLuca were denied the motion, reasoning that DAI waived its right to
parties to the lawsuit, the franchisees claimed that they compel arbitration. DAI has filed a timely appeal.
should be joined as SEL and SRI were merely extensions
of DAI. The district court apparently permitted this On appeal, DAI makes two arguments. First, DAI
1
joinder. The counterclaim *326 alleged similar claims contends that the district court erred when it held that
to those made by Sims in his arbitration demand. DAI had waived its right to arbitrate claims related to the
D.A. agreement. Second, DAI argues that, provided it is
A day before the franchisees filed their counterclaim in the correct that the district court should stay the franchisees'
1988 federal case, SEL filed an involuntary bankruptcy claims against DAI pending arbitration, then the district
petition against the franchisees. By 1990, SEL, SRI and court should also stay the claims against SEL, SRI, and
SSS had all filed separate, amended involuntary petitions SSS as well. We address each argument in turn.
against the franchisees in bankruptcy court. None of
the bankruptcy petitions involved arbitrable claims. In
December of 1990, the bankruptcy court entered orders II
for relief, granting the involuntary petition in each
proceeding. The district court reversed the bankruptcy [1] [2] We review the issue of whether a party's conduct
court, holding that SEL, SRI, and SSS were not separate amounts to a waiver of arbitration de novo. Walker v.
entities for purposes of 11 U.S.C. § 303(b)(1). On appeal, J.C. Bradford & Co., 938 F.2d 575, 577 (5th Cir.1991).
we reversed the holding that SEL, SRI, and SSS were The factual findings underlying a district court's waiver
separate entities. Matter of Sims, 994 F.2d 210 (5th determination are reviewed for clear error. See id. at 576.
Cir.1993). The franchisees then appealed to the Supreme “Waiver will be found when the party seeking arbitration
Court, which denied certiorari in 1994. Sims v. Subway substantially invokes the judicial process to the detriment
Equipment Leasing Corporation, 510 U.S. 1049, 114 S.Ct. or prejudice of the other party.” Miller Brewing Co. v. Fort
702, 126 L.Ed.2d 669 (1994). The bankruptcy proceedings Worth Distrib. Co., 781 F.2d 494, 497 (5th Cir.1986).
were finally resolved in 1996.

[3] There is a strong presumption against waiver of and later seeks to arbitrate that same issue.” Doctor's
arbitration. See, e.g., Lawrence v. Comprehensive Business Associates v. Distajo, 107 F.3d 126, 134 (2d Cir.1997),
Services Co., 833 F.2d 1159, 1164 (5th Cir.1987) (“Waiver cert. denied, 522 U.S. 948, 118 S.Ct. 365, 139 L.Ed.2d
of arbitration is not a favored finding and there is a 284 (1997) (“Distajo II ”). However, in Distajo II, the
presumption against it.”); Moses H. Cone Mem'l Hosp. court held that, even where DAI directed its affiliates to
v. Mercury Constr. Corp., 460 U.S. 1, 24–25, 103 S.Ct. sue pursuant to cross-default clauses based on franchise
927, 74 L.Ed.2d 765 (1983) (“[A]s a matter of law, any agreement breaches, there was no waiver of DAI's right to
doubts concerning the scope of arbitrable issues should be arbitrate the franchisees' claims. Id. at 132.
resolved in favor of arbitration.”). Accordingly, a party
alleging waiver of arbitration must carry a heavy burden.
Associated Builders v. Ratcliff Constr. Co., 823 F.2d 904,
III
905 (5th Cir.1987).
In this case, the arbitration clause in the D.A. agreement
Walker provides an example of this court's “hesitat[ion] covers “[a]ny controversy or claim arising out of or
to find that a party has waived its contractual right to relating to this contract or the breach thereof.” This
arbitration.” 938 F.2d at 577. In Walker, the plaintiffs language clearly covers the franchisees' claims against
sued in state court, alleging state securities law violations. DAI. Absent waiver, the FAA would require the district
*327 Instead of immediately demanding arbitration, court to stay the litigation pending arbitration. See In re
the defendant answered the complaint and participated Complaint of Hornbeck Offshore Corp., 981 F.2d 752, 754
in discovery. Thirteen months later, after the plaintiffs (5th Cir.1993).
moved to transfer the case, the defendant sought to
enforce its contractual right to arbitration. Despite the The district court provided the following explanation for
defendant's delay and participation in the lawsuit, this concluding that DAI waived its right to arbitrate:
court held that the defendant had not waived arbitration
because the plaintiffs failed to show that they were [The] disputes in these actions were
“materially prejudiced” by the delay. Id. at 578. not arbitrated at their inception
because of the actions of the
Before proceeding to the arguments in this case, we should Subway entities. Movants invoked
note that the Second Circuit has addressed the waiver issue the judicial process, in this court
in great detail with respect to litigation involving one of and in bankruptcy court, creating
the parties before this court, DAI. In Doctor's Associates, an eight year delay which has
Inc. v. Distajo, the Second Circuit considered and rejected prejudiced the opposing parties.
challenges to the arbitration clause in a Subway franchise Movants, the Subway entities,
agreement. 66 F.3d 438 (2d Cir.1995) (“Distajo I ”), cert. waived their right to arbitration.
denied, 517 U.S. 1120, 116 S.Ct. 1352, 134 L.Ed.2d 520
DAI argues that the district court erred when it concluded
(1996). The court held that “[i]f the alleged violations of
that DAI invoked the judicial process.
the subleases were premised on violations of the franchise
agreement (which DAI was contractually bound to resolve
DAI argues that it has not engaged in any litigation on
through arbitration) then DAI did litigate substantial
the merits of the claims it is seeking to arbitrate. None
issues going to the merits, and the only remaining question
of the actions brought by a DAI affiliate involved claims
will be whether the franchisees suffered prejudice from the
arising out of a contract containing an arbitration clause.
eviction proceedings.” Id. at 457.
SEL and SRI brought the 1988 federal action for breach
of their respective contracts, neither of which contained
In a subsequent appeal of Distajo I, the Second Circuit
arbitration clauses. The only other action initiated by
further delved into the meaning of prejudice for purposes
a DAI affiliate is the bankruptcy proceeding, which
of a waiver of an arbitration agreement: “prejudice ...
again did not involve arbitrable claims. In contrast, the
refers to the inherent unfairness—in terms of delay,
franchisees have, on three separate occasions, sought to
expense, or damage to a party's legal position—that occurs
litigate arbitrable claims related to the D.A. agreement:
when the party's opponent forces it to litigate an issue
(1) in their counterclaim in the 1988 federal case; (2) in

their petition filed in Baton Rouge Parish; and (3) in their agent, or precursor to DAI. Even if the affiliates and DAI
petition filed in Orleans Parish. On its face, at least, it were one and the same, DAI still would not have invoked
would appear that it is the franchisees, not DAI, that have the judicial process.
invoked the judicial process.
[6] The franchisees further argue that DAI encouraged its
The franchisees make two arguments to support their affiliates to file actions against the franchisees so that DAI
claim that DAI has invoked the judicial process to their could postpone the arbitration proceeding. This argument
detriment. First, they argue that DAI and its affiliates is a relatively novel one. The franchisees essentially
are so related, and the claims brought by the affiliates contend that by using the bankruptcy proceeding as an
so inextricably intertwined, that DAI *328 invoked the excuse to delay the Simses' arbitration, DAI invoked
judicial process when its affiliates brought the 1988 federal a judicial process (the bankruptcy proceeding) to the
action and the bankruptcy action. The franchisees second prejudice of the franchisees (who were subjected to an
argument is that DAI's affiliates acted as an agents for eight-year delay). Even if we accepted the reasoning of
DAI in filing the bankruptcy proceeding so that DAI this argument, which we do not, the franchisees' argument
could stay Sims's arbitration proceeding. would still fail on the record before us. DAI did request
that Sims's arbitration be held in abeyance pending the
[4] The franchisees contend that the district court bankruptcy proceeding and all of the parties now agree
correctly concluded that DAI invoked the judicial process that there was no legally binding reason for the arbitrator
through its affiliates, insisting that the affiliates were to do so. The franchisees, however, never challenged the
DAI's alter egos or at least its agents. 2 This argument arbitrator's decision. We will not construe a decision to
brings up an issue we addressed in Lawrence, and which delay arbitration as prejudicial to the franchisees, when
the Second Circuit has addressed in greater detail since the franchisees never objected to that delay.
—whether a party can invoke the judicial process if it
litigates a non-arbitrable claim against a party with whom [7] More importantly, the reasoning used by the
it has arbitrable claims. Lawrence, 833 F.2d at 1165 franchisees is ultimately specious. As we make clear today,
(holding that franchisor who sued franchisees had not in order to invoke the *329 judicial process, a party must
invoked the judicial process for purposes of a subsequent have litigated the claim that the party now proposes to
dispute); Distajo II, 107 F.3d at 132–33 (“only prior arbitrate. Here, the franchisees argue that, by asserting
litigation of the same legal and factual issues as those unrelated litigation—the bankruptcy proceeding—as a
the party now wants to arbitrate results in waiver of basis for delaying the arbitration proceeding, DAI has
the right to arbitrate”); see also Gingiss Int'l, Inc. v. “invoked the judicial process” and therefore waived its
Bormet, 58 F.3d 328, 330(holding that a franchisor “did right to arbitrate. This argument, however, confuses our
not waive ... [his arbitrable] claims by prosecuting the use of the term “invoke” in past cases. We use the
unlawful detainer action in California state court because term to describe the act of implementing or enforcing
that action involved different issues”). We hold today that the judicial process, not the act of calling upon for
a party only invokes the judicial process to the extent it support or assistance, as say, one would invoke a spirit
litigates a specific claim it subsequently seeks to arbitrate. or the elements. 3 Thus, to invoke the judicial process,
the waiving party must do more than call upon unrelated
[5] The franchisees argue, however, that the dispute over litigation to delay an arbitration proceeding. The party
the D.A. agreement is so inextricably intertwined with must, at the very least, engage in some overt act in court
the actions brought by DAI's affiliates that they amount that evinces a desire to resolve the arbitrable dispute
to the same action. We cannot agree. DAI's affiliates through litigation rather than arbitration. There is no
sought to recover for obligations under their respective evidence that DAI's actions or, assuming arguendo that
contracts. These contracts, all related to obligations for DAI's associates' actions can be imputed to DAI, the
leasing equipment and real estate, in no instance involved actions of SEL, SRI, or SSS amount to this threshold
the D.A. agreement between Sims and DAI. Because the showing of an attempt to invoke the judicial process.
actions brought by the DAI affiliates involved claims that
are different from the one DAI now seeks to arbitrate, it We therefore find no basis for concluding that DAI should
does not matter whether DAI's affiliates were the alter ego, be denied an opportunity to arbitrate this claim. DAI

did not invoke the judicial process with respect to the have no right to arbitration, the claim brought by the
franchisees is based entirely on the franchisees' rights
arbitrable claim at issue here. Even if the franchisees could
under the D.A. contract. We therefore fail to see how
show that DAI intentionally brought the bankruptcy
litigation could proceed on the franchisees' claims without
proceeding to delay arbitration, the franchisees have not
adversely affecting DAI's right to arbitration. See, e.g.,
shown that they were prejudiced as a result of that stay.
Kroll v. Doctor's Associates, Inc., 3 F.3d 1167, 1171 (7th
We therefore hold that the district court erred when it
Cir.1993) (stating that a decision about whether to grant
denied DAI's motion for a stay pending arbitration.
a stay should be motivated by the court's “concern that
litigation against a party not bound by an arbitration
provision may impair an arbitrator's consideration of
IV claims against a party that is compelled to arbitrate.”).
[8] Having concluded that DAI is entitled to a stay

pending arbitration, we now must address the scope of
the stay order. DAI argues that, even though SEL, SRI, V
and SSS have no right to arbitrate the claims brought
For the foregoing reasons, we hold that DAI, SEL, SRI,
against them by the franchisees, the district court should
and SSS are entitled to a stay pending arbitration of the
stay the litigation with respect to them as well. DAI argues
franchisees' claims against DAI. We therefore REVERSE
that the FAA requires the district court to stay litigation
the district court and REMAND for further proceedings
where issues presented in the litigation are the subject of
not inconsistent with the opinion.
an arbitration agreement. See 9 U.S.C. § 3.
REVERSED and REMANDED.

Based on the record before us, we find merit in DAI's
argument. In Sam Reisfeld & Son Import Co. v. S.A. Eteco,
we held that an order to stay covering claims against all All Citations
defendants was proper, even though two defendant were
not part of the arbitration agreement. 530 F.2d 679, 681 169 F.3d 324
(5th Cir.1976). Although the DAI affiliates themselves
Footnotes
1 This point is not entirely clear. Normally, such a joinder would raise an issue regarding whether DAI and DeLuca were
properly joined under Fed.R.Civ.P. 14(a). Because the 1988 case was subsequently consolidated with the 1990 case,
in which DAI and DeLuca were named defendants, and because this issue was not argued on appeal, we assume that
DAI and DeLuca are proper parties in this appeal.
2 The franchisees concede that, in Matter of Sims, 994 F.2d 210, 217–20 (5th Cir.1993), we held that the bankruptcy court's
finding that DAI's affiliates were not its alter egos was not clearly erroneous. Even so, the appellees note that several
post-Sims cases have found an alter ego relationship between DAI and its affiliates. See Jannotta v. Subway Sandwich
Shops, Inc., 125 F.3d 503, 510 (7th Cir.1997) (noting that DAI did not appeal the jury finding that SSS was DAI's alter
ego); Doctor's Associates, Inc. v. Distajo, 944 F.Supp. 1010, 1014 (D.Conn.1996) (stating that “DAI has conceded that
the leasing companies were its alter egos”); Pine Tree Associates v. Doctors' Associates, Inc., 654 So.2d 735, 739–40
(La.App.1995) (finding sufficient evidence to warrant a trial on the issue of whether DAI's affiliates were its alter egos).
The franchisees also contend that DAI is responsible for SEL's conduct in initiating the involuntary bankruptcy
proceeding because SEL merged into DAI on December 31, 1996. The franchisees claim that, as a Florida corporation,
DAI is “liable and responsible” for SEL's pre-merger conduct pursuant to Fla. Stat. Ann. § 607.1106(1)(c).
Because we need not make a determination of the exact relationship between DAI and its affiliates to resolve the
matter before us, we will not do so.
3 See Webster's Third International Dictionary 1191 (1993). Both uses of “invoke” are accepted definitions. In this context,
however, we cannot see a plausible reading of the term “invoke” that would lead to our treating the “judicial process”
as if it were a specter, ghost, or deity. In this context, we regard the judicial process as a mechanism: to invoke it is
to implement it.


Taft v. Burttram, 254 Ga. 687 (1985)
333 S.E.2d 585

254 Ga. 687
Supreme Court of Georgia. **585 *688 Rex M. Lamb III, Henry D. Fellows, Jr.,
Hurt, Richardson, Garner, Todd & Cadenhead, Atlanta,
TAFT for William H. Taft and Kevin P. Kilroy.
v.
BURTTRAM, Jr., et al. *689 Robert M. Axelrod, Rogers & Hardin, Atlanta,
KILROY Phillip S. McKinney, for H. Dyar Burttram, Jr., et al.
v.
Opinion
BURTTRAM, Jr., et al.
*687 SMITH, Justice.
Nos. 42329, 42330.
| Appellants, William H. Taft and Kevin P. Kilroy, each
Sept. 5, 1985. sued appellees, H. Dyar Burttram, Jr., and Robert
Rosenberg, officers of appellee Norris and Hirshberg,
Former account executives with securities brokerage Inc., for malicious prosecution, libel, abuse of process,
corporation brought action against officers of the slander, wrongful interference with an employment
corporation for malicious prosecution, libel, abuse of relationship, and intentional infliction of emotional harm.
process, slander, wrongful interference with employment Taft and Kilroy appeal the trial court's grants of appellees'
relationship and intentional infliction of emotional harm. motions to stay the lawsuits pending arbitration. The
The Superior Court, Fulton County, William W. Daniel, appeals have been consolidated. We reverse.
J., granted defendants' motions to stay lawsuits pending
arbitration, and plaintiffs appealed. The Supreme Court, Norris and Hirshberg, a securities brokerage business,
Smith, J., held that defendants, by swearing out criminal hired Taft and Kilroy as account executives in August,
warrants against former account executives rather than 1983. Taft and Kilroy resigned in August, 1984, to
arbitrating dispute as required by employment contract, join a similar business. They allege that the appellees
waived right to compel arbitration. altered their employment records to show that they
were terminated for cause, and that the appellees mailed
Reversed. libelous material and related slanderous charges about
them to various people involved in the securities business.
West Headnotes (1) In October, 1984, after requesting the return of certain
information and records to Norris and Hirshberg,
appellee Burttram swore out warrants charging Taft
[1] Alternative Dispute Resolution and Kilroy with theft by taking. He contended that
Performance, Breach, Enforcement, and they had stolen client lists, confirmation slips, and other
Contest of Agreement information regarding Norris and Hirshberg's clients
Officers of securities exchange brokerage when they left Norris and Hirshberg to join the other
corporation, by swearing out criminal business. Taft and Kilroy were arrested on November 2,
warrants against former account executives 1984.
rather than arbitrating dispute as required by
employment contract, waived right to compel On November 6, a Fulton County Magistrate dismissed
arbitration. the charges for lack of probable cause. He stated that
the controversy was best suited for civil court. The
2 Cases that cite this headnote **586 appellees subsequently requested Taft and Kilroy
to submit the dispute to arbitration. Taft and Kilroy filed
the complaints initiating these lawsuits five days later, on
December 12, 1984.

Taft v. Burttram, 254 Ga. 687 (1985)
333 S.E.2d 585
1. Taft and Kilroy contend that the trial court erred in Manhattan Industries, 754 F.2d 457, 461 (2d Cir.1985), as
the dispute involved in the criminal case and this case, and
staying their lawsuits pending arbitration.
the parties involved in both cases for all practical purposes
Under the agreement that the appellants signed prior are identical. 2 The appellees, in choosing the forum of
to their employment with Norris and Hirshberg, they criminal law rather than arbitration in their first attempt
“[agreed] to arbitrate any dispute, claim, or controversy” to sort out their dispute with Taft and Kilroy, waived their
that the National Association of Securities Dealers right to compel arbitration. To put it simply, appellees
[NASD] requires to be arbitrated. The NASD requires its cannot run with the hare and the hounds. Accordingly
members to arbitrate “any dispute, claim, or controversy we find that the trial court should have denied appellees'
arising out of or in connection with the business of any motions for stay of these lawsuits pending arbitration.
member of the Association ...” (Emphasis supplied.) As
the appellees note, this procedure broadly encourages the 2. Following the holding in Division 1, we need not reach
members to arbitrate their disputes. appellants' remaining enumerations of error.
When the appellees failed to abide by this policy, in Judgment reversed.

swearing out criminal warrants against the appellants
“instead of seeking to arbitrate, this was the clearest kind
of waiver on their part of an agreement to arbitrate.” 1 All the Justices concur.
Morales Rivera v. Sea Land of Puerto Rico, 418 F.2d
725, 726 (1st Cir.1969). Any other holding would be All Citations
contrary to the clear federal policy of encouraging parties
254 Ga. 687, 333 S.E.2d 585
to resolve disputes through arbitration, rather than a
resort to the courts. See Sweater Bee By Banff, Ltd. v.
Footnotes
1 Here, the party who initiated legal proceedings subsequently seeks arbitration, and the party who defended that action
claims waiver by inconsistency. This distinguishes this case from waiver cases in which the party defending the initial
action seeks arbitration belatedly and the party initiating the action claims waiver. See, e.g., Sweater Bee, infra.
2 Compare Amalgamated Local No. 55, etc. v. Metal and Alloy Division, 396 F.Supp. 667 (W.D.N.Y.1975).

Tuscan Builders, LP v. 1437 SH6 L.L.C., 438 S.W.3d 717 (2014)

Distinguished by Cooper Industries, LLC v. Pepsi-Cola Metropolitan
Bottling Co., Inc., Tex.App.-Hous. (14 Dist.), August 25, 2015
438 S.W.3d 717 Suing or participating in suit
Court of Appeals of Texas, Party waives arbitration clause by
Houston (1st Dist.). substantially invoking judicial process to
other party's detriment or prejudice.
TUSCAN BUILDERS, LP, Appellant
1437 SH6 L.L.C. d/b/a Sweetwater Aesthetic
SPA & Wellness Center, Shelena C. Lalji, [3] Alternative Dispute Resolution
M.D., P.A. d/b/a Dr. Shel Wellness & Medical Suing or participating in suit
SPA and Lalji Dental, P.C. d/b/a Lake Party substantially invokes judicial process,
Pointe Dental And Specialty, Appellees. so as to waive arbitration clause, if it
takes specific and deliberate actions that are
No. 01–13–00685–CV. inconsistent with the right to arbitrate or if it
| actively tries, but fails to achieve, satisfactory
May 15, 2014. result through litigation before turning to
arbitration.
Synopsis
Background: Commercial building owners sued builder 2 Cases that cite this headnote
for breach of warranty associated with alleged
construction defects. The 151st District Court, Harris
County, denied builder's motion to compel arbitration. [4] Alternative Dispute Resolution
Builder appealed. Suing or participating in suit
For purposes of a waiver of arbitration
agreement, prejudice refers to inherent
unfairness caused by party's attempt to have it
[Holding:] On rehearing, the Court of Appeals, Jane
both ways by switching between litigation and
Bland, J., held that builder substantially invoked judicial
arbitration to its own advantage.
process to detriment of owners.
Affirmed and remanded.

Evidence
Courts apply strong presumption against
West Headnotes (10)
waiver of arbitration and resolve any doubt on
the issue in favor of arbitration.
[1] Estoppel
Nature and elements of waiver Cases that cite this headnote
Estoppel
Implied waiver and conduct constituting [6] Alternative Dispute Resolution
waiver Suing or participating in suit
“Waiver ” is the intentional relinquishment For waiver of arbitration agreement to have
of known right or intentional conduct occurred, appellant must, at the very least,
inconsistent with claiming that right. have engaged in some overt act in court
that evinced a desire to resolve the same

arbitrable dispute through litigation rather and physically inspected building, with the
than arbitration. trial setting less than a month away.

Suing or participating in suit Presentation and reservation of grounds
In determining whether party waived for review
arbitration clause, courts can consider, among Builder waived any complaint about
other factors: (1) whether movant for evidentiary value of counsel's statement
arbitration was plaintiff, who chose to file in regarding status of discovery, as relating to
court, or defendant, who merely responded; builder's motion to compel arbitration of
(2) when movant learned of arbitration contract dispute, by failing to object in trial
clause and how long movant delayed before court.
seeking arbitration; (3) amount of movant's
pretrial activity related to merits rather than 1 Cases that cite this headnote
arbitrability or jurisdiction; (4) amount of
discovery conducted; and (5) whether movant
sought judgment on the merits.
*718 Michael B. Gerstle, Patrick T. Mulry, Gerstle,
Minissale & Snelson, LLP, Dallas, TX, for Appellant.
Waiver or Estoppel E. Michelle Bohreer, Todd Zucker, Pritesh Soni, Bohreer
Courts analyze whether waiver of arbitration & Zuccker LLP Houston, TX, for Appellees.
agreement occurred based on the totality of
the circumstances presented in each case. Panel consists of Chief Justice RADACK and Justices
BLAND and HUDDLE.
[9] Alternative Dispute Resolution OPINION ON REHEARING

JANE BLAND, Justice.
Builder of commercial building substantially
invoked judicial process to the prejudice of Appellant Tuscan Builders, LP has moved for rehearing
building owners in owners' suit against builder and en banc consideration. We grant rehearing, withdraw
for breach of warranty associated with alleged our opinion and judgment of January 30, and issue the
construction defects, such that builder waived following in their stead. We dismiss as moot Tuscan's
arbitration clause incorporated by reference motion for en banc consideration. Our disposition of the
in construction contract; builder did not appeal remains unchanged.
accompany its answer or third-party claims
against subcontractors with any notice of In this construction dispute, a builder appeals the trial
intent to pursue arbitration, builder joined in court's order denying its motion to compel arbitration
motions that prolonged discovery period and against the building's owners. The builder contends that
postponed trial date and mediation deadline the trial court erred in finding that the builder had
to allow additional discovery on the merits, waived enforcement of an arbitration clause by invoking
and by the time builder moved to compel the judicial process and delaying its effort to compel
arbitration, parties had completed written arbitration for more than a year. Finding no error, we
discovery, designated their experts for trial, affirm.

currently in effect. The demand for

arbitration shall be filed in writing
with the other party to the Contract
*719 Background
and with the American Arbitration
The contract dispute Association, and a copy shall be filed
The commercial building owners, 1437 SH6 L.L.C. d/b/ with the Architect.
a Sweetwater Aesthetic Spa & Wellness Center, Shelena
C. Lalji, M.D., P.A. d/b/a Dr. Shel Wellness & Medical After it moved in, Sweetwater noticed water leaking into
Spa, and Lalji Dental, P.C. d/b/a Lake Pointe Dental the building. It informed Mirador and Tuscan of the
and Specialty (collectively, Sweetwater) sued Tuscan, the problem, and they attempted to repair the leaks. During
builder, for breach of warranty associated with alleged a rainstorm in July 2010, however, significant water
construction defects. Sweetwater had contracted with a leaks appeared in the exterior walls and roof, causing
construction design team, the Mirador Group, Inc., and substantial damage to the structure and interior walls.
an architect, Todd Blitzer, to design a building suitable Sweetwater again sought to have Mirador and Tuscan
for a dental office, a wellness clinic, and other health- repair the building, but Sweetwater was not satisfied with
related businesses. Sweetwater's design services agreement the results.
with Mirador provides that venue for any suit “shall be
in a Texas State District Court in Harris County, Texas.”
The design agreement incorporates by reference specific Course of proceedings
provisions of the “Standard Form of Agreement between In June 2012, Sweetwater sued Mirador, Tuscan, and
Owner and Architect (AIA Document B141–1997),” but Blitzer for negligence, breach of contract, and breaches of
it expressly excludes “Sections 1.3.4, Mediation and 1.3.5, express and implied warranties, as well as statutory claims
Arbitration.” under the Texas Deceptive Trade Practices Act. Tuscan
answered the suit on June 29. Tuscan denied Sweetwater's
Sweetwater hired Tuscan to construct the building allegations, raised several specific defenses, and made a
according to Mirador's design specifications. Tuscan verified denial; it did not mention arbitration in the filing.
prepared the construction contract using AIA Document In November, Tuscan sued its five subcontractors, seeking
AlOl–1997, the “Standard Form of Agreement between indemnification under the indemnification provisions
Owner and Contractor where the basis of payment is in each subcontractor agreement. Tuscan sued each
a stipulated sum.” The parties' construction contract subcontractor for negligence, breach of contract, and
incorporates by reference an industry form document breach of warranty. Sweetwater later *720 amended
—AIA Document A201–1997, the “General Conditions its petition to include its own claims against the
of the Contract for Construction” [General Conditions] subcontractors. The subcontractors answered, and several
—but it does not attach a copy of that document. demanded a jury trial. In addition to pursuing written
Like AIA Document B141–1997, incorporated into the discovery, the subcontractors also sought to inspect the
design agreement, A201–1997 calls for mediation in Sweetwater property, pursuant to Texas Rule of Civil
the first instance, followed by arbitration. Unlike the Procedure 196.7. Tuscan participated with the third-party
design agreement, the construction contract does not defendants in the inspection.
exclude the AIA Document's arbitration provisions that
were incorporated by reference, but not attached to the The trial court's docket control order called for the
contract. The pertinent sections of A201–1997 provide: discovery period to end in March 2013 and trial to
commence in April 2013. In January 2013, Tuscan joined
Claims not resolved by mediation Sweetwater in filing an agreed motion for continuance.
shall be decided by arbitration The joint motion requested the continuance for the
which, unless the parties mutually “opportunity to conduct discovery and identify the
agree otherwise, shall be in relevant issues.” Tuscan did not mention arbitration. The
accordance with the Construction trial court granted the motion and extended the discovery,
Industry Arbitration Rules of the motion, and pleading deadlines. It set trial to commence
American Arbitration Association on September 16, 2013.

turning to arbitration. In re Christus Spohn Health Sys.

On June 6, 2013, Tuscan, the other defendants, and the Corp., 231 S.W.3d 475, 478–79 (Tex.App.-Corpus Christi
third-party defendants moved to extend the mediation 2007, *721 orig. proceeding); see In re Vesta Ins. Grp.,
deadline complaining that, before mediating the dispute, Inc., 192 S.W.3d 759, 763 (Tex.2006) (orig. proceeding).
they required additional information concerning the Prejudice refers to the inherent unfairness caused by “a
various components of Sweetwater's alleged damages, party's attempt to have it both ways by switching between
responses to additional interrogatories, answers to litigation and arbitration to its own advantage.” Perry
requests for admissions they had propounded, and the Homes, 258 S.W.3d at 597.
depositions of Sweetwater's corporate representatives and
management agents, which, the motion represented, were [5] Whether a party has participated in the litigation
scheduled for July 2 and 8. process and thus waived the right to arbitrate is a question
of law for the court. Id. at 587. We apply a strong
By July 14, the expert witnesses had been designated and presumption against waiver of arbitration and resolve any
the expert designation deadlines for all parties had passed; doubt on the issue in favor of arbitration. Id. at 584; see In
approximately one month remained of the discovery re Bruce Terminix Co., 988 S.W.2d 702, 705 (Tex.1998).
period. The parties had completed their paper discovery.
On that date, Tuscan invoked the arbitration provision [6] [7] [8] For a waiver to have occurred, the
incorporated by reference into the construction contract appellant “must, at the very least, [have] engage[d] in some
and included with its motion an unsigned copy of the overt act in court that evince[d] a desire to resolve the
General Conditions form containing that provision. [same] arbitrable dispute through litigation rather than
arbitration.” Haddock v. Quinn, 287 S.W.3d 158, 177
The trial court held an evidentiary hearing on Tuscan's (Tex.App.-Fort Worth 2009, pet. denied). In assessing
motion to compel arbitration and denied the motion on whether Tuscan waived its right to arbitrate, we consider
August 1. whether Tuscan's conduct in the litigation portrays the
kind of “aggressive litigation strategy” that substantially
invokes the litigation process. See Okorafor v. Uncle Sam
& Assocs., 295 S.W.3d 27, 40 (Tex.App.-Houston [1st
Discussion
Dist.] 2009, pet. denied); see also In re Christus Spohn
Tuscan challenges the trial court's ruling, contending that Health Sys. Corp., 231 S.W.3d at 479 (explaining that
it erred in denying Tuscan's motion to compel arbitration actions inconsistent with right to arbitrate may include
because the evidence does not establish that Tuscan had “some combination of filing an answer, setting up a
waived its contractual right to arbitrate by substantially counterclaim, pursuing extensive discovery, moving for a
continuance, and failing to timely request arbitration”)
invoking the judicial process. 1
(citing Cent. Nat'l Ins. Co. of Omaha v. Lerner, 856
S.W.2d 492, 494 (Tex.App.-Houston [1st Dist.] 1993,
Applicable Law and Standard of Review orig. proceeding)). In determining whether a party waived
[1] [2] [3] [4] Waiver is the intentional relinquishmentan arbitration clause, the courts can consider, among
of a known right or intentional conduct inconsistent other factors: (1) whether the movant for arbitration
with claiming that right. Jernigan v. Langley, 111 S.W.3d was the plaintiff (who chose to file in court) or the
153, 156 (Tex.2003); Interconex, Inc. v. Ugarov, 224 defendant (who merely responded), (2) when the movant
S.W.3d 523, 533 (Tex.App.-Houston [1st Dist.] 2007, learned of the arbitration clause and how long the movant
no pet.). “[A] party waives an arbitration clause by delayed before seeking arbitration, (3) the amount of the
substantially invoking the judicial process to the other movant's pretrial activity related to the merits rather than
party's detriment or prejudice.” Perry Homes v. Cull, arbitrability or jurisdiction, (4) the amount of discovery
258 S.W.3d 580, 589–90 (Tex.2008) (footnote omitted). conducted, and (5) whether the movant sought judgment
A party substantially invokes the judicial process if it on the merits. See Perry Homes, 258 S.W.3d at 591–
takes specific and deliberate actions that are inconsistent 92; In re Hawthorne Townhomes, L.P., 282 S.W.3d 131,
with the right to arbitrate or if it actively tries, but fails 141 (Tex.App.-Dallas 2009, no pet.). We analyze whether
to achieve, a satisfactory result through litigation before waiver occurred based on the totality of the circumstances

presented in each case. See In re Citigroup Global Mkts., Contract, other documents listed in the Agreement and
Inc., 258 S.W.3d 623, 625 (Tex.2008); Okorafor, 295 Modifications issued after execution of the Contract.” It
S.W.3d at 38; Interconex, Inc., 224 S.W.3d at 533. further provides that “[t]he Contract Documents shall be
signed by Owner and Contractor.” Tuscan, however, did
not provide a signed copy of the form with its motion, nor
The Perry Homes Factors did it deny Sweetwater's assertion that it had no actual
[9] Tuscan began as a defendant in the suit. Early in knowledge or notice of the form's contents until it received
the litigation, however, Tuscan also became a third-party Tuscan's motion to compel.
plaintiff by suing its subcontractors. Although a party
invokes the judicial process when it sues in court, the If Tuscan's failure to attach the industry form to the
filing of a third-party action, standing alone, may not be construction contract did not render the arbitration
enough to constitute waiver of an agreement to arbitrate. provision invalid, the record, at a minimum, demonstrates
In D.R. Horton–Tex., Ltd. v. Drogseth, for example, the that Tuscan understood the reference to its own industry
Fort Worth Court of Appeals held that the defendant form and was aware that it contained an arbitration
did not waive its right to arbitrate by filing a third-party provision, yet did not enlighten Sweetwater that its claims
action because the defendant concurrently had moved in were subject to arbitration until Tuscan moved to compel
the trial court to abate the case and submit it to binding arbitration more than a year after filing third party actions
arbitration. No. 02–12–00435–CV, 2013 WL 3377121, at and proceeding with discovery.
*5–6 (Tex.App.-Fort Worth July 3, 2013, no pet.) (mem.
op.). In its motion to compel arbitration filed six weeks Sweetwater's contract with Mirador expressly excludes
later, the defendant explained that it had filed the third- any obligation to arbitrate and requires litigation in
party petition before the hearing on its motion to compel Harris County district court. As a result, Tuscan's belated
to preserve its claims against the third-party defendants invocation of the arbitration clause to conduct arbitration
and did not intend a waiver of *722 right to arbitration. would delay the resolution of the dispute between
Id. at *5. In contrast to the movant in D.R. Horton, Tuscan Tuscan and Mirador, and would make for an inefficient,
did not accompany its answer or its third-party claims piecemeal adjudication, to the expense of Sweetwater, who
with any notice of an intent to pursue arbitration, nor did has prepared its case against the defendants in a single
Tuscan seek an abatement of the case pending resolution forum. Had Tuscan promptly moved for arbitration,
of its claim to arbitration. Sweetwater and the other defendants would have been
entitled to a stay of proceedings pending arbitration;
[10] Based on the record, the trial court reasonably instead, the parties engaged in considerable time and
could have found that Tuscan knew of the arbitration expense on the road to a court trial. These circumstances
clause before it answered Sweetwater's suit, but that make the timing of Tuscan's motion to compel more
it did not reveal the existence of the arbitration consistent with a late-game tactical decision than an intent
agreement to Sweetwater until after Tuscan had to preserve the right to arbitrate.
sued third parties and the parties had conducted a
property inspection and completed written discovery, Tuscan joined in motions that prolonged the discovery
including expert designations. 2 The owner-contractor period and postponed the trial date and mediation
agreement, prepared by Tuscan for Sweetwater's deadline to allow the parties to pursue additional
execution, incorporates a construction industry form that discovery on the merits. By the time Tuscan moved to
incorporates by reference another clause, contained in the compel arbitration—more than a year after Sweetwater
General Conditions form, that allows for arbitration. filed suit—the parties had completed written discovery,
designated *723 their experts for trial, and physically
The “General Conditions” form containing the inspected the building, and the trial setting was less than
arbitration clause declares that, “The Contract a month away. The need for further merits discovery
Documents consist of the Agreement between Owner served as the basis for the parties' successful requests
and Contractor ..., Conditions of the Contract (General, for both the trial continuance and the extension of the
Supplementary, and other Conditions), Drawings, mediation deadline. In opposing Tuscan's motion to
Specifications, Addenda issued prior to execution of the compel arbitration, Sweetwater pointed out that Tuscan

would not have been likely to obtain a building inspection disposition of the disputed matter. See Porter & Clements,
L.L.P. v. Stone, 935 S.W.2d 217, 221 (Tex.App.-Houston
in an arbitral forum.
[1st Dist.] 1996, no pet.). Tuscan's year-long delay in
invoking or even mentioning the arbitration clause gave
Tuscan responds that its own discovery activities were
Tuscan litigation advantages it would not have had in
limited to written discovery. Tuscan's litigation strategy,
an arbitration proceeding. We hold that the trial court
however, enhanced its discovery efforts. By suing its
properly denied Tuscan's motion to compel arbitration
subcontractor-indemnitors, Tuscan benefited from the
because Tuscan had substantially invoked the judicial
discovery sought by these additional parties, who are
process, to Sweetwater's prejudice.
aligned with it against Sweetwater. For example, Tuscan
availed itself of the opportunity, made possible by the
subcontractors' discovery request, to inspect the building.
By bringing the subcontractors into the suit, Tuscan Conclusion
accomplished indirectly what it did not do directly. The
record supports the trial court's conclusion that these We hold that the trial court did not err in denying Tuscan's
tactics, taken together, were inconsistent with any intent motion to compel arbitration. We therefore affirm the
to arbitrate these claims, and caused some prejudice to trial court's order and remand the cause for further
Sweetwater. proceedings.
The purpose of the presumption against finding a waiver

All Citations
of contractual arbitration is to preserve the purpose of the
parties' agreement to obtain a speedy and inexpensive final 438 S.W.3d 717
Footnotes
1 Tuscan also contends on appeal that it established the validity of the arbitration agreement. The trial court raised questions
concerning the validity during the evidentiary hearing, but it but did not base its ruling on any specific ground. For purposes
of this appeal, we assume that a valid arbitration agreement exists between Tuscan and Sweetwater.
2 On rehearing, Tuscan contends that we should disregard counsel's statements concerning the status of discovery in
the proceedings because they are not evidence, only argument. Tuscan, however, waived any complaint about their
evidentiary value by failing to object in the trial court. See Banda v. Garcia, 955 S.W.2d 270, 272 (Tex.1997).

Venture Cotton Co-op. v. Freeman, 435 S.W.3d 222 (2014)
57 Tex. Sup. Ct. J. 730

Distinguished by Bonded Builders Home Warranty Association of
Texas, Inc. v. Smith, Tex.App.-Dallas, April 21, 2016
Supreme Court of Texas. Decisions reviewable; finality
Courts
VENTURE COTTON COOPERATIVE Review by or certificate to Supreme
and Noble Americas Corp., Petitioners, Court by Court of Civil Appeals of questions
v. where its decision conflicts with or overrules
Shelby Alan FREEMAN, et al., Respondents. that of another Court of Civil Appeals or
that of the Supreme Court
No. 13–0122. Supreme Court has jurisdiction to hear an
| appeal from an interlocutory order denying
Argued Jan. 9, 2014. arbitration when the court of appeals' decision
| conflicts with prior precedent.
Delivered June 13, 2014.
Synopsis
Background: Cotton growers who entered into contract
with cooperative marketing pool brought action against [2] Alternative Dispute Resolution
cooperative pool. Cooperative pool moved to compel Preemption
arbitration pursuant to an arbitration agreement States
contained in the contracts between growers and Particular cases, preemption or
cooperative pool. The 106th District Court, Gaines supersession
County, Kelly Moore, J., denied motion, finding the Although the Federal Arbitration Act (FAA)
arbitration agreement to be unconscionable. Cooperative preempts state law that conflicts with
pool appealed, and the Eastland Court of Appeals, 395 its objectives, state law remains relevant
S.W.3d 272, Jim R. Wright, C.J., affirmed. Cooperative to declare an arbitration agreement itself
pool filed petition for review. unenforceable on such grounds as exist in law
or in equity for the revocation of any contract.
9 U.S.C.A. § 2.
Holdings: The Supreme Court, Devine, J., held that:
[1] any implied waiver of growers' statutory right to

recover attorney fees was invalid as contrary to public [3] Alternative Dispute Resolution
policy; Validity
[2] unenforceable limitation on growers' right to recover Validity of assent
attorney fees was severable from the remainder of the
arbitration agreement; and
Unconscionability
The “saving clause” of the Federal
[3] one-sided attorney fee provision of the arbitration
Arbitration Act (FAA) permits agreements
agreement was insufficient to invalidate agreement as
to arbitrate to be invalidated by generally
unconscionable.
applicable contract defenses, such as fraud,
duress, or unconscionability, but not by
Reversed and remanded. defenses that apply only to arbitration or that
derive their meaning from the fact that an

57 Tex. Sup. Ct. J. 730
agreement to arbitrate is at issue. 9 U.S.C.A.

§ 2. 4 Cases that cite this headnote

[7] Contracts
Unreasonable or Oppressive Contracts
[4] Alternative Dispute Resolution Contracts
Unconscionability Presumptions and burden of proof
Alternative Dispute Resolution Unambiguous contracts are presumed to
Construction reflect the intent of the contracting parties and
In determining an arbitration agreement's are generally enforced as written regardless of
validity, a court may not construe the whether one or more of the parties contracted
agreement differently from how it would wisely or foolishly, or created a hardship for
construe contracts generally under state law, himself; courts therefore do not ordinarily
nor may a court rely on the uniqueness inquire into the reasons for the contract or the
of an arbitration agreement as a basis for relative fairness of its terms.
a state-law holding that enforcement would
be unconscionable; but if the circumstances 1 Cases that cite this headnote
would render any contract unconscionable
under Texas law, they are appropriate to [8] Contracts
invalidate the agreement to arbitrate as well. Unconscionable Contracts
9 U.S.C.A. § 2.
Unconscionable bargains are an exception to
11 Cases that cite this headnote the freedom that generally pervades contract
law.

Preemption
States [9] Alternative Dispute Resolution
Particular cases, preemption or Statutory rights and obligations
supersession
When parties agree to arbitrate a statutory
Special state rules for interpreting arbitration claim, a party does not forego the substantive
agreements cannot coexist with the Federal rights afforded by the statute; it only submits
Arbitration Act (FAA) because Congress to their resolution in an arbitral, rather than a
intended the act as its response to a judicial, forum.
longstanding judicial hostility to arbitration
agreements. 9 U.S.C.A. § 1 et seq. Cases that cite this headnote

Writing, signature, and acknowledgment
Evidence
Validity
A party seeking to compel arbitration under
Any implied waiver of cotton growers' right
the Federal Arbitration Act (FAA) must
to recover attorney fees under the Consumer
establish that the dispute falls within the scope
Protection-Deceptive Trade Practices Act
of an existing agreement to arbitrate; upon
arising out of their execution of arbitration
such proof, the burden shifts to the party
agreement that incorporated arbitration rules
opposing arbitration to raise an affirmative
limiting recovery of attorney fees was invalid
defense to the agreement's enforcement. 9
as contrary to public policy; arbitration
U.S.C.A. §§ 3, 4.

57 Tex. Sup. Ct. J. 730
rules did not comply with the statutory of contract was insufficient to invalidate
requirements for waiver of rights under the arbitration agreement as unconscionable,
the Consumer Protection-Deceptive Trade despite contention that it deprived growers of
Practices Act, including that the waiver be their statutory right to recover attorney fees
conspicuous and in bold-face type of at least on a breach of contract claim. V.T.C.A., Civil
10 points in size, and that it include language Practice & Remedies Code § 38.001.
substantially similar to the form provided by
the statute. V.T.C.A., Bus. & C. § 17.42(c)(1– 4 Cases that cite this headnote
3).
[14] Costs
Contracts
Parties are generally free to contract for
[11] Alternative Dispute Resolution attorney's fees as they see fit; thus, a
Severability contract that expressly provides for one
Arbitration agreement's unenforceable party's attorney fees, but not another's, is not
limitation on cotton growers' right to unconscionable per se.
recover attorney fees on their claim
against cooperative marketing pool under Cases that cite this headnote
the Consumer Protection-Deceptive Trade
Practices Act was severable from the [15] Alternative Dispute Resolution
remainder of the arbitration agreement; Matters to Be Determined by Court
essential purpose of the arbitration agreement
was to provide for speedy and efficient
resolution of disputes to ensure timely
performance under the contract, and
agreement's collateral effect on statutory
rights and remedies appeared to be a Questions of waiver, illegality, remedies, and
peripheral concern. attorney fees often relate to the broader,
container contract, rather than the separable
3 Cases that cite this headnote agreement to arbitrate, and, as such, are
matters entrusted to the arbitrators.
[12] Contracts
Partial Illegality
In determining an agreement's essential
purpose, for purposes of severability of
Evidence
unenforceable provisions, the issue is whether
or not parties would have entered into When authority over the matters of waiver,
the agreement absent the unenforceable illegality, remedies, and attorney fees is
provisions. unclear, a strong federal presumption favors
arbitration. 9 U.S.C.A. § 1 et seq.

Unconscionability [17] Contracts
Unconscionable Contracts
Provision of arbitration agreement between
cotton growers and cooperative marketing Courts usually analyze unconscionability
pool that entitled pool, but not growers, issues in light of a variety of factors, which aim
to recover attorney fees for any breach to prevent oppression and unfair surprise.

57 Tex. Sup. Ct. J. 730
51.016 (permitting interlocutory appeals of orders denying

arbitration under the FAA). 1
*225 The trial court has concluded that the parties'

agreement to arbitrate should not be enforced because
Attorneys and Law Firms it is unconscionable, and the court of appeals has
affirmed the trial court's order denying arbitration. 395
*224 R. Carson Fisk, Ford Nassen & Baldwin P.C.,
S.W.3d 272, 275–76 (Tex.App.–Eastland 2013). The court
Austin, TX, for Amicus Curiae Fisk R. Carson.
of appeals reasons that the arbitration agreement is
Amber S. Miller, ZS Brady & Co., Lubbock, TX, for unconscionable because it prevents the farmers from
Amicus Curiae Plains Cotton Growers, Inc. pursuing the statutory remedies and attorney's fees alleged
in their pleadings. Id. at 277. We conclude that this
Zachary S. Brady, ZS Brady & Co., Lubbock, TX, for limitation of statutory remedies is insufficient to defeat
Amicus Curiae Texans for Lawsuit Reform. arbitration under the FAA and accordingly reverse the
court of appeals' judgment. We conclude further that,
Danica Lynn Milios, Kent C. Sullivan, Sean D. Jordan,
because the court has not fully considered the parties'
Sutherland Asbill & Brennan LLP, Austin, H. Grady
arguments on the issue of unconscionability, the case
Terrill III, Craig Terrill Hale & Grantham LLP, Lubbock,
should be remanded to the court of appeals.
TX, for Petitioner.
Don David Martinson, McCleskey Harriger Brazill &

Graf, L.L.P., Lubbock, Dustin Slade, Fernando Manuel I. Background
Bustos, Bustos Law Firm, P.C., Lubbock, Jennifer Lea
Kelley, Fanning Harper Martinson Brandt & Kutchin PC, Venture Cotton Cooperative is a cotton cooperative-
Dallas, TX, for Respondent Freeman, Shelby Alan. marketing association, incorporated in Texas, and
managed by Noble Americas Corp., a foreign
Dennis R. Burrows, William P. Lane, McCleskey Harriger corporation. In 2010, Venture operated a pool for the
Brazill & Graf, L.L.P., Lubbock, Don Martinson, exclusive sale and marketing of its members' cotton
Fanning Harper Martinson Brandt & Kutchin, P.C., production. Venture promoted this pool through various
Dallas, Jennifer Lea Kelley, Texans for Lawsuit Reform, cotton-gin companies, which arranged meetings with local
Austin, TX, for Respondent Neitsch, Roger. farmers. Venture would explain the pool's terms and
solicit membership at these meetings. One such meeting
H. Alan Carmichael, Wetsel & Carmichael, LLP,
was arranged by Ocho Gin Company in Seminole, Texas.
Sweetwater, TX, for Respondent OCHO Gin Company,
Ltd.
Farmers, who agreed to join the 2010 pool, signed
Opinion Venture's Membership and Marketing Agreement and
other related documents. These documents asked each
Justice DEVINE delivered the opinion of the Court. farmer to designate the acreage committed to the pool
and to estimate the production Venture might expect to
[1] Two groups of cotton farmers sue to rescind market. After the meeting in Seminole, Venture left copies
contracts in which they agreed to sell cotton through a of these documents with Ocho for farmers to execute,
cooperative marketing pool. The farmers allege that they should they decide to join the cooperative. Several farmers
were fraudulently induced to join the cooperative and decided to join the pool.
seek damages, declaratory relief, and attorney's fees under
various statutes. Because the agreements provide for During the growing season, the price of cotton rose
arbitration of all disputes under the Federal Arbitration significantly. By harvest, Venture had become concerned
Act, 9 U.S.C §§ 1–16, the cotton cooperative moved to that members of the pool might be tempted to sell their
stay the litigation and compel arbitration. This appeal committed production on the open market. This concern
is from the trial court's interlocutory order, denying blossomed into a dispute with some member-farmers
those motions. See TEX. CIV. PRAC. & REM.CODE § over the quantity of cotton committed to the pool and

57 Tex. Sup. Ct. J. 730
ultimately led to a lawsuit by Alan Freeman and Perry unconscionable and should not be enforced. The trial
Brewer, two prominent cotton farmers in Gaines County, court scheduled an evidentiary hearing.
Texas. 2
At this hearing, Freeman and Brewer testified about
In their lawsuit, Freeman and Brewer asserted claims for their decisions to join the pool. According to their
fraud, negligent misrepresentation, breach of fiduciary testimony, they had a question about “overages” a few
duty, mutual mistake, civil conspiracy and violations days after Venture's marketing presentation. “Overages”
of the Texas Consumer Protection—Deceptive Trade refers to cotton produced on designated land in excess
Practices Act, and the Texas Free Enterprise and Antitrust of the estimate given by a farmer at the time of land's
Act of 1983. Freeman and Brewer also sought declaratory commitment to the pool. Freeman and Brewer's question,
and injunctive relief and attorney's fees under Civil which they directed to Ocho, was whether overages
Practice and Remedies Code section 38.001. Shortly after were included in the pool under Venture's contracts. An
filing this suit, another group of farmers filed a second Ocho representative called Venture with this question and
suit against Venture and the other defendants in Gaines allegedly learned that the disposition of overages was at
the farmer's discretion, that is, the farmer could elect to
County, asserting similar claims. 3
sell overages under the agreement or not.
*226 Venture generally denied the allegations in both

Venture denies making any such representations. It also
suits and moved to stay the litigation and compel
argues that its contract clearly calls for the commitment
arbitration under the United States Arbitration Act
of acres, not bales, making overages subject to the
(also known as the Federal Arbitration Act or FAA). 9
agreement. In any event, Freeman and Brewer maintain
U.S.C §§ 1–16. The farmers' membership and marketing
that they signed with the cooperative after being led to
agreements with the cooperative provided for the
believe that they would control overages.
arbitration of all disputes under the FAA and the
arbitration rules of the American Cotton Shippers
After considering the parties' pleadings, motions,
Association (ACSA). The arbitration provision referred
responses, and briefs, as well as evidence presented at
to the farmers as “producers” and provided in pertinent
the hearing, the trial court refused to stay the litigation
part:
or compel arbitration, finding the arbitration agreements
• All disputes will be resolved pursuant to binding unconscionable. Findings of fact and conclusions of
arbitration pursuant to the arbitration rules of the law were requested and filed, but these findings and
American Cotton Shippers Association. conclusions shed no light on the court's reasoning. 4
• The site of the arbitration shall be either Houston, Venture filed interlocutory appeals in both cases, and
Texas, or Memphis, Tennessee, as chosen by Venture, the court of appeals consolidated them for decision. See
unless otherwise directed by the arbitrator(s). TEX. CIV. PRAC. & REM.CODE § 51.016 (permitting
interlocutory *227 appeals of orders denying arbitration
• The cotton sold herein is purchased for shipment out
under the FAA). Agreeing that the arbitration agreements
of state of origin in interstate or foreign commerce.
were unconscionable, the court affirmed the trial court's
• Any court having or claiming jurisdiction, whether order denying Venture's motion to compel. 395 S.W.3d
state or federal, shall apply the substantive provisions at 275–76. The court reasoned that the agreements were
of the United States Arbitration Act.... unconscionable in two respects: (1) they forced the farmers
“to forego substantive rights and remedies afforded by
• In the event of a breach of this Agreement by Producer, statute,” id. at 275, and (2) they were one-sided because
Producer agrees to pay all arbitration and court costs, they allowed Venture to recover its attorney's fees, if
if any, and the reasonable attorney's fees and litigation the farmers breached the contract, but did not provide
and arbitration expenses of Venture. reciprocal rights to the farmers, id. at 276.
The farmers opposed Venture's motions, asserting a

number of reasons why the arbitration agreement was

57 Tex. Sup. Ct. J. 730
make at least a threshold determination of arbitrability

—that the dispute is subject to an enforceable agreement
II. The FAA and State Law
to arbitrate—before enforcing the arbitration agreement
[2] [3] [4] Although the Federal Arbitration Act by compelling arbitration or staying litigation. 9 U.S.C. §§
preempts state law that conflicts with its objectives, 3–4. 5
Southland Corp. v. Keating, 465 U.S. 1, 10–17, 104
S.Ct. 852, 79 L.Ed.2d 1 (1984), state law remains
relevant to declare an arbitration agreement itself
*228 A. Unconscionability
unenforceable on “such grounds as exist in law or in
equity for the revocation of any contract.” 9 U.S.C. [7] [8] The farmers do not dispute that their claims are
§ 2 (the saving clause). “This saving clause permits covered by the agreements with Venture and subject to
agreements to arbitrate to be invalidated by ‘generally arbitration under the FAA, if their arbitration agreement
applicable contract defenses, such as fraud, duress, or itself is valid and enforceable. They contend, of course,
unconscionability,’ but not by defenses that apply only that it cannot be enforced because the agreement is one-
to arbitration or that derive their meaning from the sided and grossly unfair in several respects. Unambiguous
fact that an agreement to arbitrate is at issue.” AT & contracts, however, are presumed to reflect the intent
T Mobility LLC v. Concepcion, ––– U.S. ––––, ––––, of the contracting parties and are generally enforced as
131 S.Ct. 1740, 1746, 179 L.Ed.2d 742 (2011) (quoting written “regardless of whether one or more of the parties
Doctor's Associates, Inc. v. Casarotto, 517 U.S. 681, 687, contracted wisely or foolishly, or created a hardship for
116 S.Ct. 1652, 134 L.Ed.2d 902 (1996)). In determining himself.” Wooten Props., Inc. v. Smith, 368 S.W.2d 707,
the arbitration agreement's validity then, a court may not 709 (Tex.Civ.App.–El Paso 1963, writ ref'd). Texas courts
construe the agreement differently from how it would therefore do not ordinarily inquire into the reasons for
construe contracts generally under state law, nor may a the contract or the relative fairness of its terms. El Paso
court rely on the uniqueness of an arbitration agreement Field Services, L.P. v. MasTec N. Am., Inc., 389 S.W.3d
as a basis for a state-law holding that enforcement 802, 810–11 (Tex.2012) (observing that a court's role
would be unconscionable. Perry v. Thomas, 482 U.S. 483, “is not to protect parties from their own agreements”).
492, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987). But if the But this notion that parties are free to negotiate their
circumstances would render any contract unconscionable own bargains conflicts with the equally compelling notion
under Texas law, they are appropriate to invalidate the that grossly unfair bargains should not be enforced.
agreement to arbitrate as well. In re Poly–America, 262 49 DAVID R. DOW & CRAIG SMYSER, TEXAS
S.W.3d 337, 348 (Tex.2008). PRACTICE SERIES: CONTRACT LAW § 3.9 (2005).
Unconscionable bargains are therefore an exception to the
[5] [6] Special state rules for interpreting arbitration freedom that generally pervades contract law.
agreements cannot coexist with the FAA because
Congress intended the act as its response to Unconscionability, however, is not easily defined. The
a “longstanding judicial hostility to arbitration term defies a precise legal definition because “it is not
agreements.” Green Tree Fin. Corp.–Ala. v. Randolph, a concept, but a determination to be made in light of
531 U.S. 79, 89, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000). a variety of factors not unifiable into a formula.” 27
Under the FAA, an agreement to arbitrate that is valid STEPHEN COCHRAN, TEXAS PRACTICE SERIES:
under general state law principles and involves interstate CONSUMER RIGHTS AND REMEDIES § 4.2 at 394
commerce is “valid, irrevocable, and enforceable.” 9 (3d ed.2002); see also 1 JAMES J. WHITE & ROBERT
U.S.C. § 2. A party seeking to compel arbitration under S. SUMMERS, UNIFORM COMMERCIAL CODE §
the FAA, however, must establish that the dispute falls 4–3 at 294 (5th ed.2006). Although difficult to define, the
within the scope of an existing agreement to arbitrate. In defense has a long history. One of the earliest decisions
re Rubiola, 334 S.W.3d 220, 223 (Tex.2011). Upon such to apply the defense described an unconscionable contract
proof, the burden shifts to the party opposing arbitration as one that “no man in his senses and not under delusion
to raise an affirmative defense to the agreement's would make on the one hand, and as no honest and
enforcement. J.M. Davidson, Inc. v. Webster, 128 S.W.3d fair man would accept on the other.” Earl of Chesterfield
223, 227 (Tex.2003). The FAA thus requires a court to v. Janssen, 28 Eng. Rep. 82, 100, 2 Ves. Sr. 125, 155

57 Tex. Sup. Ct. J. 730
(1751); see also Saunders v. Guinn, 1 S.W.2d 363, 366 here is premised on our decision in In re Poly–America,
(Tex.Civ.App.–Eastland 1927, writ ref'd) (noting this L.P., 262 S.W.3d 337 (Tex.2008). There, we indicated
“definition”); Shumway v. Horizon Credit Corp., 801 that it would be unconscionable for an arbitration
S.W.2d 890, 896 (Tex.1991) (Mauzy, J. concurring and agreement to mandate arbitration of a statutory claim
quoting Janssen ). Modern uniform laws add context to and at the same time eliminate the rights and remedies
the defense but again do not attempt to define it. afforded by the statute. Id. at 349. The court of appeals
concludes that such a possibility exists here because the
The Uniform Commercial Code provides that a court arbitration agreement applies to “all disputes,” while the
should afford the parties a reasonable opportunity to ACSA Arbitration Rules, incorporated into the parties'
present evidence as to a contract's commercial setting, agreement, foreclose the farmers' statutory claims for
purpose and effect to aid the court in evaluating the attorney's fees and enhanced damages under the DTPA.
defense. TEX. BUS. & COMM.CODE § 2.302(b); see Specifically, section 8(k) of the ACSA rules limits the
also RESTATEMENT (SECOND) OF CONTRACTS § arbitral award “to the monetary damages arising out
208, cmt. a (stating that unconscionability determinations of the failure of either party to perform its obligations
are made in “light of [a contract's] setting, purpose, and pursuant to the contract as determined by the Arbitration
effect”). Under the UCC, an unconscionability defense Committee and shall not include attorney's fees unless
is a question of law that involves a highly fact-specific provided for in the contract.”
inquiry into the circumstances of the bargain, such as
the commercial atmosphere in which the agreement was [9] When parties agree to arbitrate a statutory claim,
made, the alternatives available to the parties at the time “a party does not forego the substantive rights afforded
and their ability to bargain, any illegality or public-policy by the statute; it only submits to their resolution in
concerns, and the agreement's oppressive or shocking an arbitral, rather than a judicial, forum.” Mitsubishi
nature. 49 TEXAS PRACTICE SERIES: CONTRACT Motors Corp. v. Soler Chrysler–Plymouth, Inc., 473
LAW § 3.11. U.S. 614, 628, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985).
Thus, in Poly–America, we observed that arbitration
In the court of appeals, the cotton farmers argued that agreements typically function simply as forum-selection
the arbitration agreement was unconscionable in several clauses rather than statutory waivers and generalized that
respects. They complained that the American Cotton “[a]n arbitration agreement covering statutory claims is
Shippers Association (ACSA) Arbitration Rules, adopted valid so long as ‘the arbitration agreement does not waive
by the agreement, were one-sided and designed to foster substantive rights and remedies of the statute and the
arbitrator bias and that the rules' summary procedures arbitration procedures are fair so that the employee may
further denied them adequate discovery and preparation effectively vindicate his statutory rights.’ ” Poly–America,
time. They also *229 contended that the arbitration was 262 S.W.3d at 352 (quoting In re Halliburton, 80 S.W.3d
too expensive and that its prospective cost would prevent at 572).
them from vindicating their rights in the arbitral forum.
Finally, they argued that the agreement and ACSA rules An asserted waiver of the anti-retaliation provisions of
violated the state's public policy by illegally eliminating the Workers' Compensation Act was at issue in Poly–
their statutory right to attorney's fees and other remedies America. The employee in that case sued his employer,
under the Texas Consumer Protection—Deceptive Trade seeking statutory remedies of reinstatement and punitive
Practices Act (DTPA). damages after being allegedly terminated for filing a
workers' compensation claim. Id. at 345. Because the
employee had agreed to arbitrate all disputes under the
FAA, the trial court granted the employer's motion to
B. Invalidity
compel arbitration. Id. at 344.
The court of appeals' decision focuses solely on this last
argument, concluding that the arbitration agreement is The employee sought mandamus relief from this
unconscionable because it forces the farmers “to forego order, arguing that the arbitration agreement was
substantive rights and remedies afforded by statute.” 395 unconscionable because it eliminated his rights and
S.W.3d at 275. The court's application of public policy remedies under the Workers Compensation Act. Id. at

57 Tex. Sup. Ct. J. 730
352, 359. We agreed. Id. at 353, 360. After reviewing the ordinarily to deny effect to the unconscionable term.”
statutory remedies at issue, we held the anti-retaliation RESTATEMENT (SECOND) OF CONTRACTS § 208
provisions to be “a non-waivable legislative system” cmt. g.
necessary to the Act's function. Id. at 352. We further
concluded that their elimination under the arbitration The court of appeals concludes, however, that Venture
agreement undermined a key purpose of the Workers' waived its right to enforce the remainder of the arbitration
Compensation Act, was contrary to public policy, and clause by not asking the trial court to sever the offending
could not be enforced. Id. at 353. We did not, however, limitation of statutory remedies. 395 S.W.3d at 277. But
hold the arbitration agreement invalid. Instead, *230 this is an interlocutory appeal, and the case remains
we severed the offending limitation from the agreement pending in the trial court. We are therefore unsure about
and permitted the arbitration to proceed. See id. at 344 what Venture has waived. If the court merely means
(noting that severance was proper because the limitation to suggest that Venture waived the right to complain
of statutory remedies was “not integral to the parties' about severance in this interlocutory appeal, the waiver
overall intended purpose to arbitrate”). argument serves only to delay a decision in the case.
Conservation of time and resources recommend that we
[10] In contrast to Poly–America 's anti-retaliation consider the issue now because nothing prevents Venture
provision, the DTPA remedies at issue here can be from urging severance in the trial court and, if denied,
contractually waived. TEX. BUS. & COM.CODE § 17.42. from renewing its complaint in yet another interlocutory
The DTPA provides detailed instructions on how to appeal.
accomplish this. See id. (detailing requirements for a
valid waiver). Among other requirements, the waiver must [12] In Poly–America we noted that “[a]n illegal or
be “conspicuous and in bold-face type of at least 10 unconscionable provision of a contract may generally be
points in size,” identified by a specific heading indicating severed so long as it does not constitute the essential
the waiver, and include language substantially similar purpose of the agreement.” Poly–America, 262 S.W.3d
to the form the statute provides. Id. § 17.42(c)(1), (2) at 360. In determining an agreement's essential purpose,
and (3). The contracts here do not comply with the the issue is “whether or not parties would have entered
statutory requirements. We accordingly agree with the into the agreement absent the unenforceable provisions.”
court of appeals that any implied waiver under ACSA Id. Quite clearly, the arbitration agreement's essential
Rule 8(k), which likewise does not conform to the DTPA's purpose here was to provide for a speedy and efficient
requirements, is contrary to public policy and therefore resolution of disputes to ensure timely performance under
invalid. the contract. The agreement's collateral effect on statutory
rights and remedies appears to be a peripheral concern
to this essential purpose. We accordingly conclude that
the court of appeals erred in declining to sever *231 the
C. Severability
objectionable limitation on the farmers' statutory rights.
[11] Venture argues, however, that even if ACSA Rule
8(k) and the arbitration clause are deemed unconscionable
and incapable of limiting the farmers' statutory rights D. Attorney's Fees
under the DTPA, the court of appeals nevertheless
erred when it refused to sever the offending rule and In addition to the agreement's unconscionable limitation
require arbitration under the remainder of the agreement. on potential statutory rights, the court of appeals
Venture submits that the unconscionability defense, concludes that the arbitration agreement is also
which is codified in the Texas Business and Commerce unconscionably one-sided because it provides for only
Code and applicable to the cotton sales at issue here, Venture to recover attorney's fees. 395 S.W.3d at 276.
allows courts to consider severance whenever they are The court's opinion further indicates that this provision
confronted with an unconscionable contract term. TEX. together with an ACSA rule, limiting the award of
BUS. & COM.CODE § 2.302. Similarly, the Restatement attorney's fees to those expressed in the contract, violates
provides that “[w]here a term rather than the entire the farmers' statutory right to attorney's fees under Civil
contract is unconscionable, the appropriate remedy is Practice and Remedies Code section 38.001.

57 Tex. Sup. Ct. J. 730
arbitration agreement did not waive the farmers' statutory

That section provides, in relevant part, that “[a] person right to attorney's fees under section 38.001 and so
may recover reasonable attorney's fees from an individual its relevancy to the court's unconscionability analysis is
or corporation, in addition to the amount of a valid claim unclear.
and costs, if the claim is for ... an oral or written contract.”
TEX. CIV. PRAC. & REM.CODE 38.001. The court of In Olshan, we observed that the “crucial inquiry” in
appeals ultimately decides, however, that the arbitration determining unconscionability was “whether the arbitral
agreement fails effectively to waive the farmers' rights forum in a particular case is an adequate and accessible
under section 38.001 because the agreement and ACSA substitute to litigation, a forum where the litigant can
rules do not reference the statute or otherwise specifically effectively vindicate his or her rights.” In re Olshan Found.
inform the farmers of the intended waiver of such rights. Repair Co., *232 LLC, 328 S.W.3d 883, 894 (Tex.2010).
See 395 S.W.3d at 276 (concluding that waiver of these That inquiry is not satisfied by speculation but by
statutory rights cannot occur absent specific notice and specific proof in the particular case of the arbitral forum's
reference to § 38.001). inadequacy. Id. at 896. If speculation about possible
harm was insufficient to establish unconscionability in
Venture, on the other hand, argues that whether the Olshan, then clearly the court's determination here that
agreement waives these rights is irrelevant because no harm has been done will not suffice. See 395 S.W.3d
the statute simply does not apply to the farmers' at 276 (concluding that arbitration agreement did not
circumstances. The statute does not apply, according waive cotton farmers' right to attorney's fees under section
to Venture, because the farmers seek to cancel the 38.001).
contract rather than recover under its terms. In short,
Venture contends that the farmers' pleadings do not assert In Olshan, we cautioned that courts “should be wary
contractual rights and therefore do no invoke a right to of setting the bar for holding arbitration clauses
attorney's fees under section 38.001. unconscionable too low” as that would undermine the
“liberal federal policy favoring arbitration agreements.”
[13] The farmers respond that they have pled a breach of Olshan, 328 S.W.3d at 893. Courts should also use care not
contact claim. Their pleadings are not clear on the subject, to intrude upon arbitral jurisdiction under the guise of an
but even were we to recognize some deficiency in the unconscionability defense.
present pleadings, the result would be merely to postpone
the issue, much the same as the court of appeals has done [15] [16] Questions of waiver, illegality, remedies, and
with the severance question. The appeal is interlocutory, attorney's fees often relate to the broader, container
and the farmers are free to amend their pleadings to clarify contract, rather than the separable agreement to arbitrate,
the matter. For purposes of this appeal then, we accept and, as such, are matters entrusted to the arbitrators. 6
that the farmers intended to plead an alternative breach And, when authority over the matter is unclear, “a strong
of contract claim, as they assert. We conclude, however, federal presumption” favors arbitration. Poly–America,
that neither the contract's attorney's fee provision nor its 262 S.W.3d at 348. Thus, the United States Supreme
effect on attorney's fees under section 38.001 is sufficient Court has indicated that arbitration provisions should
to invalidate the arbitration agreement as unconscionable. not be held unconscionable based on speculation about
their potential effect. See PacifiCare Health Sys., Inc. v.
[14] Parties are generally free to contract for attorney's Book, 538 U.S. 401, 407 n. 2, 123 S.Ct. 1531, 155 L.Ed.2d
fees as they see fit. Intercontinental Group P'ship v. KB 578 (2003) (noting that “the preliminary question [of]
Home Lone Star L.P., 295 S.W.3d 650, 653 (Tex.2009). whether the remedial limitations at issue ... prohibit[ed]
Thus, a contract that expressly provides for one party's an award of RICO treble damages [was] not a question of
attorney's fees, but not another's, is not unconscionable arbitrability”).
per se. Although perhaps relevant to a broader inquiry
into contractual oppression or an imbalance in bargaining In PacifiCare, several physicians filed suit against
power, the attorney's fee provision here is not, standing managed healthcare organizations, including PacifiCare
alone, decisive proof of an unconscionable bargain. and UnitedHealth, alleging breach of contract, unjust
Moreover, the court of appeals itself concludes that the enrichment, and violations of several federal and state

57 Tex. Sup. Ct. J. 730
statutes, including RICO. Id. at 402, 123 S.Ct. 1531. farmers from pursuing statutory remedies. See 395
S.W.3d at 277 (concluding that the court did not need
Because the arbitration agreements prohibited awarding
to consider “remaining arguments attacking appellees'
punitive damages, the physicians argued that arbitration
other substantive unconscionability and procedural
would prevent them from obtaining “meaningful relief”
unconscionability defenses”).
under RICO's treble-damages provision. Id. at 403,
123 S.Ct. 1531. The lower courts agreed, holding the
[17] Texas courts usually analyze unconscionability
arbitration clauses to *233 be unenforceable with respect
issues “in light of a variety of factors, which aim to
to the RICO claims. Id.
prevent oppression and unfair surprise ...” Poly–America,
262 S.W.3d at 348. Unconscionability determinations
The Supreme Court reversed and remanded, concluding
are not isolated inquiries but rather are made in
that it was “premature” to conclude that the contractual
“light of [a contract's] setting, purpose, and effect.”
ban on punitive damages acted as a bar to statutory
RESTATEMENT (SECOND) OF CONTRACTS § 208,
damages and that the arbitrator should decide the issue
cmt. a.
as an initial matter. Id. at 404, 123 S.Ct. 1531. The Court
thus deferred consideration of whether public policy
Thus, in Olshan we observed that a court should consider
might taint the arbitration agreement's enforceability until
“the parties' general commercial background and the
the award-enforcement stage, but implicit in the Court's
commercial needs of the particular trade or case” when
analysis was the notion that the arbitration clause was
determining whether “the clause involved is so one-sided
prima facie enforceable, notwithstanding the contractual
that it is unconscionable under the circumstances existing
prohibition on punitive damages.
when the parties made the contract.” Olshan, 328 S.W.3d
at 892 (quoting FirstMerit Bank, 52 S.W.3d at 757).
In summary, we conclude that a contract that fails
to provide reciprocal rights to attorney's fees is not
In the court of appeals, Venture has argued the
unconscionable per se. We further disagree with the court
commercial reasonableness and necessity for the
of appeals' opinion to the extent it uses the contract's “one-
arbitration agreement, while the farmers have emphasized
sided” attorney's fees provision as an independent reason
potential abuses and unequal treatment under the arbitral
to hold the arbitration agreement unconscionable. See 395
process. In this Court, the parties have not briefed or
S.W.3d at 276.
argued these broader concerns. They have instead focused
solely on the court of appeals' rationale for affirming
the trial court's order. Because the court's public-policy
III. Unaddressed Arguments analysis is insufficient to defeat arbitration, the arguments
left unaddressed in the court of appeals should be
Although the court of appeals' refusal to compel
considered as they are “necessary to the final disposition
arbitration in this case rests solely on public-policy
of the appeal.” TEX.R.APP. P. 47.1.
grounds, unconscionability typically involves a broader
inquiry, and, indeed, the farmers presented a broader
***
case in the trial court. In addition to their complaint
about the agreement's limitation of remedies, the farmers
The court of appeals' judgment, affirming the trial court's
contended they could not effectively vindicate their rights
order denying arbitration, is reversed, and the case is
through arbitration because of arbitrator bias, the lack
remanded *234 to the court of appeals for consideration
of adequate discovery under the arbitration's summary
of the remaining arguments.
procedures, the exorbitant cost of the arbitration itself,
and other inequities in the arbitral process. The court
of appeals did not consider these additional concerns All Citations
once it determined the arbitration agreement to be
“substantively unconscionable” because it prevented the 435 S.W.3d 222, 57 Tex. Sup. Ct. J. 730
Footnotes

57 Tex. Sup. Ct. J. 730
1 We have jurisdiction to hear an appeal from an interlocutory order denying arbitration when the court of appeals' decision
conflicts with prior precedent. See Forest Oil Corp. v. McAllen, 268 S.W.3d 51, 55 n. 8 (Tex.2008) (noting that our
jurisdiction over the interlocutory appeal depends on a dissent or decisional conflict); Certain Underwriters at Lloyd's of
London v. Celebrity, Inc., 988 S.W.2d 731, 733 (Tex.1998) (per curiam) (same).
2 The lawsuit was styled Alan and Christine Freeman d/b/a Alan Freeman Farms, J.V., and Perry and Kathy Brewer d/b/a
PDB Joint Venture v. Venture Cotton Cooperative, Noble Americas, Corp., Ocho Gin Co. and Ocho Management Corp.
3 The second lawsuit was styled Roger Neitsch, Gregory Upton, Wayne Upton, Anderson Upton, Jud Cheuvront d/b/a L
& ME, Inc. and JDC Farms, Max McGuire, Raymond McPherson, Abe Froese d/b/a BAC Farms, Gerardo Froese d/b/
a Gerardo Froese Farms, George P. Froese d/b/a George P. Froese Farms, Neil Enns, David Bergen, Bradley Peters,
Peter Neustaeter Jr., Wilhelm Friesen, Cornelius Banman, Gerard Neustaeter, Peter Friesen, Heinrich Friesen, Abe S.
Peters, Isaak T. Fehr, Jacob Peters, Abe Loewen, Isaak Wiebe, Ben Neudorf, and Rudolph Peters v. Venture Cotton
Cooperative, Noble Americas, Corp., Ocho Gin Co. and Ocho Management Corp.
4 The trial court's finding of fact stated: “The arbitration clause sought to be enforced is unconscionable.” Its conclusion of
law stated: “The arbitration clause sought to be enforced is unenforceable because it is unconscionable.”
5 Under FAA § 3, when a party moves to stay litigation pending arbitration, the court shall grant the motion “upon being
satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement.” 9 U.S.C. §
3. Section 4 requires a court to grant a motion to compel arbitration “upon being satisfied that the making of the agreement
for arbitration or the failure to comply therewith is not in issue.” Id. § 4.
6 Professor Rau explains:
Suppose that the issue—“whether the plaintiff can recover statutory damages or attorneys' fees”—is treated as one
more claim or dispute within the scope of the arbitration clause; suppose further that in pursuing this inquiry the
decisionmaker is presented with some more precise questions:
. For openers, is the contractual limitation of remedies properly interpreted as a “waiver” by the plaintiff of the recovery
otherwise made available by statute?
. If so, is the plaintiff able to waive this recovery? More precisely: Are, say, “sophisticated groups of doctors” who
contract with a managed care company the sort of plaintiffs who in these circumstances need the protection of
an unwaivable rule? For commercial parties in high-stakes cases, the appropriate trade-off between litigation and
informal justice may sometimes take the form of choosing a more intensive form of judicial review; an alternative
bargain might call for reducing the risk of excessive damage awards.
And in any event, is it sensible to address either of these concerns in the form of an interim decision preceding
the merits? Might they not instead be the focus of attention at a later point-once the predicate of liability has been
established, and an appropriate remedy needs to be crafted?
Framed in this way, all these questions begin very much to look as if they belonged to the realms of interpretation
and appreciation of context—that is, to the matters of substance that have been routinely entrusted to arbitrators.
Alan Scott Rau, Everything You Really Need to Know About “Separability” in Seventeen Simple Propositions, 14 AM.
REV. INT'L ARB. 1, 65–66 (2003) (emphasis in original) (footnotes omitted).

§ 51.016. Appeal Arising Under Federal Arbitration Act, TX CIV PRAC & REM § 51.016
Vernon's Texas Statutes and Codes Annotated

Civil Practice and Remedies Code (Refs & Annos)
Title 2. Trial, Judgment, and Appeal
Subtitle D. Appeals
Chapter 51. Appeals
Subchapter B. Appeals from County or District Court (Refs & Annos)
V.T.C.A., Civil Practice & Remedies Code § 51.016
§ 51.016. Appeal Arising Under Federal Arbitration Act
Effective: September 1, 2009

Currentness
In a matter subject to the Federal Arbitration Act (9 U.S.C. Section 1 et seq.), a person may take an appeal or writ of
error to the court of appeals from the judgment or interlocutory order of a district court, county court at law, or county
court under the same circumstances that an appeal from a federal district court's order or decision would be permitted
by 9 U.S.C. Section 16.
Credits
Added by Acts 2009, 81st Leg., ch. 820, § 1, eff. Sept. 1, 2009.
NOTES OF DECISIONS
Interlocutory appeal
Court of Appeals lacked jurisdiction over employer's interlocutory appeal from trial court's order denying its motion
to compel appraisal and abate lawsuit, in employee's action for breach of contract, tortious interference with contract,
and breach of fiduciary duty; statute provided that parties could appeal an order denying an application to compel
arbitration, appraisal provisions were different from arbitration provisions, and appraisal provision's reference to the
American Arbitration Association (AAA) was only for the purpose of appointing an appraiser and could not have been
construed as an agreement to submit dispute to arbitration. Tex. Civ. Prac. & Rem. Code Ann. §§ 51.016, 171.021,
171.098(a)(1). Hodge v. Kraft (App. 4 Dist. 2015) 490 S.W.3d 510, rule 53.7(f) motion granted. Alternative Dispute
Resolution 213(3)
V. T. C. A., Civil Practice & Remedies Code § 51.016, TX CIV PRAC & REM § 51.016
Current through the end of the 2015 Regular Session of the 84th Legislature

T. 7, Ch. 171, Refs & Annos, TX CIV PRAC & REM T. 7, Ch. 171, Refs & Annos

Civil Practice and Remedies Code
Title 7. Alternate Methods of Dispute Resolution
Chapter 171. General Arbitration
V.T.C.A., Civil Practice & Remedies Code T. 7, Ch. 171, Refs & Annos
Currentness
Footnotes
* Date of approval.
1 Adopted the Uniform Arbitration Act (2000) without repealing the Uniform Arbitration Act (1956). See the General Statutory
Note.
V. T. C. A., Civil Practice & Remedies Code T. 7, Ch. 171, Refs & Annos, TX CIV PRAC & REM T. 7, Ch. 171, Refs
& Annos

T. 7, Ch. 171, Disp Table, TX CIV PRAC & REM T. 7, Ch. 171, Disp Table

V.T.C.A., Civil Practice & Remedies Code T. 7, Ch. 171, Disp Table
Currentness
Editors' Notes
DISPOSITION TABLE
Showing where the subject matter of provisions contained in former Chapter 171 may be found in Chapter 171
as amended by Acts 1997, 75th Leg., ch. 165, § 5.01.
Former Section Amended Section

171.001........................................................................ ............................................................ 171.001, 171.002, 171.022

171.002........................................................................ .........................................................171.021, 171.023 to 171.025

171.003........................................................................ .........................................................................................171.041

171.004........................................................................ .........................................................................................171.042

171.005........................................................................ .......................................................................171.043 to 171.046

171.006........................................................................ .........................................................................................171.048

171.007........................................................................ .......................................................................171.049 to 171.052

171.008........................................................................ .........................................................................................171.053

171.009........................................................................ .........................................................................................171.054

171.010........................................................................ .......................................................................... 171.048, 171.055

171.011........................................................................ .........................................................................................171.081

171.012........................................................................ ....................................... 171.082 to 171.086, 171.094 to 171.097

171.013........................................................................ .........................................................................................171.087

171.014........................................................................ .......................................................................171.088 to 171.090

171.015........................................................................ .........................................................................................171.091

171.016........................................................................ .........................................................................................171.092

171.017........................................................................ .........................................................................................171.098

171.018........................................................................ .................................................................................................. --

171.019........................................................................ .........................................................................................171.003


T. 7, Ch. 171, Disp Table, TX CIV PRAC & REM T. 7, Ch. 171, Disp Table
171.020........................................................................ .................................................................................................. --

171.021........................................................................ .................................................................................................. --

171.022........................................................................ .................................................................................................. --

171.023........................................................................ .................................................................................................. --

Former §§ 171.018 and 171.020, relating to an effective date and severability, respectively, were derived from Acts 1965,
49th Leg., p. 1593, ch. 689, § 1; Vernon's Ann.Civ.St. arts. 238-3, 238-5; and Acts 1995, 74th Leg., ch. 588, § 1.
For subject matter of former §§ 171.021 to 171.023, see, now, V.T.C.A, Civil Practice & Remedies Code § 173.001 et seq.
V. T. C. A., Civil Practice & Remedies Code T. 7, Ch. 171, Disp Table, TX CIV PRAC & REM T. 7, Ch. 171, Disp
Table

T. 7, Ch. 171, Subch. A, Refs & Annos, TX CIV PRAC & REM T. 7, Ch. 171, Subch....

Subchapter A. General Provisions
V.T.C.A., Civil Practice & Remedies Code T. 7, Ch. 171, Subch. A, Refs & Annos
Currentness
V. T. C. A., Civil Practice & Remedies Code T. 7, Ch. 171, Subch. A, Refs & Annos, TX CIV PRAC & REM T. 7,
Ch. 171, Subch. A, Refs & Annos

§ 171.001. Arbitration Agreements Valid, TX CIV PRAC & REM § 171.001

Title 7. Alternate Methods of Dispute Resolution (Refs & Annos)
Chapter 171. General Arbitration (Refs & Annos)
Subchapter A. General Provisions (Refs & Annos)
§ 171.001. Arbitration Agreements Valid
Currentness
(a) A written agreement to arbitrate is valid and enforceable if the agreement is to arbitrate a controversy that:
(1) exists at the time of the agreement; or
(2) arises between the parties after the date of the agreement.
(b) A party may revoke the agreement only on a ground that exists at law or in equity for the revocation of a contract.
Credits
Amended by Acts 1997, 75th Leg., ch. 165, § 5.01, eff. Sept. 1, 1997.
Notes of Decisions (650)

§ 171.002. Scope of Chapter, TX CIV PRAC & REM § 171.002
KeyCite Red Flag - Severe Negative Treatment

Unconstitutional or PreemptedPreempted by Forged Components, Inc. v. Guzman, Tex.App.-Hous. (1 Dist.), June 25, 2013
§ 171.002. Scope of Chapter
Currentness
(a) This chapter does not apply to:
(1) a collective bargaining agreement between an employer and a labor union;
(2) an agreement for the acquisition by one or more individuals of property, services, money, or credit in which the
total consideration to be furnished by the individual is not more than $50,000, except as provided by Subsection (b);
(3) a claim for personal injury, except as provided by Subsection (c);
(4) a claim for workers' compensation benefits; or
(5) an agreement made before January 1, 1966.
(b) An agreement described by Subsection (a)(2) is subject to this chapter if:
(1) the parties to the agreement agree in writing to arbitrate; and
(2) the agreement is signed by each party and each party's attorney.
(c) A claim described by Subsection (a)(3) is subject to this chapter if:
(1) each party to the claim, on the advice of counsel, agrees in writing to arbitrate; and
(2) the agreement is signed by each party and each party's attorney.

§ 171.002. Scope of Chapter, TX CIV PRAC & REM § 171.002
Credits

§ 171.003. Uniform Interpretation, TX CIV PRAC & REM § 171.003

§ 171.003. Uniform Interpretation
Currentness
This chapter shall be construed to effect its purpose and make uniform the construction of other states' law applicable
to an arbitration.
Credits

§§ 171.004 to 171.020. Deleted by Acts 1997, 75th Leg.,..., TX CIV PRAC & REM...

KeyCite Red Flag Negative Treatment§§ 171.004 to 171.020. Deleted by Acts 1997, 75th Leg., ch. 165, § 5.01, eff. Sept. 1, 1997
§§ 171.004 to 171.020. Deleted by Acts 1997, 75th Leg., ch. 165, § 5.01, eff. Sept. 1, 1997
Currentness


Currentness


Currentness


Currentness


Currentness


Currentness


Currentness


Currentness


Currentness


Currentness


Currentness


Currentness


Currentness


Currentness


Currentness


Currentness


Currentness

T. 7, Ch. 171, Subch. B, Refs & Annos, TX CIV PRAC & REM T. 7, Ch. 171, Subch....

Subchapter B. Proceedings to Compel or Stay Arbitrations
V.T.C.A., Civil Practice & Remedies Code T. 7, Ch. 171, Subch. B, Refs & Annos
Currentness
V. T. C. A., Civil Practice & Remedies Code T. 7, Ch. 171, Subch. B, Refs & Annos, TX CIV PRAC & REM T. 7, Ch.
171, Subch. B, Refs & Annos

§ 171.021. Proceeding to Compel Arbitration, TX CIV PRAC & REM § 171.021

Subchapter B. Proceedings to Compel or Stay Arbitrations (Refs & Annos)
§ 171.021. Proceeding to Compel Arbitration
Currentness
(a) A court shall order the parties to arbitrate on application of a party showing:
(1) an agreement to arbitrate; and
(2) the opposing party's refusal to arbitrate.
(b) If a party opposing an application made under Subsection (a) denies the existence of the agreement, the court shall
summarily determine that issue. The court shall order the arbitration if it finds for the party that made the application.
If the court does not find for that party, the court shall deny the application.
(c) An order compelling arbitration must include a stay of any proceeding subject to Section 171.025.
Credits
Added by Acts 1997, 75th Leg., ch. 165, § 5.01, eff. Sept. 1, 1997.

§ 171.022. Unconscionable Agreements Unenforceable, TX CIV PRAC & REM § 171.022

§ 171.022. Unconscionable Agreements Unenforceable
Currentness
A court may not enforce an agreement to arbitrate if the court finds the agreement was unconscionable at the time the
agreement was made.
Credits

§ 171.023. Proceeding to Stay Arbitration, TX CIV PRAC & REM § 171.023

§ 171.023. Proceeding to Stay Arbitration
Currentness
(a) A court may stay an arbitration commenced or threatened on application and a showing that there is not an agreement
to arbitrate.
(b) If there is a substantial bona fide dispute as to whether an agreement to arbitrate exists, the court shall try the issue
promptly and summarily.
(c) The court shall stay the arbitration if the court finds for the party moving for the stay. If the court finds for the party
opposing the stay, the court shall order the parties to arbitrate.
Credits

§ 171.024. Place for Making Application, TX CIV PRAC & REM § 171.024

§ 171.024. Place for Making Application
Currentness
(a) If there is a proceeding pending in a court involving an issue referable to arbitration under an alleged agreement to
arbitrate, a party may make an application under this subchapter only in that court.
(b) If Subsection (a) does not apply, a party may make an application in any court, subject to Section 171.096.
Credits

§ 171.025. Stay of Related Proceeding, TX CIV PRAC & REM § 171.025

§ 171.025. Stay of Related Proceeding
Currentness
(a) The court shall stay a proceeding that involves an issue subject to arbitration if an order for arbitration or an
application for that order is made under this subchapter.
(b) The stay applies only to the issue subject to arbitration if that issue is severable from the remainder of the proceeding.
Credits

§ 171.026. Validity of Underlying Claim, TX CIV PRAC & REM § 171.026

§ 171.026. Validity of Underlying Claim
Currentness
A court may not refuse to order arbitration because:
(1) the claim lacks merit or bona fides; or
(2) the fault or ground for the claim is not shown.
Credits

T. 7, Ch. 171, Subch. C, Refs & Annos, TX CIV PRAC & REM T. 7, Ch. 171, Subch....

Subchapter C. Arbitration
V.T.C.A., Civil Practice & Remedies Code T. 7, Ch. 171, Subch. C, Refs & Annos
Currentness
V. T. C. A., Civil Practice & Remedies Code T. 7, Ch. 171, Subch. C, Refs & Annos, TX CIV PRAC & REM T. 7, Ch.
171, Subch. C, Refs & Annos

§ 171.041. Appointment of Arbitrators, TX CIV PRAC & REM § 171.041

Subchapter C. Arbitration (Refs & Annos)
§ 171.041. Appointment of Arbitrators
Currentness
(a) The method of appointment of arbitrators is as specified in the agreement to arbitrate.
(b) The court, on application of a party stating the nature of the issues to be arbitrated and the qualifications of the
proposed arbitrators, shall appoint one or more qualified arbitrators if:
(1) the agreement to arbitrate does not specify a method of appointment;
(2) the agreed method fails or cannot be followed; or
(3) an appointed arbitrator fails or is unable to act and a successor has not been appointed.
(c) An arbitrator appointed under Subsection (b) has the powers of an arbitrator named in the agreement to arbitrate.
Credits

§ 171.042. Majority Action by Arbitrators, TX CIV PRAC & REM § 171.042

§ 171.042. Majority Action by Arbitrators
Currentness
The powers of the arbitrators are exercised by a majority unless otherwise provided by the agreement to arbitrate or
this chapter.
Credits

§ 171.043. Hearing Conducted by Arbitrators, TX CIV PRAC & REM § 171.043

§ 171.043. Hearing Conducted by Arbitrators
Currentness
(a) Unless otherwise provided by the agreement to arbitrate, all the arbitrators shall conduct the hearing. A majority of
the arbitrators may determine a question and render a final award.
(b) If, during the course of the hearing, an arbitrator ceases to act, one or more remaining arbitrators appointed to act
as neutral arbitrators may hear and determine the controversy.
Credits

§ 171.044. Time and Place of Hearing; Notice, TX CIV PRAC & REM § 171.044

§ 171.044. Time and Place of Hearing; Notice
Currentness
(a) Unless otherwise provided by the agreement to arbitrate, the arbitrators shall set a time and place for the hearing
and notify each party.
(b) The notice must be served not later than the fifth day before the hearing either personally or by registered or certified
mail with return receipt requested. Appearance at the hearing waives the notice.
(c) The court on application may direct the arbitrators to proceed promptly with the hearing and determination of the
controversy.
Credits

§ 171.045. Adjournment or Postponement, TX CIV PRAC & REM § 171.045

§ 171.045. Adjournment or Postponement
Currentness
Unless otherwise provided by the agreement to arbitrate, the arbitrators may:
(1) adjourn the hearing as necessary; and
(2) on request of a party and for good cause, or on their own motion, postpone the hearing to a time not later than:
(A) the date set by the agreement for making the award; or
(B) a later date agreed to by the parties.
Credits

§ 171.046. Failure of Party to Appear, TX CIV PRAC & REM § 171.046

§ 171.046. Failure of Party to Appear
Currentness
Unless otherwise provided by the agreement to arbitrate, the arbitrators may hear and determine the controversy on
the evidence produced without regard to whether a party who has been notified as provided by Section 171.044 fails
to appear.
Credits

§ 171.047. Rights of Party at Hearing, TX CIV PRAC & REM § 171.047

§ 171.047. Rights of Party at Hearing
Currentness
Unless otherwise provided by the agreement to arbitrate, a party at the hearing is entitled to:
(1) be heard;
(2) present evidence material to the controversy; and
(3) cross-examine any witness.
Credits

§ 171.048. Representation by Attorney; Fees, TX CIV PRAC & REM § 171.048

§ 171.048. Representation by Attorney; Fees
Currentness
(a) A party is entitled to representation by an attorney at a proceeding under this chapter.
(b) A waiver of the right described by Subsection (a) before the proceeding is ineffective.
(c) The arbitrators shall award attorney's fees as additional sums required to be paid under the award only if the fees
are provided for:
(1) in the agreement to arbitrate; or
(2) by law for a recovery in a civil action in the district court on a cause of action on which any part of the award
is based.
Credits

§ 171.049. Oath, TX CIV PRAC & REM § 171.049

§ 171.049. Oath
Currentness
The arbitrators, or an arbitrator at the direction of the arbitrators, may administer to each witness testifying before them
the oath required of a witness in a civil action pending in a district court.
Credits

§ 171.050. Depositions, TX CIV PRAC & REM § 171.050

§ 171.050. Depositions
Currentness
(a) The arbitrators may authorize a deposition:
(1) for use as evidence to be taken of a witness who cannot be required by subpoena to appear before the arbitrators
or who is unable to attend the hearing; or
(2) for discovery or evidentiary purposes to be taken of an adverse witness.
(b) A deposition under this section shall be taken in the manner provided by law for a deposition in a civil action pending
in a district court.
Credits

§ 171.051. Subpoenas, TX CIV PRAC & REM § 171.051

§ 171.051. Subpoenas
Currentness
(a) The arbitrators, or an arbitrator at the direction of the arbitrators, may issue a subpoena for:
(1) attendance of a witness; or
(2) production of books, records, documents, or other evidence.
(b) A witness required to appear by subpoena under this section may appear at the hearing before the arbitrators or
at a deposition.
(c) A subpoena issued under this section shall be served in the manner provided by law for the service of a subpoena
issued in a civil action pending in a district court.
(d) Each provision of law requiring a witness to appear, produce evidence, and testify under a subpoena issued in a civil
action pending in a district court applies to a subpoena issued under this section.
Credits

§ 171.052. Witness Fee, TX CIV PRAC & REM § 171.052

§ 171.052. Witness Fee
Currentness
The fee for a witness attending a hearing or a deposition under this subchapter is the same as the fee for a witness in
a civil action in a district court.
Credits

§ 171.053. Arbitrators' Award, TX CIV PRAC & REM § 171.053

§ 171.053. Arbitrators' Award
Currentness
(a) The arbitrators' award must be in writing and signed by each arbitrator joining in the award.
(b) The arbitrators shall deliver a copy of the award to each party personally, by registered or certified mail, or as
provided in the agreement.
(c) The arbitrators shall make the award:
(1) within the time established by the agreement to arbitrate; or
(2) if a time is not established by the agreement, within the time ordered by the court on application of a party.
(d) The parties may extend the time for making the award either before or after the time expires. The extension must
be in writing.
(e) A party waives the objection that an award was not made within the time required unless the party notifies the
arbitrators of the objection before the delivery of the award to that party.
Credits

§ 171.054. Modification or Correction to Award, TX CIV PRAC & REM § 171.054

§ 171.054. Modification or Correction to Award
Currentness
(a) The arbitrators may modify or correct an award:
(1) on the grounds stated in Section 171.091; or
(2) to clarify the award.
(b) A modification or correction under Subsection (a) may be made only:
(1) on application of a party; or
(2) on submission to the arbitrators by a court, if an application to the court is pending under Sections 171.087, 171.088,
171.089, and 171.091, subject to any condition ordered by the court.
(c) A party may make an application under this section not later than the 20th day after the date the award is delivered
to the applicant.
(d) An applicant shall give written notice of the application promptly to the opposing party. The notice must state that
the opposing party must serve any objection to the application not later than the 10th day after the date of notice.
(e) An award modified or corrected under this section is subject to Sections 171.087, 171.088, 171.089, 171.090, and
171.091.
Credits

§ 171.054. Modification or Correction to Award, TX CIV PRAC & REM § 171.054

§ 171.055. Arbitrator's Fees and Expenses, TX CIV PRAC & REM § 171.055

§ 171.055. Arbitrator's Fees and Expenses
Currentness
Unless otherwise provided in the agreement to arbitrate, the arbitrators' expenses and fees, with other expenses incurred
in conducting the arbitration, shall be paid as provided in the award.
Credits

T. 7, Ch. 171, Subch. D, Refs & Annos, TX CIV PRAC & REM T. 7, Ch. 171, Subch....

Subchapter D. Court Proceedings
V.T.C.A., Civil Practice & Remedies Code T. 7, Ch. 171, Subch. D, Refs & Annos
Currentness
V. T. C. A., Civil Practice & Remedies Code T. 7, Ch. 171, Subch. D, Refs & Annos, TX CIV PRAC & REM T. 7,
Ch. 171, Subch. D, Refs & Annos

§ 171.081. Jurisdiction, TX CIV PRAC & REM § 171.081

Subchapter D. Court Proceedings (Refs & Annos)
§ 171.081. Jurisdiction
Currentness
The making of an agreement described by Section 171.001 that provides for or authorizes an arbitration in this state
and to which that section applies confers jurisdiction on the court to enforce the agreement and to render judgment on
an award under this chapter.
Credits

§ 171.082. Application to Court; Fees, TX CIV PRAC & REM § 171.082

§ 171.082. Application to Court; Fees
Currentness
(a) The filing with the clerk of the court of an application for an order under this chapter, including a judgment or decree,
invokes the jurisdiction of the court.
(b) On the filing of the initial application and the payment to the clerk of the fees of court required to be paid on the
filing of a civil action in the court, the clerk shall docket the proceeding as a civil action pending in that court.
Credits

§ 171.083. Time for Filing, TX CIV PRAC & REM § 171.083

§ 171.083. Time for Filing
Currentness
An applicant for a court order under this chapter may file the application:
(1) before arbitration proceedings begin in support of those proceedings;
(2) during the period the arbitration is pending before the arbitrators; or
(3) subject to this chapter, at or after the conclusion of the arbitration.
Credits

§ 171.084. Stay of Certain Proceedings, TX CIV PRAC & REM § 171.084

§ 171.084. Stay of Certain Proceedings
Currentness
(a) After an initial application is filed, the court may stay:
(1) a proceeding under a later filed application in another court to:
(A) invoke the jurisdiction of that court; or
(B) obtain an order under this chapter; or
(2) a proceeding instituted after the initial application has been filed.
(b) A stay under this section affects only an issue subject to arbitration under an agreement in accordance with the terms
of the initial application.
Credits

§ 171.085. Contents of Application, TX CIV PRAC & REM § 171.085

§ 171.085. Contents of Application
Currentness
(a) A court may require that an application filed under this chapter:
(1) show the jurisdiction of the court;
(2) have attached a copy of the agreement to arbitrate;
(3) define the issue subject to arbitration between the parties under the agreement;
(4) specify the status of the arbitration before the arbitrators; and
(5) show the need for the court order sought by the applicant.
(b) A court may not find an application inadequate because of the absence of a requirement listed in Subsection (a)
unless the court, in its discretion:
(1) requires that the applicant amend the application to meet the requirements of the court; and
(2) grants the applicant a 10-day period to comply.
Credits

§ 171.086. Orders That May be Rendered, TX CIV PRAC & REM § 171.086

§ 171.086. Orders That May be Rendered
Currentness
(a) Before arbitration proceedings begin, in support of arbitration a party may file an application for a court order,
including an order to:
(1) invoke the jurisdiction of the court over the adverse party and to effect that jurisdiction by service of process on
the party before arbitration proceedings begin;
(2) invoke the jurisdiction of the court over an ancillary proceeding in rem, including by attachment, garnishment, or
sequestration, in the manner and subject to the conditions under which the proceeding may be instituted and conducted
ancillary to a civil action in a district court;
(3) restrain or enjoin:
(A) the destruction of all or an essential part of the subject matter of the controversy; or
(B) the destruction or alteration of books, records, documents, or other evidence needed for the arbitration;
(4) obtain from the court in its discretion an order for a deposition for discovery, perpetuation of testimony, or evidence
needed before the arbitration proceedings begin;
(5) appoint one or more arbitrators so that an arbitration under the agreement to arbitrate may proceed; or
(6) obtain other relief, which the court can grant in its discretion, needed to permit the arbitration to be conducted in
an orderly manner and to prevent improper interference or delay of the arbitration.
(b) During the period an arbitration is pending before the arbitrators or at or after the conclusion of the arbitration, a
party may file an application for a court order, including an order:
(1) that was referred to or that would serve a purpose referred to in Subsection (a);

§ 171.086. Orders That May be Rendered, TX CIV PRAC & REM § 171.086
(2) to require compliance by an adverse party or any witness with an order made under this chapter by the arbitrators
during the arbitration;
(3) to require the issuance and service under court order, rather than under the arbitrators' order, of a subpoena,
notice, or other court process:
(A) in support of the arbitration; or
(B) in an ancillary proceeding in rem, including by attachment, garnishment, or sequestration, in the manner of and
subject to the conditions under which the proceeding may be conducted ancillary to a civil action in a district court;
(4) to require security for the satisfaction of a court judgment that may be later entered under an award;
(5) to support the enforcement of a court order entered under this chapter; or
(6) to obtain relief under Section 171.087, 171.088, 171.089, or 171.091.
(c) A court may not require an applicant for an order under Subsection (a)(1) to show that the adverse party is about to,
or may, leave the state if jurisdiction over that party is not effected by service of process before the arbitration proceedings
begin.
Credits

§ 171.087. Confirmation of Award, TX CIV PRAC & REM § 171.087

§ 171.087. Confirmation of Award
Currentness
Unless grounds are offered for vacating, modifying, or correcting an award under Section 171.088 or 171.091, the court,
on application of a party, shall confirm the award.
Credits

§ 171.088. Vacating Award, TX CIV PRAC & REM § 171.088

§ 171.088. Vacating Award
Currentness
(a) On application of a party, the court shall vacate an award if:
(1) the award was obtained by corruption, fraud, or other undue means;
(2) the rights of a party were prejudiced by:
(A) evident partiality by an arbitrator appointed as a neutral arbitrator;
(B) corruption in an arbitrator; or
(C) misconduct or wilful misbehavior of an arbitrator;
(3) the arbitrators:
(A) exceeded their powers;
(B) refused to postpone the hearing after a showing of sufficient cause for the postponement;
(C) refused to hear evidence material to the controversy; or
(D) conducted the hearing, contrary to Section 171.043, 171.044, 171.045, 171.046, or 171.047, in a manner that
substantially prejudiced the rights of a party; or
(4) there was no agreement to arbitrate, the issue was not adversely determined in a proceeding under Subchapter B, 1
and the party did not participate in the arbitration hearing without raising the objection.

§ 171.088. Vacating Award, TX CIV PRAC & REM § 171.088
(b) A party must make an application under this section not later than the 90th day after the date of delivery of a copy of
the award to the applicant. A party must make an application under Subsection (a)(1) not later than the 90th day after
the date the grounds for the application are known or should have been known.
(c) If the application to vacate is denied and a motion to modify or correct the award is not pending, the court shall
confirm the award.
Credits
Footnotes
1 V.T.C.A., Civil Practice & Remedies Code § 171.021 et seq.

§ 171.089. Rehearing After Award Vacated, TX CIV PRAC & REM § 171.089

§ 171.089. Rehearing After Award Vacated
Currentness
(a) On vacating an award on grounds other than the grounds stated in Section 171.088(a)(4), the court may order a
rehearing before new arbitrators chosen:
(1) as provided in the agreement to arbitrate; or
(2) by the court under Section 171.041, if the agreement does not provide the manner for choosing the arbitrators.
(b) If the award is vacated under Section 171.088(a)(3), the court may order a rehearing before the arbitrators who made
the award or their successors appointed under Section 171.041.
(c) The period within which the agreement to arbitrate requires the award to be made applies to a rehearing under this
section and commences from the date of the order.
Credits

§ 171.090. Type of Relief Not Factor, TX CIV PRAC & REM § 171.090

§ 171.090. Type of Relief Not Factor
Currentness
The fact that the relief granted by the arbitrators could not or would not be granted by a court of law or equity is not
a ground for vacating or refusing to confirm the award.
Credits

§ 171.091. Modifying or Correcting Award, TX CIV PRAC & REM § 171.091

§ 171.091. Modifying or Correcting Award
Currentness
(a) On application, the court shall modify or correct an award if:
(1) the award contains:
(A) an evident miscalculation of numbers; or
(B) an evident mistake in the description of a person, thing, or property referred to in the award;
(2) the arbitrators have made an award with respect to a matter not submitted to them and the award may be corrected
without affecting the merits of the decision made with respect to the issues that were submitted; or
(3) the form of the award is imperfect in a manner not affecting the merits of the controversy.
(b) A party must make an application under this section not later than the 90th day after the date of delivery of a copy
of the award to the applicant.
(c) If the application is granted, the court shall modify or correct the award to effect its intent and shall confirm the
award as modified or corrected. If the application is not granted, the court shall confirm the award.
(d) An application to modify or correct an award may be joined in the alternative with an application to vacate the award.
Credits

§ 171.091. Modifying or Correcting Award, TX CIV PRAC & REM § 171.091

§ 171.092. Judgment on Award, TX CIV PRAC & REM § 171.092

§ 171.092. Judgment on Award
Currentness
(a) On granting an order that confirms, modifies, or corrects an award, the court shall enter a judgment or decree
conforming to the order. The judgment or decree may be enforced in the same manner as any other judgment or decree.
(b) The court may award:
(1) costs of the application and of the proceedings subsequent to the application; and
(2) disbursements.
Credits

§ 171.093. Hearing; Notice, TX CIV PRAC & REM § 171.093

§ 171.093. Hearing; Notice
Currentness
The court shall hear each initial and subsequent application under this subchapter in the manner and with the notice
required by law or court rule for making and hearing a motion filed in a pending civil action in a district court.
Credits

§ 171.094. Service of Process for Initial Application, TX CIV PRAC & REM § 171.094

§ 171.094. Service of Process for Initial Application
Currentness
(a) On the filing of an initial application under this subchapter, the clerk of the court shall:
(1) issue process for service on each adverse party named in the application; and
(2) attach a copy of the application to the process.
(b) To the extent applicable, the process and service and the return of service must be in the form and include the substance
required for process and service on a defendant in a civil action in a district court.
(c) An authorized official may effect the service of process.
Credits

§ 171.095. Service of Process for Subsequent Applications, TX CIV PRAC & REM §...

§ 171.095. Service of Process for Subsequent Applications
Currentness
(a) After an initial application has been made, notice to an adverse party for each subsequent application shall be made
in the same manner as is required for a motion filed in a pending civil action in a district court. This subsection applies
only if:
(1) jurisdiction over the adverse party has been established by service of process on the party or in rem for the initial
application; and
(2) the subsequent application relates to:
(A) the same arbitration or a prospective arbitration under the same agreement to arbitrate; and
(B) the same controversy or controversies.
(b) If Subsection (a) does not apply, service of process shall be made on the adverse party in the manner provided by
Section 171.094.
Credits

§ 171.096. Place of Filing, TX CIV PRAC & REM § 171.096

§ 171.096. Place of Filing
Currentness
(a) Except as otherwise provided by this section, a party must file the initial application:
(1) in the county in which an adverse party resides or has a place of business; or
(2) if an adverse party does not have a residence or place of business in this state, in any county.
(b) If the agreement to arbitrate provides that the hearing before the arbitrators is to be held in a county in this state, a
party must file the initial application with the clerk of the court of that county.
(c) If a hearing before the arbitrators has been held, a party must file the initial application with the clerk of the court
of the county in which the hearing was held.
(d) Consistent with Section 171.024, if a proceeding is pending in a court relating to arbitration of an issue subject to
arbitration under an agreement before the filing of the initial application, a party must file the initial application and
any subsequent application relating to the arbitration in that court.
Credits

§ 171.097. Transfer, TX CIV PRAC & REM § 171.097

§ 171.097. Transfer
Currentness
(a) On application of a party adverse to the party who filed the initial application, a court that has jurisdiction but that
is located in a county other than as described by Section 171.096 shall transfer the application to a court of a county
described by that section.
(b) The court shall transfer the application by an order comparable to an order sustaining a plea of privilege to be sued
in a civil action in a district court of a county other than the county in which an action is filed.
(c) The party must file the application under this section:
(1) not later than the 20th day after the date of service of process on the adverse party; and
(2) before any other appearance in the court by that adverse party, other than an appearance to challenge the
jurisdiction of the court.
Credits

§ 171.098. Appeal, TX CIV PRAC & REM § 171.098

§ 171.098. Appeal
Currentness
(a) A party may appeal a judgment or decree entered under this chapter or an order:
(1) denying an application to compel arbitration made under Section 171.021;
(2) granting an application to stay arbitration made under Section 171.023;
(3) confirming or denying confirmation of an award;
(4) modifying or correcting an award; or
(5) vacating an award without directing a rehearing.
(b) The appeal shall be taken in the manner and to the same extent as an appeal from an order or judgment in a civil
action.
Credits

§ 1. “Maritime transactions” and “commerce” defined; exceptions to..., 9 USCA § 1

Proposed Legislation
United States Code Annotated
Title 9. Arbitration (Refs & Annos)
Chapter 1. General Provisions (Refs & Annos)
9 U.S.C.A. § 1
§ 1. “Maritime transactions” and “commerce” defined; exceptions to operation of title
Currentness
“Maritime transactions”, as herein defined, means charter parties, bills of lading of water carriers, agreements relating
to wharfage, supplies furnished vessels or repairs to vessels, collisions, or any other matters in foreign commerce which,
if the subject of controversy, would be embraced within admiralty jurisdiction; “commerce”, as herein defined, means
commerce among the several States or with foreign nations, or in any Territory of the United States or in the District of
Columbia, or between any such Territory and another, or between any such Territory and any State or foreign nation,
or between the District of Columbia and any State or Territory or foreign nation, but nothing herein contained shall
apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or
interstate commerce.
CREDIT(S)
(July 30, 1947, c. 392, 61 Stat. 670.)
9 U.S.C.A. § 1, 9 USCA § 1
Current through P.L. 114-254. Also includes P.L. 114-256.

§ 2. Validity, irrevocability, and enforcement of agreements to arbitrate, 9 USCA § 2

Unconstitutional or PreemptedLimitation Recognized by Courville v. Allied Professionals Ins. Co., La.App. 1 Cir., June 05, 2015

KeyCite Yellow Flag - Negative TreatmentProposed Legislation
9 U.S.C.A. § 2
§ 2. Validity, irrevocability, and enforcement of agreements to arbitrate
Currentness
A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle
by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole
or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a
contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or
in equity for the revocation of any contract.
CREDIT(S)
(July 30, 1947, c. 392, 61 Stat. 670.)
9 U.S.C.A. § 2, 9 USCA § 2

§ 3. Stay of proceedings where issue therein referable to arbitration, 9 USCA § 3

9 U.S.C.A. § 3
§ 3. Stay of proceedings where issue therein referable to arbitration
Currentness
under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that
the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application
of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the
agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.
CREDIT(S)
(July 30, 1947, c. 392, 61 Stat. 670.)
9 U.S.C.A. § 3, 9 USCA § 3

§ 4. Failure to arbitrate under agreement; petition to United States..., 9 USCA § 4

9 U.S.C.A. § 4
§ 4. Failure to arbitrate under agreement; petition to United States court having jurisdiction
for order to compel arbitration; notice and service thereof; hearing and determination
Currentness
arbitration may petition any United States district court which, save for such agreement, would have jurisdiction under
Title 28, in a civil action or in admiralty of the subject matter of a suit arising out of the controversy between the parties,
for an order directing that such arbitration proceed in the manner provided for in such agreement. Five days' notice in
writing of such application shall be served upon the party in default. Service thereof shall be made in the manner provided
by the Federal Rules of Civil Procedure. The court shall hear the parties, and upon being satisfied that the making of
the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing
the parties to proceed to arbitration in accordance with the terms of the agreement. The hearing and proceedings, under
such agreement, shall be within the district in which the petition for an order directing such arbitration is filed. If the
making of the arbitration agreement or the failure, neglect, or refusal to perform the same be in issue, the court shall
proceed summarily to the trial thereof. If no jury trial be demanded by the party alleged to be in default, or if the matter
in dispute is within admiralty jurisdiction, the court shall hear and determine such issue. Where such an issue is raised, the
party alleged to be in default may, except in cases of admiralty, on or before the return day of the notice of application,
demand a jury trial of such issue, and upon such demand the court shall make an order referring the issue or issues to
a jury in the manner provided by the Federal Rules of Civil Procedure, or may specially call a jury for that purpose. If
the jury find that no agreement in writing for arbitration was made or that there is no default in proceeding thereunder,
the proceeding shall be dismissed. If the jury find that an agreement for arbitration was made in writing and that there
is a default in proceeding thereunder, the court shall make an order summarily directing the parties to proceed with the
arbitration in accordance with the terms thereof.
CREDIT(S)
(July 30, 1947, c. 392, 61 Stat. 671; Sept. 3, 1954, c. 1263, § 19, 68 Stat. 1233.)
9 U.S.C.A. § 4, 9 USCA § 4

§ 5. Appointment of arbitrators or umpire, 9 USCA § 5

9 U.S.C.A. § 5
§ 5. Appointment of arbitrators or umpire
Currentness
If in the agreement provision be made for a method of naming or appointing an arbitrator or arbitrators or an umpire,
such method shall be followed; but if no method be provided therein, or if a method be provided and any party thereto
shall fail to avail himself of such method, or if for any other reason there shall be a lapse in the naming of an arbitrator
or arbitrators or umpire, or in filling a vacancy, then upon the application of either party to the controversy the court
shall designate and appoint an arbitrator or arbitrators or umpire, as the case may require, who shall act under the
said agreement with the same force and effect as if he or they had been specifically named therein; and unless otherwise
provided in the agreement the arbitration shall be by a single arbitrator.
CREDIT(S)
(July 30, 1947, c. 392, 61 Stat. 671.)
9 U.S.C.A. § 5, 9 USCA § 5

§ 6. Application heard as motion, 9 USCA § 6

9 U.S.C.A. § 6
§ 6. Application heard as motion
Currentness
Any application to the court hereunder shall be made and heard in the manner provided by law for the making and
hearing of motions, except as otherwise herein expressly provided.
CREDIT(S)
(July 30, 1947, c. 392, 61 Stat. 671.)
9 U.S.C.A. § 6, 9 USCA § 6

§ 7. Witnesses before arbitrators; fees; compelling attendance, 9 USCA § 7

9 U.S.C.A. § 7
§ 7. Witnesses before arbitrators; fees; compelling attendance
Currentness
The arbitrators selected either as prescribed in this title or otherwise, or a majority of them, may summon in writing
any person to attend before them or any of them as a witness and in a proper case to bring with him or them any book,
record, document, or paper which may be deemed material as evidence in the case. The fees for such attendance shall
be the same as the fees of witnesses before masters of the United States courts. Said summons shall issue in the name of
the arbitrator or arbitrators, or a majority of them, and shall be signed by the arbitrators, or a majority of them, and
shall be directed to the said person and shall be served in the same manner as subpoenas to appear and testify before the
court; if any person or persons so summoned to testify shall refuse or neglect to obey said summons, upon petition the
United States district court for the district in which such arbitrators, or a majority of them, are sitting may compel the
attendance of such person or persons before said arbitrator or arbitrators, or punish said person or persons for contempt
in the same manner provided by law for securing the attendance of witnesses or their punishment for neglect or refusal
to attend in the courts of the United States.
CREDIT(S)
(July 30, 1947, c. 392, 61 Stat. 672; Oct. 31, 1951, c. 655, § 14, 65 Stat. 715.)
9 U.S.C.A. § 7, 9 USCA § 7

§ 8. Proceedings begun by libel in admiralty and seizure of vessel or property, 9 USCA § 8

9 U.S.C.A. § 8
§ 8. Proceedings begun by libel in admiralty and seizure of vessel or property
Currentness
If the basis of jurisdiction be a cause of action otherwise justiciable in admiralty, then, notwithstanding anything herein
to the contrary, the party claiming to be aggrieved may begin his proceeding hereunder by libel and seizure of the vessel
or other property of the other party according to the usual course of admiralty proceedings, and the court shall then
have jurisdiction to direct the parties to proceed with the arbitration and shall retain jurisdiction to enter its decree upon
the award.
CREDIT(S)
(July 30, 1947, c. 392, 61 Stat. 672.)
9 U.S.C.A. § 8, 9 USCA § 8

§ 9. Award of arbitrators; confirmation; jurisdiction; procedure, 9 USCA § 9

Unconstitutional or PreemptedLimitation Recognized by Hancor, Inc. v. R & R Engineering Products, Inc., D.Puerto Rico, Aug. 02, 2005
9 U.S.C.A. § 9
§ 9. Award of arbitrators; confirmation; jurisdiction; procedure
Currentness
If the parties in their agreement have agreed that a judgment of the court shall be entered upon the award made pursuant
to the arbitration, and shall specify the court, then at any time within one year after the award is made any party to the
arbitration may apply to the court so specified for an order confirming the award, and thereupon the court must grant
such an order unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of this title. If no
court is specified in the agreement of the parties, then such application may be made to the United States court in and
for the district within which such award was made. Notice of the application shall be served upon the adverse party, and
thereupon the court shall have jurisdiction of such party as though he had appeared generally in the proceeding. If the
adverse party is a resident of the district within which the award was made, such service shall be made upon the adverse
party or his attorney as prescribed by law for service of notice of motion in an action in the same court. If the adverse
party shall be a nonresident, then the notice of the application shall be served by the marshal of any district within which
the adverse party may be found in like manner as other process of the court.
CREDIT(S)
(July 30, 1947, c. 392, 61 Stat. 672.)
9 U.S.C.A. § 9, 9 USCA § 9

§ 10. Same; vacation; grounds; rehearing, 9 USCA § 10

Proposed Legislation
9 U.S.C.A. § 10
§ 10. Same; vacation; grounds; rehearing
Effective: May 7, 2002

Currentness
(a) In any of the following cases the United States court in and for the district wherein the award was made may make
an order vacating the award upon the application of any party to the arbitration--
(b) If an award is vacated and the time within which the agreement required the award to be made has not expired, the
court may, in its discretion, direct a rehearing by the arbitrators.
(c) The United States district court for the district wherein an award was made that was issued pursuant to section 580
of title 5 may make an order vacating the award upon the application of a person, other than a party to the arbitration,
who is adversely affected or aggrieved by the award, if the use of arbitration or the award is clearly inconsistent with
the factors set forth in section 572 of title 5.
CREDIT(S)
(July 30, 1947, c. 392, 61 Stat. 672; Nov. 15, 1990, Pub.L. 101-552, § 5, 104 Stat. 2745; Aug. 26, 1992, Pub.L. 102-354,
§ 5(b)(4), 106 Stat. 946; May 7, 2002, Pub.L. 107-169, § 1, 116 Stat. 132.)
9 U.S.C.A. § 10, 9 USCA § 10

§ 10. Same; vacation; grounds; rehearing, 9 USCA § 10

§ 11. Same; modification or correction; grounds; order, 9 USCA § 11

9 U.S.C.A. § 11
§ 11. Same; modification or correction; grounds; order
Currentness
In either of the following cases the United States court in and for the district wherein the award was made may make an
order modifying or correcting the award upon the application of any party to the arbitration--
(a) Where there was an evident material miscalculation of figures or an evident material mistake in the description of
any person, thing, or property referred to in the award.
(b) Where the arbitrators have awarded upon a matter not submitted to them, unless it is a matter not affecting the merits
of the decision upon the matter submitted.
(c) Where the award is imperfect in matter of form not affecting the merits of the controversy.
The order may modify and correct the award, so as to effect the intent thereof and promote justice between the parties.
CREDIT(S)
(July 30, 1947, c. 392, 61 Stat. 673.)
9 U.S.C.A. § 11, 9 USCA § 11


§ 12. Notice of motions to vacate or modify; service; stay of proceedings, 9 USCA § 12

9 U.S.C.A. § 12
§ 12. Notice of motions to vacate or modify; service; stay of proceedings
Currentness
Notice of a motion to vacate, modify, or correct an award must be served upon the adverse party or his attorney within
three months after the award is filed or delivered. If the adverse party is a resident of the district within which the award
was made, such service shall be made upon the adverse party or his attorney as prescribed by law for service of notice of
motion in an action in the same court. If the adverse party shall be a nonresident then the notice of the application shall
be served by the marshal of any district within which the adverse party may be found in like manner as other process
of the court. For the purposes of the motion any judge who might make an order to stay the proceedings in an action
brought in the same court may make an order, to be served with the notice of motion, staying the proceedings of the
adverse party to enforce the award.
CREDIT(S)
(July 30, 1947, c. 392, 61 Stat. 673.)
9 U.S.C.A. § 12, 9 USCA § 12


§ 13. Papers filed with order on motions; judgment; docketing; force..., 9 USCA § 13

9 U.S.C.A. § 13
§ 13. Papers filed with order on motions; judgment; docketing; force and effect; enforcement
Currentness
The party moving for an order confirming, modifying, or correcting an award shall, at the time such order is filed with
the clerk for the entry of judgment thereon, also file the following papers with the clerk:
(a) The agreement; the selection or appointment, if any, of an additional arbitrator or umpire; and each written extension
of the time, if any, within which to make the award.
(b) The award.
(c) Each notice, affidavit, or other paper used upon an application to confirm, modify, or correct the award, and a copy
of each order of the court upon such an application.
The judgment shall be docketed as if it was rendered in an action.
The judgment so entered shall have the same force and effect, in all respects, as, and be subject to all the provisions of
law relating to, a judgment in an action; and it may be enforced as if it had been rendered in an action in the court in
which it is entered.
CREDIT(S)
(July 30, 1947, c. 392, 61 Stat. 673.)
9 U.S.C.A. § 13, 9 USCA § 13


§ 14. Contracts not affected, 9 USCA § 14

9 U.S.C.A. § 14
§ 14. Contracts not affected
Currentness
This title shall not apply to contracts made prior to January 1, 1926.
CREDIT(S)
(July 30, 1947, c. 392, 61 Stat. 674.)
9 U.S.C.A. § 14, 9 USCA § 14


§ 15. Inapplicability of the Act of State doctrine, 9 USCA § 15

9 U.S.C.A. § 15
§ 15. Inapplicability of the Act of State doctrine
Currentness
Enforcement of arbitral agreements, confirmation of arbitral awards, and execution upon judgments based on orders
confirming such awards shall not be refused on the basis of the Act of State doctrine.
CREDIT(S)
(Added Pub.L. 100-669, § 1, Nov. 16, 1988, 102 Stat. 3969.)
9 U.S.C.A. § 15, 9 USCA § 15


§ 16. Appeals, 9 USCA § 16

9 U.S.C.A. § 16
§ 16. Appeals
Currentness
(a) An appeal may be taken from--
(1) an order--
(A) refusing a stay of any action under section 3 of this title,
(B) denying a petition under section 4 of this title to order arbitration to proceed,
(C) denying an application under section 206 of this title to compel arbitration,
(D) confirming or denying confirmation of an award or partial award, or
(E) modifying, correcting, or vacating an award;
(2) an interlocutory order granting, continuing, or modifying an injunction against an arbitration that is subject to
this title; or
(3) a final decision with respect to an arbitration that is subject to this title.
(b) Except as otherwise provided in section 1292(b) of title 28, an appeal may not be taken from an interlocutory order--
(1) granting a stay of any action under section 3 of this title;
(2) directing arbitration to proceed under section 4 of this title;
(3) compelling arbitration under section 206 of this title; or
(4) refusing to enjoin an arbitration that is subject to this title.

§ 16. Appeals, 9 USCA § 16
CREDIT(S)
(Added Pub.L. 100-702, Title X, § 1019(a), Nov. 19, 1988, 102 Stat. 4670, § 15; renumbered Pub.L. 101-650, Title III,
§ 325(a)(1), Dec. 1, 1990, Stat. 5120.)
9 U.S.C.A. § 16, 9 USCA § 16


Rule 12. Defenses and Objections: When and How Presented;..., FRCP Rule 12

Federal Rules of Civil Procedure for the United States District Courts (Refs & Annos)
Title III. Pleadings and Motions
Federal Rules of Civil Procedure Rule 12
Rule 12. Defenses and Objections: When and How Presented; Motion for Judgment
on the Pleadings; Consolidating Motions; Waiving Defenses; Pretrial Hearing
Currentness
<Notes of Decisions for 28 USCA Federal Rules of Civil Procedure Rule 12 are displayed in two separate
documents. Notes of Decisions for subdivisions I to VII are contained in this document. For Notes of Decisions
for subdivisions VIII to end, see second document for 28 USCA Federal Rules of Civil Procedure Rule 12.>
(a) Time to Serve a Responsive Pleading.
(1) In General. Unless another time is specified by this rule or a federal statute, the time for serving a responsive
pleading is as follows:
(A) A defendant must serve an answer:
(i) within 21 days after being served with the summons and complaint; or
(ii) if it has timely waived service under Rule 4(d), within 60 days after the request for a waiver was sent, or within
90 days after it was sent to the defendant outside any judicial district of the United States.
(B) A party must serve an answer to a counterclaim or crossclaim within 21 days after being served with the pleading
that states the counterclaim or crossclaim.
(C) A party must serve a reply to an answer within 21 days after being served with an order to reply, unless the
order specifies a different time.
(2) United States and Its Agencies, Officers, or Employees Sued in an Official Capacity. The United States, a United
States agency, or a United States officer or employee sued only in an official capacity must serve an answer to a
complaint, counterclaim, or crossclaim within 60 days after service on the United States attorney.
(3) United States Officers or Employees Sued in an Individual Capacity. A United States officer or employee sued in
an individual capacity for an act or omission occurring in connection with duties performed on the United States'
behalf must serve an answer to a complaint, counterclaim, or crossclaim within 60 days after service on the officer or
employee or service on the United States attorney, whichever is later.

(4) Effect of a Motion. Unless the court sets a different time, serving a motion under this rule alters these periods as
follows:
(A) if the court denies the motion or postpones its disposition until trial, the responsive pleading must be served
within 14 days after notice of the court's action; or
(B) if the court grants a motion for a more definite statement, the responsive pleading must be served within 14 days
after the more definite statement is served.
(b) How to Present Defenses. Every defense to a claim for relief in any pleading must be asserted in the responsive pleading
if one is required. But a party may assert the following defenses by motion:
(1) lack of subject-matter jurisdiction;
(2) lack of personal jurisdiction;
(3) improper venue;
(4) insufficient process;
(5) insufficient service of process;
(6) failure to state a claim upon which relief can be granted; and
(7) failure to join a party under Rule 19.
A motion asserting any of these defenses must be made before pleading if a responsive pleading is allowed. If a pleading
sets out a claim for relief that does not require a responsive pleading, an opposing party may assert at trial any defense to
that claim. No defense or objection is waived by joining it with one or more other defenses or objections in a responsive
pleading or in a motion.
(c) Motion for Judgment on the Pleadings. After the pleadings are closed--but early enough not to delay trial--a party
may move for judgment on the pleadings.
(d) Result of Presenting Matters Outside the Pleadings. If, on a motion under Rule 12(b)(6) or 12(c), matters outside the
pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under
Rule 56. All parties must be given a reasonable opportunity to present all the material that is pertinent to the motion.

(e) Motion for a More Definite Statement. A party may move for a more definite statement of a pleading to which a
responsive pleading is allowed but which is so vague or ambiguous that the party cannot reasonably prepare a response.
The motion must be made before filing a responsive pleading and must point out the defects complained of and the
details desired. If the court orders a more definite statement and the order is not obeyed within 14 days after notice of
the order or within the time the court sets, the court may strike the pleading or issue any other appropriate order.
(f) Motion to Strike. The court may strike from a pleading an insufficient defense or any redundant, immaterial,
impertinent, or scandalous matter. The court may act:
(1) on its own; or
(2) on motion made by a party either before responding to the pleading or, if a response is not allowed, within 21 days
after being served with the pleading.
(g) Joining Motions.
(1) Right to Join. A motion under this rule may be joined with any other motion allowed by this rule.
(2) Limitation on Further Motions. Except as provided in Rule 12(h)(2) or (3), a party that makes a motion under this
rule must not make another motion under this rule raising a defense or objection that was available to the party but
omitted from its earlier motion.
(h) Waiving and Preserving Certain Defenses.
(1) When Some Are Waived. A party waives any defense listed in Rule 12(b)(2)-(5) by:
(A) omitting it from a motion in the circumstances described in Rule 12(g)(2); or
(B) failing to either:
(i) make it by motion under this rule; or
(ii) include it in a responsive pleading or in an amendment allowed by Rule 15(a)(1) as a matter of course.
(2) When to Raise Others. Failure to state a claim upon which relief can be granted, to join a person required by Rule
19(b), or to state a legal defense to a claim may be raised:
(A) in any pleading allowed or ordered under Rule 7(a);

(B) by a motion under Rule 12(c); or
(C) at trial.
(3) Lack of Subject-Matter Jurisdiction. If the court determines at any time that it lacks subject-matter jurisdiction,
the court must dismiss the action.
(i) Hearing Before Trial. If a party so moves, any defense listed in Rule 12(b)(1)-(7)--whether made in a pleading or by
motion--and a motion under Rule 12(c) must be heard and decided before trial unless the court orders a deferral until
trial.
CREDIT(S)
(Amended December 27, 1946, effective March 19, 1948; January 21, 1963, effective July 1, 1963; February 28, 1966,
effective July 1, 1966; March 2, 1987, effective August 1, 1987; April 22, 1993, effective December 1, 1993; April 17, 2000,
effective December 1, 2000; April 30, 2007, effective December 1, 2007; March 26, 2009, effective December 1, 2009.)
ADVISORY COMMITTEE NOTES

1937 Adoption
Note to Subdivision (a). 1. Compare [former] Equity Rules 12 (Issue of Subpoena--Time for Answer) and 31 (Reply--When
Required--When Cause at Issue); 4 Mont.Rev.Codes Ann. (1935) §§ 9107, 9158; N.Y.C. P.A. (1937) § 263; N.Y.R.C.P.
(1937) Rules 109-111.
2. U.S.C., Title 28, § 763 (now § 547) (Petition in action against United States; service; appearance by district attorney)
provides that the United States as a defendant shall have 60 days within which to answer or otherwise defend. This and
other statutes which provide 60 days for the United States or an officer or agency thereof to answer or otherwise defend
are continued by this rule. In so far as any statutes not excepted in rule 81 provide a different time for a defendant to
defend, such statutes are modified. See U.S.C., Title 28, [former] § 45 (District courts; practice and procedure in certain
cases under the interstate commerce laws) (30 days).
3. Compare the last sentence of [former] Equity Rule 29 (Defenses--How Presented) and N.Y.C.P.A. (1937) § 283. See
Rule 15(a) for time within which to plead to an amended pleading.
Note to Subdivisions (b) and (d). 1. See generally [former] Equity Rules 29 (Defenses--How Presented), 33 (Testing
Sufficiency of Defense), 43 (Defect of Parties--Resisting Objection), and 44 (Defect of Parties--Tardy Objection);
N.Y.C.P.A. (1937) §§ 277-280; N.Y.R.C.P. (1937) Rules 106-112; English Rules Under the Judicature Act (The Annual
Practice, 1937) O. 25, r.r. 1-4; Clark, Code Pleading, 1928, pp. 371-381.
2. For provisions authorizing defenses to be made in the answer or reply see English Rules Under the Judicature Act,
(The Annual Practice, 1937) O. 25, r.r. 1-4; 1 Miss.Code Ann. (1930) §§ 378, 379. Compare Equity Rule 29 (Defenses--
How Presented); U.S.C.A., Title 28, [former] § 45 (District Courts; practice and procedure in certain cases under the
interstate commerce laws). U.S.C., Title 28, [former] § 45, substantially continued by this rule, provides: “No replication
need be filed to the answer, and objections to the sufficiency of the petition or answer as not setting forth a cause
of action or defense must be taken at the final hearing or by motion to dismiss the petition based on said grounds,
which motion may be made at any time before answer is filed.” Compare Calif.Code Civ.Proc., (Deering, 1937) § 433; 4

Nev.Comp.Laws (Hillyer, 1929) § 8600. For provisions that the defendant may demur and answer at the same time, see
Calif.Code Civ.Proc. (Deering, 1937) § 431; 4 Nev.Comp.Laws (Hillyer, 1929) § 8598.
3. [Former] Equity Rule 29 (Defenses--How Presented) abolished demurrers and provided that defenses in point of law
arising on the face of the bill should be made by motion to dismiss or in the answer, with further provision that every such
point of law going to the whole or material part of the cause or causes stated might be called up and disposed of before
final hearing “at the discretion of the court.” Likewise many state practices have abolished the demurrer, or retain it only
to attack substantial and not formal defects. See 6 Tenn.Code Ann. (Williams, 1934) § 8784; Ala.Code Ann. (Michie,
1928) § 9479; 2 Mass.Gen.Laws (Ter.Ed., 1932) ch. 231, §§ 15-18; Kansas Gen.Stat.Ann. (1935) §§ 60-705, 60-706.
Note to Subdivision (c). Compare [former] Equity Rule 33 (Testing Sufficiency of Defense); N.Y.R.C.P. (1937) Rules
111 and 112.
Note to Subdivisions (e) and (f). Compare [former] Equity Rules 20 (Further and Particular Statement in Pleading May
be Required) and 21 (Scandal and Impertinence); English Rules Under the Judicature Act (The Annual Practice, 1937)
O. 19, r.r. 7, 7a, 7b, 8; 4 Mont.Rev.Codes Ann. (1935) §§ 9166, 9167; N.Y.C.P.A. (1937) § 247; N.Y.C.P.A. (1937) Rules
103, 115, 116, 117; Wyo.Rev.Stat.Ann. (Courtright, 1931) §§ 89-1033, 89-1034.
Note to Subdivision (g). Compare Rules of the District Court of the United States for the District of Columbia (1937)
Equity Rule 11; N.M. Rules of Pleading, Practice and Procedure, 38 N.M.Rep. vii. [105-408] (1934); Wash.Gen.Rules
of the Superior Courts, 1 Wash.Rev.Stat.Ann. (Remington, 1932) p. 160, Rule VI(e) and (f).
Note to Subdivision (h). Compare Calif.Code Civ.Proc. (Deering, 1937) § 434; 2 Minn.Stat. (Mason, 1927) § 9252;
N.Y.C.P.A. (1937) §§ 278 and 279; Wash.Gen.Rules of the Superior Courts, 1 Wash.Rev.Stat.Ann. (Remington, 1932)
p. 160, Rule VI(e). This rule continues U.S.C.A., Title 28, former § 80 [now 1359, 1447, 1919] (Dismissal or remand)
(of action over which district court lacks jurisdiction), while U.S.C.A., Title 28, § 399 (Amendments to show diverse
citizenship) is continued by Rule 15.
1946 Amendment
Note. Subdivision (a). Various minor alterations in language have been made to improve the statement of the rule. All
references to bills of particulars have been stricken in accordance with changes made in subdivision (e).
Subdivision (b). The addition of defense (7), “failure to join an indispensable party”, cures an omission in the rules
which are silent as to the mode of raising such failure. See Commentary, Manner of Raising Objection of Non-Joinder
of Indispensable Party, 1940, 2 Fed.Rules Serv. 658, and, 1942, 5 Fed.Rules Serv. 820. In one case, United States v.
Metropolitan Life Ins. Co., E.D.Pa.1941, 36 F.Supp. 399, the failure to join an indispensable party was raised under
Rule 12(c).
Rule 12(b)(6), permitting a motion to dismiss for failure of the complaint to state a claim on which relief can be granted,
is substantially the same as the old demurrer for failure of a pleading to state a cause of action. Some courts have held that
as the rule by its terms refers to statements in the complaint, extraneous matter on affidavits, depositions or otherwise,
may not be introduced in support of the motion, or to resist it. On the other hand, in many cases the district courts
have permitted the introduction of such material. When these cases have reached circuit courts of appeals in situations
where the extraneous material so received shows that there is no genuine issue as to any material question of fact and
that on the undisputed facts as disclosed by the affidavits or depositions, one party or the other is entitled to judgment
as a matter of law, the circuit courts, properly enough, have been reluctant to dispose of the case merely on the face of
the pleading, and in the interest of prompt disposition of the action have made a final disposition of it. In dealing with
such situations the Second Circuit has made the sound suggestion that whatever its label or original basis, the motion

may be treated as a motion for summary judgment and disposed of as such. Samara v. United States, C.C.A.2, 1942, 129
F.2d 594, certiorari denied 63 S.Ct. 258, 317 U.S. 686, 87 L.Ed. 549; Boro Hall Corp. v. General Motors Corp., C.C.A.2,
1942, 124 F.2d 822, certiorari denied 63 S.Ct. 436, 317 U.S. 695, 87 L.Ed. 556. See, also, Kithcart v. Metropolitan Life
Ins. Co., C.C.A.8, 1945, 150 F.2d 997.
It has also been suggested that this practice could be justified on the ground that the federal rules permit “speaking”
motions. The Committee entertains the view that on motion under Rule 12(b)(6) to dismiss for failure of the complaint
to state a good claim, the trial court should have authority to permit the introduction of extraneous matter, such as
may be offered on a motion for summary judgment, and if it does not exclude such matter the motion should then
be treated as a motion for summary judgment and disposed of in the manner and on the conditions stated in Rule 56
relating to summary judgments, and, of course, in such a situation, when the case reaches the circuit court of appeals,
that court should treat the motion in the same way. The Committee believes that such practice, however, should be tied
to the summary judgment rule. The term “speaking motion” is not mentioned in the rules, and if there is such a thing its
limitations are undefined. Where extraneous matter is received, by tying further proceedings to the summary judgment
rule the courts have a definite basis in the rules for disposing of the motion.
The Committee emphasizes particularly the fact that the summary judgment rule does not permit a case to be disposed
of by judgment on the merits on affidavits, which disclose a conflict on a material issue of fact, and unless this practice
is tied to the summary judgment, rule, the extent to which a court, on the introduction of such extraneous matter, may
resolve questions of fact on conflicting proof would be left uncertain.
The decisions dealing with this general situation may be generally grouped as follows: (1) cases dealing with the use of
affidavits and other extraneous material on motions; (2) cases reversing judgments to prevent final determination on
mere pleading allegations alone.
Under group (1) are: Boro Hall Corp. v. General Motors Corp., C.C.A.2, 1942, 124 F.2d 822, certiorari denied 1943, 63
S.Ct. 436, 317 U.S. 695, 87 L.Ed. 556; Gallup v. Caldwell, C.C.A.3, 1941, 120 F.2d 90; Central Mexico Light & Power
Co. v. Munch, C.C.A.2, 1940, 116 F.2d 85; National Labor Relations Board v. Montgomery Ward & Co., 1944, 144 F.2d
528, 79 U.S.App.D.C. 200, certiorari denied 1944, 65 S.Ct. 134, 323 U.S. 774, 89 L.Ed. 619; Urquhart v. American-La
France Foamite Corp., 1944, 144 F.2d 542, 79 U.S.App.D.C. 219; Samara v. United States, C.C.A.2, 1942, 129 F.2d 594;
Cohen v. American Window Glass Co., C.C.A.2, 1942, 126 F.2d 111; Sperry Products Inc. v. Association of American
Railroads, C.C.A.2, 1942, 132 F.2d 408; Joint Council Dining Car Employees Local 370 v. Delaware, Lackawanna and
Western R. Co., C.C.A.2, 1946, 157 F.2d 417; Weeks v. Bareco Oil Co., C.C.A.7, 1941, 125 F.2d 84; Carroll v. Morrison
Hotel Corp., C.C.A.7, 1945, 149 F.2d 404; Victory v. Manning, C.C.A.3, 1942, 128 F.2d 415; Locals No. 1470, No. 1469,
and No. 1512 of International Longshoremen's Association v. Southern Pacific Co., C.C.A.5, 1942, 131 F.2d 605; Lucking v.
Delano, C.C.A.6, 1942, 129 F.2d 283; San Francisco Lodge No. 68 of International Association of Machinists v. Forrestal,
Cal.1944, 58 F.Supp. 466; Benson v. Export Equipment Corp., 1945, 164 P.2d 380, 49 N.M. 356, construing New Mexico
rule identical with Rule 12(b)(6); F. E. Myers & Bros. Co. v. Gould Pumps, Inc., W.D.N.Y.1946, 9 Fed.Rules Serv. 12b.33,
Case 2, 5 F.R.D. 132. Cf. Kohler v. Jacobs, C.C.A.5, 1943, 138 F.2d 440; Cohen v. United States, C.C.A.8, 1942, 129
F.2d 733.
Under group (2) are: Sparks v. England, C.C.A.8, 1940, 113 F.2d 579; Continental Collieries, Inc. v. Shober, C.C.A.3,
1942, 130 F.2d 631; Downey v. Palmer, C.C.A.2, 1940, 114 F.2d 116; DeLoach v. Crowley's Inc., C.C.A.5, 1942, 128 F.2d
378; Leimer v. State Mutual Life Assurance Co. of Worcester, Mass., C.C.A.8, 1940, 108 F.2d 302; Rossiter v. Vogel,
C.C.A.2, 1943, 134 F.2d 908, compare s.c., C.C.A.2, 1945, 148 F.2d 292; Karl Kiefer Machine Co. v. United States Bottlers
Machinery Co., C.C.A.7, 1940, 113 F.2d 356; Chicago Metallic Mfg. Co. v. Edward Katzinger Co., C.C.A.7, 1941, 123
F.2d 518; Louisiana Farmers' Protective Union, Inc. v. Great Atlantic & Pacific Tea Co. of America, Inc., C.C.A.8, 1942,
131 F.2d 419; Publicity Bldg. Realty Corp. v. Hannegan, C.C.A.8, 1943, 139 F.2d 583; Dioguardi v. Durning, C.C.A.2,
1944, 139 F.2d 774; Package Closure Corp. v. Sealright Co., Inc., C.C.A.2, 1944, 141 F.2d 972; Tahir Erk v. Glenn L.

Martin Co., C.C.A.4, 1941, 116 F.2d 865; Bell v. Preferred Life Assurance Society of Montgomery, Ala., 1943, 64 S.Ct.
5, 320 U.S. 238, 88 L.Ed. 15.
The addition at the end of subdivision (b) makes it clear that on a motion under Rule 12(b)(6) extraneous material
may not be considered if the court excludes it, but that if the court does not exclude such material the motion shall
be treated as a motion for summary judgment and disposed of as provided in Rule 56. It will also be observed that if
a motion under Rule 12(b)(6) is thus converted into a summary judgment motion, the amendment insures that both
parties shall be given a reasonable opportunity to submit affidavits and extraneous proofs to avoid taking a party by
surprise through the conversion of the motion into a motion for summary judgment. In this manner and to this extent the
amendment regularizes the practice above described. As the courts are already dealing with cases in this way, the effect
of this amendment is really only to define the practice carefully and apply the requirements of the summary judgment
rule in the disposition of the motion.
Subdivision (c). The sentence appended to subdivision (c) performs the same function and is grounded on the same
reasons as the corresponding sentence added in subdivision (b).
Subdivision (d). The change here was made necessary because of the addition of defense (7) in subdivision (b).
Subdivision (e). References in this subdivision to a bill of particulars have been deleted, and the motion provided for is
confined to one for more definite statement to be obtained only in cases where the movant cannot reasonably be required
to frame an answer or other responsive pleading to the pleading in question. With respect to preparations for trial, the
party is properly relegated to the various methods of examination and discovery provided in the rules for that purpose.
Slusher v. Jones, E.D.Ky.1943, 7 Fed.Rules Serv. 12e.231, Case 5, 3 F.R.D. 168; Best Foods, Inc. v. General Mills, Inc.,
D.Del.1943, 7 Fed.Rules Serv. 12e.231, Case 7, 3 F.R.D. 275; Braden v. Callaway, E.D.Tenn.1943, 8 Fed.Rules Serv.
12e.231, Case 1 (“. . . most courts . . . conclude that the definiteness required is only such as will be sufficient for the
party to prepare responsive pleadings”). Accordingly, the reference to the 20 day time limit has also been eliminated,
since the purpose of this present provision is to state a time period where the motion for a bill is made for the purpose
of preparing for trial.
Rule 12(e) as originally drawn has been the subject of more judicial rulings than any other part of the rules, and has
been much criticized by commentators, judges and members of the bar. See general discussion and cases cited in 1
Moore's Federal Practice, 1938, Cum.Supplement, § 12.07, under “Page 657”; also, Holtzoff, New Federal Procedure
and the Courts, 1940, 35-41. And compare vote of Second Circuit Conference of Circuit and District Judges, June
1940, recommending the abolition of the bill of particulars; Sun Valley Mfg. Co. v. Mylish, E.D.Pa.1944, 8 Fed.Rules
Serv. 12e.231, Case 6 (“Our experience . . . has demonstrated not only that ‘the office of the bill of particulars is fast
becoming obsolete’ . . . but that in view of the adequate discovery procedure available under the Rules, motions for bills
of particulars should be abolished altogether.”); Walling v. American Steamship Co., W.D.N.Y.1945, 4 F.R.D. 355, 8
Fed.Rules Serv. 12e.244, Case 8 (“. . . the adoption of the rule was ill advised. It has led to confusion, duplication and
delay.”) The tendency of some courts freely to grant extended bills of particulars has served to neutralize any helpful
benefits derived from rule 8, and has overlooked the intended use of the rules on depositions and discovery. The words
“or to prepare for trial”--eliminated by the proposed amendment--have sometimes been seized upon as grounds for
compulsory statement in the opposing pleading of all the details which the movant would have to meet at the trial. On the
other hand, many courts have in effect read these words out of the rule. See Walling v. Alabama Pipe Co., W.D.Mo.1942,
3 F.R.D. 159, 6 Fed.Rules Serv. 12e.244, Case 7; Fleming v. Mason & Dixon Lines, Inc., E.D.Tenn.1941, 42 F.Supp. 230;
Kellogg Co. v. National Biscuit Co., D.N.J.1941, 38 F.Supp. 643; Brown v. H. L. Green Co., S.D.N.Y.1943, 7 Fed.Rules
Serv. 12e.231, Case 6; Pedersen v. Standard Accident Ins. Co., W.D.Mo.1945, 8 Fed.Rules Serv. 12e.231, Case 8; Bowles
v. Ohse, D.Neb.1945, 4 F.R.D. 403, 9 Fed.Rules Serv. 12e.231, Case 1; Klages v. Cohen, E.D.N.Y.1945, 9 Fed.Rules
Serv. 8a.25, Case 4; Bowles v. Lawrence, D.Mass.1945, 8 Fed.Rules Serv. 12e.231, Case 19; McKinney Tool & Mfg. Co.
v. Hoyt, N.D.Ohio 1945, 9 Fed.Rules Serv. 12e.235, Case 1; Bowles v. Jack, D.Minn.1945, 5 F.R.D. 1, 9 Fed.Rules Serv.

12e.244, Case 9. And it has been urged from the bench that the phrase be stricken, Poole v. White, N.D.W.Va.1941, 5
Fed.Rules Serv. 12e.231, Case 4, 2 F.R.D. 40. See also Bowles v. Gabel, W.D.Mo.1946, 9 Fed.Rules Serv. 12e.244, Case
10. (“The courts have never favored that portion of the rules which undertook to justify a motion of this kind for the
purpose of aiding counsel in preparing his case for trial.”).
Subdivision (f). This amendment affords a specific method of raising the insufficiency of a defense, a matter which
has troubled some courts, although attack has been permitted in one way or another. See Dysart v. Remington-Rand,
Inc., D.Conn.1939, 31 F.Supp. 296; Eastman Kodak Co. v. McAuley, S.D.N.Y.1941, 4 Fed.Rules Serv., 12f.21, Case
8, 2 F.R.D. 21; Schenley Distillers Corp. v. Renken, E.D.S.C.1940, 34 F.Supp. 678; Yale Transport Corp. v. Yellow
Truck & Coach Mfg. Co., S.D.N.Y.1944, 3 F.R.D. 440; United States v. Turner Milk Co., N.D.Ill.1941, 4 Fed.Rules
Serv. 12b.51, Case 3, 1 F.R.D. 643; Teiger v. Stephan Oderwald, Inc., S.D.N.Y.1940, 31 F.Supp. 626; Teplitsky v.
Pennsylvania R. Co., N.D.Ill.1941, 38 F.Supp. 535; Callagher v. Carroll, E.D.N.Y.1939, 27 F.Supp. 568; United States
v. Palmer, S.D.N.Y.1939, 28 F.Supp. 936. And see Indemnity Ins. Co. of North America v. Pan American Airways,
Inc., S.D.N.Y.1944, 58 F.Supp. 338; Commentary, Modes of Attacking Insufficient Defenses in the Answer, 901, 1939, 1
Fed.Rules Serv. 669, 1940, 2 Fed.Rules Serv. 640.
Subdivision (g). The change in title conforms with the companion provision in subdivision (h).
The alteration of the “except” clause requires that other than provided in subdivision (h) a party who resorts to a motion
to raise defenses specified in the rule, must include in one motion all that are then available to him. Under the original
rule defenses which could be raised by motion were divided into two groups which could be the subjects of two successive
motions.
Subdivision (h). The addition of the phrase relating to indispensable parties is one of necessity.
1963 Amendment
This amendment conforms to the amendment of Rule 4(e). See also the Advisory Committee's Note to amended Rule
4(b).
1966 Amendment
Subdivision (b)(7). The terminology of this subdivision is changed to accord with the amendment of Rule 19. See
the Advisory Committee's Note to Rule 19, as amended, especially the third paragraph therein before the caption
“Subdivision (c).”
Subdivision (g). Subdivision (g) has forbidden a defendant who makes a preanswer motion under this rule from making a
further motion presenting any defense or objection which was available to him at the time he made the first motion and
which he could have included, but did not in fact include therein. Thus if the defendant moves before answer to dismiss
the complaint for failure to state a claim, he is barred from making a further motion presenting the defense of improper
venue, if that defense was available to him when he made his original motion. Amended subdivision (g) is to the same
effect. This required consolidation of defenses and objections in a Rule 12 motion is salutary in that it works against
piecemeal consideration of a case. For exceptions to the requirement of consolidation, see the last clause of subdivision
(g), referring to new subdivision (h)(2).
Subdivision (h). The question has arisen whether an omitted defense which cannot be made the basis of a second motion
may nevertheless be pleaded in the answer. Subdivision (h) called for waiver of “* * * defenses and objections which he
[defendant] does not present * * * by motion * * * or, if he has made no motion, in his answer * * *.” If the clause “if
he has made no motion,” was read literally, it seemed that the omitted defense was waived and could not be pleaded

in the answer. On the other hand, the clause might be read as adding nothing of substance to the preceding words;
in that event it appeared that a defense was not waived by reason of being omitted from the motion and might be
set up in the answer. The decisions were divided. Favoring waiver, see Keef v. Derounian, 6 F.R.D. 11 (N.D.Ill.1946);
Elbinger v. Precision Metal Workers Corp., 18 F.R.D. 467 (E.D.Wis.1956); see also Rensing v. Turner Aviation Corp.,
166 F.Supp. 790 (N.D.Ill.1958); P. Beiersdorf & Co. v. Duke Laboratories, Inc., 10 F.R.D. 282 (S.D.N.Y.1950); Neset v.
Christensen, 92 F.Supp. 78 (E.D.N.Y.1950). Opposing waiver, see Phillips v. Baker, 121 F.2d 752 (9th Cir.1941); Crum
v. Graham, 32 F.R.D. 173 (D.Mont.1963) (regretfully following the Phillips case); see also Birnbaum v. Birrell, 9 F.R.D.
72 (S.D.N.Y.1948); Johnson v. Joseph Schlitz Brewing Co., 33 F.Supp. 176 (E.D.Tenn.1940); cf. Carter v. American Bus
Lines, Inc., 22 F.R.D. 323 (D.Neb.1958).
Amended subdivision (h)(1)(A) eliminates the ambiguity and states that certain specified defenses which were available
to a party when he made a preanswer motion, but which he omitted from the motion, are waived. The specified defenses
are lack of jurisdiction over the person, improper venue, insufficiency of process, and insufficiency of service of process
(see Rule 12(b)(2)-(5) ). A party who by motion invites the court to pass upon a threshold defense should bring forward
all the specified defenses he then has and thus allow the court to do a reasonably complete job. The waiver reinforces
the policy of subdivision (g) forbidding successive motions.
By amended subdivision (h)(1)(B), the specified defenses, even if not waived by the operation of (A), are waived by the
failure to raise them by a motion under Rule 12 or in the responsive pleading or any amendment thereof to which the
party is entitled as a matter of course. The specified defenses are of such a character that they should not be delayed and
brought up for the first time by means of an application to the court to amend the responsive pleading.
Since the language of the subdivisions is made clear, the party is put on fair notice of the effect of his actions and omissions
and can guard himself against unintended waiver. It is to be noted that while the defenses specified in subdivision (h)(1)
are subject to waiver as there provided, the more substantial defenses of failure to state a claim upon which relief can
be granted, failure to join a party indispensable under Rule 19, and failure to state a legal defense to a claim (see Rule
12(b)(6), (7), (f) ), as well as the defense of lack of jurisdiction over the subject matter (see Rule 12(b)(1) ), are expressly
preserved against waiver by amended subdivision (h)(2) and (3).
1987 Amendment
The amendments are technical. No substantive change is intended.
1993 Amendment
Subdivision (a) is divided into paragraphs for greater clarity, and paragraph (1)(B) is added to reflect amendments to
Rule 4. Consistent with Rule 4(d)(3), a defendant that timely waives service is allowed 60 days from the date the request
was mailed in which to respond to the complaint, with an additional 30 days afforded if the request was sent out of
the country. Service is timely waived if the waiver is returned within the time specified in the request (30 days after the
request was mailed, or 60 days if mailed out of the country) and before being formally served with process. Sometimes a
plaintiff may attempt to serve a defendant with process while also sending the defendant a request for waiver of service;
if the defendant executes the waiver of service within the time specified and before being served with process, it should
have the longer time to respond afforded by waiving service.
The date of sending the request is to be inserted by the plaintiff on the face of the request for waiver and on the waiver
itself. This date is used to measure the return day for the waiver form, so that the plaintiff can know on a day certain
whether formal service of process will be necessary; it is also a useful date to measure the time for answer when service is
waived. The defendant who returns the waiver is given additional time for answer in order to assure that it loses nothing
by waiving service of process.

2000 Amendment
Rule 12(a)(3)(B) is added to complement the addition of Rule 4(i)(2)(B). The purposes that underlie the requirement that
service be made on the United States in an action that asserts individual liability of a United States officer or employee
for acts occurring in connection with the performance of duties on behalf of the United States also require that the time
to answer be extended to 60 days. Time is needed for the United States to determine whether to provide representation to
the defendant officer or employee. If the United States provides representation, the need for an extended answer period
is the same as in actions against the United States, a United States agency, or a United States officer sued in an official
capacity.
An action against a former officer or employee of the United States is covered by subparagraph (3)(B) in the same way
as an action against a present officer or employee. Termination of the relationship between the individual defendant and
the United States does not reduce the need for additional time to answer.
GAP Report
No changes are recommended for Rule 12 as published.
2007 Amendment
The language of Rule 12 has been amended as part of the general restyling of the Civil Rules to make them more easily
understood and to make style and terminology consistent throughout the rules. These changes are intended to be stylistic
only.
Former Rule 12(a)(4)(A) referred to an order that postpones disposition of a motion “until the trial on the merits.” Rule
12(a)(4) now refers to postponing disposition “until trial.” The new expression avoids the ambiguity that inheres in “trial
on the merits,” which may become confusing when there is a separate trial of a single issue or another event different
from a single all-encompassing trial.
2009 Amendment
The times set in the former rule at 10 or 20 days have been revised to 14 or 21 days. See the Note to Rule 6.
Fed. Rules Civ. Proc. Rule 12, 28 U.S.C.A., FRCP Rule 12

Including Amendments Received Through 12-1-16

28.1. Accelerated Appeal, TX R APP Rule 28.1
Vernon's Texas Rules Annotated

Texas Rules of Appellate Procedure
Section Two. Appeals from Trial Court Judgments and Orders (Refs & Annos)
Rule 28. Accelerated, Agreed, and Permissive Appeals in Civil Cases (Refs & Annos)
TX Rules App.Proc., Rule 28.1
28.1. Accelerated Appeal
Currentness
(a) Types of Accelerated Appeals. Appeals from interlocutory orders (when allowed by statute), appeals in quo warranto
proceedings, appeals required by statute to be accelerated or expedited, and appeals required by law to be filed or
perfected within less than 30 days after the date of the order or judgment being appealed are accelerated appeals.
(b) Perfection of Accelerated Appeal. Unless otherwise provided by statute, an accelerated appeal is perfected by filing
a notice of appeal in compliance with Rule 25.1 within the time allowed by Rule 26.1(b) or as extended by Rule 26.3.
Filing a motion for new trial, any other post-trial motion, or a request for findings of fact will not extend the time to
perfect an accelerated appeal.
(c) Appeals of Interlocutory Orders. The trial court need not file findings of fact and conclusions of law but may do so
within 30 days after the order is signed.
(d) Quo Warranto Appeals. The trial court may grant a motion for new trial timely filed under Texas Rule of Civil
Procedure 329b(a)-(b) until 50 days after the trial court's final judgment is signed. If not determined by signed written
order within that period, the motion will be deemed overruled by operation of law on expiration of that period.
(e) Record and Briefs. In lieu of the clerk's record, the appellate court may hear an accelerated appeal on the original
papers forwarded by the trial court or on sworn and uncontroverted copies of those papers. The appellate court may allow
the case to be submitted without briefs. The deadlines and procedures for filing the record and briefs in an accelerated
appeal are provided in Rules 35.1 and 38.6.
Credits
Eff. Sept. 1, 1997. Amended by Supreme Court March 10, 2008, Aug. 20, 2008, and Aug. 25, 2008, eff. Sept. 1, 2008.
Approved by Court of Criminal Appeals Sept. 30, 2008, eff. Sept. 30, 2008. Amended by Supreme Court Sept. 9, 2011,
eff. Sept. 9, 2011.
Editors' Notes
NOTES AND COMMENTS

Comment to 2011 Change: Section 51.014(d)-(f) of the Texas Civil Practice and Remedies Code, as amended
in 2011, provides for appeals of orders not otherwise appealable when permitted by the trial court. The 2011
amendments, which explicitly apply only to cases commenced on or after September 1, 2011, eliminated the
prior requirement that the parties agree to the appeal and reinstated a requirement that the court of appeals

28.1. Accelerated Appeal, TX R APP Rule 28.1
also permit the appeal. Act of May 25, 2011, 82nd Leg., R.S., ch. 203, §§ 3.01, 6.01 [HB 274], amending Act
of May 27, 2005, 79th Leg. R.S., ch. 1051 [HB 1294], §§ 1-2, 2005 Tex. Gen. Laws 3512, 3512-3513 and Act of
May 17, 2001, 77th Leg., R.S., ch. 1389 [HB 978], § 1, 2001 Tex. Gen. Laws 3575. The amendments necessitated
the addition of Rule 28.3 and the adoption of Rule of Civil Procedure 168, which governs the procedure for
obtaining permission to appeal from the trial court.
New Rule 28.3 applies only to appeals in cases that were filed in the trial court on or after September 1, 2011.
Rule 28.2 applies only to appeals in cases that were filed in the trial court before September 1, 2011.
Rule of Civil Procedure 168 clarifies that the trial court's permission to appeal should be included in the order
to be appealed rather than in a separate order. As stated in Rule 28.3(c), if a prior order containing the trial
court's ruling is amended to include such permission, the time for appeal runs from the amended order. Rule
28.3(k) further clarifies that if the petition is granted, appeal is thereby perfected, and the appeal proceeds as an
accelerated appeal, with all deadlines--including deadlines and obligations for preparing the record--running
from the date the petition was granted. A separate notice of appeal need not be filed. The petition procedure in
Rule 28.3 is intended to be similar to the Rule 53 procedure governing petitions for review in the Supreme Court.
Comment to 2008 change: Rule 28 is rewritten. Subdivision 28.1 more clearly defines accelerated appeals and
provides a uniform appellate timetable. But many statutes that provide for accelerated or expedited appeals also
set appellate timetables, and statutory deadlines govern over deadlines provided in the rule. Subdivision 28.2
provides procedures for an agreed appeal of an interlocutory order permitted by statute. Such appeals are now
permitted under Section 51.014(d) of the Civil Practice and Remedies Code. The requirements for perfecting
appeal are generally set out in Rule 25.1, and as provided there, only the notice of appeal is jurisdictional.
Rules App. Proc., Rule 28.1, TX R APP Rule 28.1

Rules of Civil Procedure, Rules of Evidence, and Rules of Appellate Procedure are current with amendments received
through September 1, 2016. Bar Rules, Rules of Disciplinary Procedure, Code of Judicial Conduct, and Rules of Judicial
Administration are current with amendments received through September 1, 2016. Other state court rules and selected
county rules are current with rules verified through September 1, 2016.

for violation of the Deceptive Trade

Practices Act, and violation of the Credit
350 S.W.3d 152
Services Organization Act, where the parties'
arbitration agreement expressly assigned
San Antonio.
“any dispute about the validity, effect or
NCP FINANCE LIMITED PARTNERSHIP enforceability of the prohibitions against class
and NMCapital, Inc., Appellants, proceedings” to the trial court, not the
v. arbitrator. V.T.C.A. Bus. & C., § 17.41 et seq.
Humberto ESCATIOLA, Appellee. Cases that cite this headnote
No. 04–10–00644–CV.
April 27, 2011. Disputes and Matters Arbitrable Under
Agreement
Synopsis
Lender was entitled to compel individual
Background: On behalf of a purported class, borrower
arbitration of borrower's purported class
sued credit services organization and lender for usury,
action claims for violation of the Deceptive
violation of the Deceptive Trade Practices Act, and
Trade Practices Act, and violation of the
violation of the Credit Services Organization Act. Lender
Credit Services Organization Act, where the
filed a motion to compel individual arbitration, to strike
parties' arbitration agreement committed any
borrower's request for class action certification, and to
claim, which it defined as any legal dispute
stay the litigation pending completion of arbitration.
between borrower, on the one hand, and credit
The 150th Judicial District Court, Bexar County,
services organization and/or lender, on the
Antonia Arteaga, J., denied lender's motion to compel
other hand, to the arbitrator, and the clear
individual arbitration and permitted borrower to seek
language of the parties' agreement expressly
class certification before the arbitrator. Lender appealed.
forbade class certification in arbitration.
V.T.C.A. Bus. & C., § 17.41 et seq.
Holdings: The Court of Appeals, Sandee Bryan Marion, 1 Cases that cite this headnote
J., held that:
[1] trial court was required to rule on lender's motion to

compel individual arbitration, and Attorneys and Law Firms
[2] lender was entitled to compel individual arbitration of *152 Bryan James Wick, Jeffrey Wallace Hellberg Jr.,
borrower's claims. Wick Phillips, LLC, Dallas, TX, for Appellants.
John Steven Dwyre, John Dwyre & Associates, San

Reversed and remanded. Antonio, TX, for Appellee.
Sitting: SANDEE BRYAN MARION, Justice,

REBECCA SIMMONS, Justice, STEVEN C. HILBIG,
West Headnotes (2) Justice.

OPINION
Trial court was required to rule on lender's Opinion by: SANDEE BRYAN MARION, Justice.
motion to compel individual arbitration of
borrower's purported class actions claims

In this accelerated appeal, appellants, NCP Finance

Limited Partnership and NMCapital, Inc. (collectively The arbitration agreement commits any “claim,” which
“NCP”), appeal from the trial court's order on their it defines as “any legal dispute between [Escatiola],
motion to compel individual arbitration and stay on the one hand, and ACE and/or [NCP], on the
litigation pending arbitration. We reverse and remand. other hand,” to the arbitrator. However, the arbitration
agreement also states: “[A]ny dispute about the validity,
effect or enforceability of the prohibitions against class
proceedings, private attorney general proceedings and/
*153 BACKGROUND or multiple-party proceedings ... shall be resolved by a
court and not by an arbitrator or arbitration administrator
ACE Credit Service, LLC (“ACE”) is a registered Texas
” (emphasis added). Escatiola refinanced the loan three
credit services organization, and NMCapital is an out-of-
times over the next two months, and he signed identical
state lender and a general partner of NCP Finance Limited
arbitration agreements on each occasion.
Partnership, a Texas limited partnership. On February
16, 2008, appellee, Humberto Escatiola, obtained a loan
On behalf of a purported class, Escatiola sued ACE and
from NCP through credit services provided by ACE. On
NCP for usury, violation of the Texas Deceptive Trade
that same date, Escatiola, ACE, and NCP signed a credit
Practices Act, and violation of the Texas Credit Services
services agreement, a loan agreement, a promissory note,
Organization Act. NCP filed a motion in the trial court to
and an arbitration agreement. The arbitration agreement
compel individual arbitration, to strike Escatiola's request
states:
for class action certification, and to stay the litigation
[U]pon the election of either pending completion of arbitration. The trial court's order
[Escatiola], [ACE] ..., or [NCP] ..., on the motion reads, in part: “IT IS ... ORDERED THAT
any legal dispute between [NCP's] Motion as to individual arbitration is denied and
[Escatiola], on the one hand, that the case shall proceed in arbitration and [Escatiola]
and ACE and/or [NCP], on the may seek class certification therein.” The trial court stayed
other hand, will be resolved the litigation and appointed an arbitrator.
by binding arbitration.... (1) NO
PARTY MAY PARTICIPATE On appeal, NCP argues the trial court was required to
IN A CLASS ACTION IN grant the motion as to individual arbitration because (a)
COURT OR IN CLASS– the parties' arbitration agreement specifically prohibits
WIDE ARBITRATION ...; (2) class arbitration, and (b) the United States Supreme
NO PARTY MAY ACT Court recently ruled in Stolt–Nielsen S.A. v. AnimalFeeds
AS A PRIVATE ATTORNEY International Corp. that class arbitration may not be
GENERAL IN COURT OR IN compelled absent express agreement of the parties.
AN ARBITRATION; (3) CLAIMS
BROUGHT BY OR AGAINST
[ESCATIOLA] MAY NOT BE DISCUSSION
JOINED OR CONSOLIDATED
WITH CLAIMS BROUGHT [1] Several years ago, the United States Supreme Court
BY OR AGAINST ANY held that whether an arbitration agreement forbids a class
OTHER PERSON; AND (4) action is a question for the arbitrator, not the trial court,
THE ARBITRATOR SHALL to decide. Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444,
HAVE NO AUTHORITY TO 452, 123 S.Ct. 2402, 156 L.Ed.2d 414 (2003) (plurality
CONDUCT A CLASS–WIDE opinion). In Green Tree, Lynn and Burt Bazzle (“the
ARBITRATION, PRIVATE Bazzles”) obtained a home improvement loan from Green
ATTORNEY GENERAL Tree *154 Financial Corporation (“Green Tree”). Id. at
ARBITRATION OR MULTIPLE– 447, 123 S.Ct. 2402. The Bazzles and Green Tree signed
PARTY ARBITRATION. a contract, which included this arbitration clause: “ ‘All
disputes, claims, or controversies arising from or relating

to this contract or the relationships which result from could seek class certification in arbitration. Id. The court
this contract ... shall be resolved by binding arbitration of appeals issued a writ of mandamus directing the
by one arbitrator selected by [Green Tree] with consent trial court to vacate its second order and determine
of [the Bazzles].’ ” Id. at 448, 123 S.Ct. 2402 (emphasis whether the parties' agreement permitted class arbitration.
in original). The Bazzles subsequently sued Green Tree Id. However, the Texas Supreme Court concluded the
in South Carolina state court for violation of the South decision in Green Tree was “directly on point” and held
Carolina Consumer Protection Code and asked the trial the court of appeals erred in directing the trial court
court to certify their claim as a class action. Id. at 449, to determine the class certification issue. Id. at 369–
123 S.Ct. 2402. The trial court certified a class and entered 70. According to the unanimous Texas Supreme Court,
an order compelling arbitration. Id. Affirming the trial “when the contracts at issue commit[ ] all disputes arising
court's order, the South Carolina Supreme Court held out of the agreement to the arbitrator,” the arbitrator
class arbitration was authorized because the contract was must decide class certification issues. Id. at 368.
silent on the matter. Id. at 450, 123 S.Ct. 2402.
Recently, a majority of the United States Supreme
A plurality of the United States Supreme Court vacated Court recognized Green Tree did not garner a majority
the South Carolina Supreme Court's ruling, holding on the question of whether the trial court or the
that in certain limited circumstances, courts must decide arbitrator must decide class certification questions. *155
“gateway” arbitration-related matters, “such as whether Stolt–Nielsen, ––– U.S. ––––, 130 S.Ct. 1758, 1772,
the parties have a valid arbitration agreement at all or 176 L.Ed.2d 605 (2010). However, the Stolt–Nielsen
whether a concededly binding arbitration clause applies to majority declined to resolve this unsettled question
a certain type of controversy.” Id. at 452, 123 S.Ct. 2402. because the parties' agreement expressly assigned the class
However, the Court concluded the question involved certification question to the arbitration panel. Id. Instead,
in Green Tree—whether the parties' contract forbade the Court turned to the question the Green Tree Court did
class arbitration—did not fall into that narrow exception not address—the standard to be applied when determining
because it concerned neither the validity of the arbitration whether a contract permits class arbitration. Id. The Court
clause nor the clause's applicability to the underlying held that “a party may not be compelled ... to submit
dispute. Id. According to the Court, whether the parties' to class arbitration unless there is a contractual basis for
contract forbade class arbitration was a question of what concluding that the party agreed to do so.” Id. at 1775
kind of arbitration the parties agreed to—a matter of (emphasis in original). Because the parties conceded their
contract interpretation and arbitration procedures. Id. at agreement was silent on the matter of class certification,
452–53, 123 S.Ct. 2402. Given that “[a]rbitrators are well the Court found the arbitration panel's certification of
suited to answer” questions of contract interpretation, and a class “fundamentally at war with the foundational ...
that the parties' contract contained “sweeping language principle that arbitration is a matter of consent.” Id.
concerning the scope of the questions committed to
arbitration,” the Court held the matter should be decided Here, the arbitration agreement expressly assigns “any
by the arbitrator, not the trial court. Id. at 453, 123 S.Ct. dispute about the validity, effect or enforceability of the
2402. prohibitions against class proceedings” to the trial court,
not the arbitrator. Accordingly, because the contract at
Expressly relying upon the United States Supreme Court's issue here did not commit all disputes to the arbitrator,
ruling in Green Tree, the Texas Supreme Court also held but rather expressly assigned disputes involving the class
the arbitrator, not the trial court, must rule on class action waiver provision to the trial court, the trial
certification issues. In re Wood, 140 S.W.3d 367, 368 court was required to rule on NCP's motion to compel
(Tex.2004) (per curiam). In Wood, an attorney and three individual arbitration.
of his clients signed fee agreements providing that all
disputes arising from the agreements would be submitted [2] Turning to whether the trial court's denial of NCP's
to binding arbitration. Id. When the clients sued the motion was correct in light of recent precedent, we
attorney over a fee dispute, the trial court ordered the must conclude it was not. The clear language of the
case to arbitration and signed a second order specifically parties' agreement expressly forbids class certification in
authorizing the arbitrator to decide whether the clients arbitration. Because the United States Supreme Court

recently held in Stolt–Nielsen that a party cannot be We reverse the trial court's order and remand this matter
to the trial court for proceedings consistent with this
compelled to submit to class arbitration absent its express
opinion.
consent, the trial court erred by denying NCP's motion to
compel individual arbitration and by permitting Escatiola
to seek class certification before the arbitrator. All Citations
350 S.W.3d 152

CONCLUSION

51 Tex. Sup. Ct. J. 819
KeyCite Yellow Flag - Negative Treatment Judgment of Court of Appeals reversed, arbitration award
Distinguished by RSL Funding, LLC v. Pippins, Tex., July 1, 2016 vacated, and case remanded.
258 S.W.3d 580
Supreme Court of Texas. O'Neill, J., concurred and filed opinion.
PERRY HOMES, A Joint Venture, Home Johnson, J., concurred in part, dissented in part, and filed
Owners Multiple Equity, Inc., and Warranty opinion in which Jefferson, C.J., and Green, J., joined.
Underwriters Insurance Company, Petitioners,
v. Willett, J., concurred in part, dissented in part, and filed
Robert E. CULL and S. Jane Cull, Respondents. opinion.
No. 05–0882.
|
Argued March 20, 2007. West Headnotes (42)
|
Delivered May 2, 2008. [1] Alternative Dispute Resolution
| Suing or participating in suit
Rehearing Denied Aug. 29, 2008.
A party can not substantially invoke
Synopsis the litigation process and then switch to
Background: Homeowners moved to confirm arbitration arbitration on the eve of trial.
award against home builder and warranty companies
on faulty construction claim. The 236th District Court,
Tarrant County, Thomas Wilson Lowe III, J., granted
motion. Defendants appealed. The Fort Worth Court of [2] Alternative Dispute Resolution
Appeals, 173 S.W.3d 565, affirmed as modified to delete Evidence
duplicative interest. Defendants' petitioned for review. There is a strong presumption against waiver
of arbitration, but it is not irrebuttable.

Holdings: The Supreme Court, Brister, J., held that:
[1] order compelling arbitration could be reviewed post- [3] Courts

arbitration; Operation and effect in general
Appellate courts' denial, without comment,
[2] waiver of arbitration by litigation conduct is an issue of home builder and warranty companies'
for the courts, rather than arbitrators; petitions for mandamus relief from trial
court order compelling arbitration of
[3] waiver of arbitration by litigation conduct must be faulty construction claim did not foreclose
decided on a case-by-case basis, and courts should look to Supreme Court's review of order compelling
the totality of the circumstances; arbitration, on appeal from confirmation of
arbitration award.
[4] waiver of arbitration requires a showing of prejudice;
[5] homeowners substantially invoked the litigation
process to defendants' prejudice and, thus, waived
[4] Mandamus
arbitration; and
Remedy by Appeal or Writ of Error
[6] warranty companies also waived arbitration.

51 Tex. Sup. Ct. J. 819
Mandamus is only available when a final

appeal would be inadequate. [10] Alternative Dispute Resolution
3 Cases that cite this headnote Alternative Dispute Resolution
[5] Alternative Dispute Resolution Arbitrators generally must decide defenses
Scope and Standards of Review that apply to the whole contract, while
Trial court order compelling arbitration could courts decide defenses relating solely to the
be reviewed post-arbitration. arbitration clause; thus, arbitrators must
decide if an entire contract was fraudulently
9 Cases that cite this headnote induced, while courts must decide if an
arbitration clause was.
[6] Appeal and Error 10 Cases that cite this headnote
Parties waive nothing by foregoing
interlocutory review and awaiting a final
judgment to appeal.
1 Cases that cite this headnote must be decided on a case-by-case basis, and
courts should look to the totality of the
circumstances.
Decisions reviewable; finality 15 Cases that cite this headnote
Courts may review an order compelling
arbitration if the order also dismisses the
underlying litigation so it is final rather than
interlocutory.
3 Cases that cite this headnote was not ruled out solely because plaintiffs,
who moved to compel arbitration, did not ask
the court to make any judicial decisions on the
merits of their faulty construction claim; while
that was a factor to consider, it was not the
Alternative Dispute Resolution only one.
Courts conduct ordinary review of a trial 1 Cases that cite this headnote
court's initial referral to arbitration and
deferential review only of the arbitrator's final [13] Alternative Dispute Resolution
award. Suing or participating in suit
3 Cases that cite this headnote Waiver of arbitration by litigation conduct
involves substantial invocation of the judicial
process, not just judgment on the merits.
Waiver, laches, or estoppel 10 Cases that cite this headnote
Waiver of arbitration by litigation conduct is
an issue for the courts, rather than arbitrators. [14] Alternative Dispute Resolution

51 Tex. Sup. Ct. J. 819
Parties may file suit in order to compel turning around and seeking arbitration with
arbitration. V.T.C.A., Civil Practice & the spoils.
Remedies Code § 171.021(a).

[15] Alternative Dispute Resolution Contractual or consensual basis
Suing or participating in suit The answers to most questions regarding
While whether the party who moves to compel arbitration flow inexorably from the fact that
arbitration is the plaintiff or the defendant arbitration is simply a matter of contract
is a factor to consider in determining waiver between the parties.
of arbitration by litigation conduct, it does
not alone justify a finding of waiver or 8 Cases that cite this headnote
change the basic nature of the totality-of-the-
circumstances test. [20] Alternative Dispute Resolution
Waiver or Estoppel
Like any other contract right, arbitration can
be waived if the parties agree instead to resolve
[16] Alternative Dispute Resolution a dispute in court.
How much litigation conduct will be 6 Cases that cite this headnote
“substantial,” for purposes of rule that a party
waives arbitration by substantially invoking [21] Alternative Dispute Resolution
the judicial process to the other party's Waiver or Estoppel
prejudice, depends very much on the context;
Waiver of arbitration can be implied from a
three or four depositions may be all the
party's conduct, although that conduct must
discovery needed in one case, but purely
be unequivocal, and in close cases, the strong
preliminary in another.
[17] Estoppel
[22] Estoppel
Nature and Application of Estoppel in
Pais
Waiver is essentially unilateral in its character
Estoppel is a defensive theory barring parties
and no act of the party in whose favor it is
from asserting a claim or defense when
made is necessary to complete it.
their representations have induced action or
forbearance of a definite and substantial 1 Cases that cite this headnote
character and injustice can be avoided only by
enforcement.
[23] Estoppel
3 Cases that cite this headnote Prejudice to person setting up estoppel
Estoppel includes a prejudice requirement.
A party who enjoys substantial direct benefits
by gaining an advantage in the pretrial
Waiver or Estoppel
litigation process should be barred from

51 Tex. Sup. Ct. J. 819
Waiver of arbitration requires a showing of

prejudice. 33 Cases that cite this headnote

Waiver or Estoppel
[25] Alternative Dispute Resolution A party should not be allowed purposefully
Suing or participating in suit and unjustifiably to manipulate the exercise
Homeowners who filed action claiming of its arbitral rights simply to gain an unfair
faulty construction substantially invoked tactical advantage over the opposing party.
the litigation process to home builder
and warranty companies' prejudice and, 8 Cases that cite this headnote
thus, waived arbitration clause in warranty
agreement, where homeowners vigorously [30] Alternative Dispute Resolution
opposed arbitration in their pleadings and in Suing or participating in suit
open court, then requested hundreds of items
Under the Federal Arbitration Act,
of merits-based information and conducted
“prejudice” relates to inherent unfairness; that
months of discovery under the rules of court,
is, a party's attempt to have it both ways by
and finally, only four days before the trial
switching between litigation and arbitration
setting, changed their minds and decided they
to its own advantage. 9 U.S.C.A. § 1 et seq.
would prefer to arbitrate after all.

Abuse of discretion
Every abuse-of-discretion review is not
Under the totality-of-the-circumstances test,
identical because a trial judge's discretion may
discovery is not the only measure of waiver of
be applied to scores of situations and in many
arbitration by litigation conduct.
different ways.

Applicant's default, delay, or laches
The rule that one can not wait until the eve of
The totality-of-the-circumstances test for
trial to request arbitration is not limited to the
determining waiver of arbitration by litigation
evening before trial; it is a rule of proportion.
conduct presumes a multitude of potential
6 Cases that cite this headnote factors and a balancing of evidence on either
side.

For purposes of a waiver of an arbitration [33] Appeal and Error
agreement, “prejudice” refers to the inherent Power to Review
unfairness in terms of delay, expense, or
Under a proper abuse-of-discretion review,
damage to a party's legal position that occurs
waiver is a question of law for the court, and
when the party's opponent forces it to litigate
an appellate court does not defer to the trial
an issue and later seeks to arbitrate that same
court on questions of law.
issue.

51 Tex. Sup. Ct. J. 819

[34] Appeal and Error Prejudice, as required to establish waiver of

Sufficiency of Evidence in Support arbitration by litigation conduct, should be
easier to show against a party that initially
Appellate court defers to a trial court's factual
opposed arbitration than against one who
findings if they are supported by evidence.
sought it from the start.

Discovery and depositions
Arbitrators have almost unbridled discretion
A party who requests lots of discovery is not
regarding discovery.
prejudiced, as required to establish waiver of
1 Cases that cite this headnote arbitration by litigation conduct, by getting
it and taking it to arbitration in the same
way that a party who produces lots of
[36] Alternative Dispute Resolution discovery outside the stricter discovery limits
Suing or participating in suit in arbitration.
Defendants asserting that plaintiffs waived
their right to arbitration had to show 14 Cases that cite this headnote
substantial invocation of the litigation process
that prejudiced them, not precisely how much [41] Alternative Dispute Resolution
it all was. Suing or participating in suit
5 Cases that cite this headnote Warranty companies that originally
requested arbitration of homeowners' faulty
construction claim waived arbitration by
[37] Alternative Dispute Resolution extensively co-participating in months of
Trial or hearing discovery.
Referral to arbitration should be decided
summarily with the evidence limited to Cases that cite this headnote
disputed facts. V.T.C.A., Civil Practice &
Remedies Code § 171.021(b). [42] Alternative Dispute Resolution
for review
Fact that the only objection to trial
[38] Alternative Dispute Resolution court's order compelling arbitration was
Remedies and Proceedings for signed by home builder's attorneys, not
Enforcement in General co-defendant warranty companies, did not
The amount of discovery needed to show preclude warranty companies from objecting
prejudice, for purposes of rule that a party to arbitration on appeal from confirmation
waives arbitration by substantially invoking of arbitration award, where, in the motion
the judicial process to the other party's objecting to order compelling arbitration
prejudice, will vary depending on what the and at the hearing held on it, home
other circumstances are. builder's attorneys represented that they were
authorized to do so on behalf of all the
defendants; if the homeowners wanted to

51 Tex. Sup. Ct. J. 819
question home builder's attorneys' authority The Plaintiffs argue—and we agree—that sending them
to speak for the warranty companies, they back to the trial court not only deprives them of a
should have done so by sworn motion. substantial award but also wastes the time and money
spent in arbitration. But they knew of this risk when
1 Cases that cite this headnote they requested arbitration at the last minute because all
of the Defendants objected. Accordingly, we vacate the
arbitration award and remand the case to the trial court
for a prompt trial.
*584 Geoffrey H. Bracken, Gardere Wynne Sewell,

L.L.P., Houston, TX, Stacy R. Obenhaus, Gardere I. Background
Wynne Sewell LLP, Dallas, TX, Kent Hance, Hance
In 1996, Robert and Jane Cull bought a house
Scarborough Wright Woodward & Weisbart LLP,
from Perry Homes for $233,730. They also bought a
Austin, TX, Gary W. Javore, Johnson Cristopher Javore
warranty from Home Owners Multiple Equity, Inc.
& Cochran, Inc., San Antonio, TX, for Petitioners.
and Warranty Underwriters Insurance Company. The
Thomas M. Michel, Griffith, Jay, & Michel LLP, Fort warranty agreement included a broad arbitration clause
Worth, TX, Evan (Van) Lane Shaw, Law Offices of Van providing that all disputes the Culls might have against
Shaw, Dallas, TX, for Respondent. Perry Homes or the warranty companies were subject to
the Federal Arbitration Act, and would be submitted to
M. Scott Norman Jr., Texas Association of Builders, the American Arbitration *585 Association (AAA) or
Austin, TX, for Amicus Curiae. another arbitrator agreed upon by the parties. 4
Opinion
Over the next several years, the home suffered serious
Justice BRISTER delivered the opinion of the Court, structural and drainage problems. According to the Culls,
in which Justice HECHT, Justice O'NEILL, Justice the Defendants spent more effort shifting blame than
WAINWRIGHT, and Justice MEDINA joined, and repairing the home. When the Culls sued in October
in which Chief Justice JEFFERSON, Justice GREEN, 2000, the warranty companies (but not Perry Homes)
Justice JOHNSON, and Justice WILLETT joined as to immediately requested arbitration; the Culls vigorously
parts I–V. opposed it, and no one ever pressed for a ruling. At the
same time, the Culls' attorneys began seeking extensive
[1] [2] Since 1846, Texas law has provided that parties discovery from all of the Defendants.
to a dispute may choose to arbitrate rather than litigate. 1
But that choice cannot be abused; a party cannot After most of the discovery was completed and the case
substantially invoke the litigation process and then switch was set for trial, the Culls changed their minds about
2
to arbitration on the eve of trial. There is a strong litigating. Instead they asked the trial court to compel
arbitration under precisely the same clause and conditions
presumption against waiver of arbitration, 3 but it is not
to which they had originally objected. The trial judge
irrebuttable and was plainly rebutted here. The Plaintiffs
expressed reservations, saying:
vigorously opposed (indeed spurned) arbitration in their
pleadings and in open court; then they requested hundreds I really have a problem with people
of items of merits-based information and conducted who have competent counsel who
months of discovery under the rules of court; finally wait 14 months and after all this
only four days before the trial setting they changed their much effort in the courthouse has
minds and decided they would prefer to arbitrate after taken place, to come in and say
all. Having gotten what they wanted from the litigation that they have not waived that
process, they could not switch to arbitration at the last arbitration. That arbitration clause
minute like this. was there when the lawsuit was filed.

51 Tex. Sup. Ct. J. 819
subsequent appeal.” 7 Mandamus is only available when a

Nevertheless, the trial court ordered arbitration because
the Defendants had not shown any prejudice from final appeal would be inadequate; 8 if filing for mandamus
litigation conduct: precluded a final appeal, that requirement would be self-
fulfilling. Because the earlier proceedings here were denied
[A]ll I have heard from [defense without comment on the merits, they do not foreclose our
counsel] insofar as what is the review.
prejudice suffered by people you
represent is that they have [5] [6] Second, the Culls argue that an order compelling
participated in litigation activities arbitration can only be reviewed before arbitration occurs.
that may or may not have been The Culls address none of the cases in which this Court
required by the arbitrator. So and the United States Supreme Court have reviewed such
without anything further, I am going orders after arbitration. 9 Nor do they address the general
to grant the motion to abate the case rule that parties waive nothing by foregoing interlocutory
for arbitration.
review and awaiting a final judgment to appeal. 10
The order was signed December 6, 2001, four days before
the case was set for trial. The Defendants filed petitions [7] But most important, the Culls do not address
for mandamus in the court of appeals and this Court, both section 16 of the Federal Arbitration Act, which expressly
prohibits pre-arbitration appeals:
of which were denied without opinion within a few days. 5
Except as otherwise provided in
After a year in arbitration, on December 24, section 1292(b) of title 28 [providing
2002, the arbitrator awarded the Culls $800,000, for certified questions to federal
including restitution of the purchase price of their circuit courts], an appeal may not
home ($242,759), mental anguish ($200,000), exemplary be taken from an interlocutory
damages ($200,000), and attorney's fees ($110,000). The order ... directing arbitration to
Defendants moved to vacate the award, again arguing proceed under section 4 of this title
(among other things) that the case should never have been [providing for orders compelling
sent to arbitration after so much activity in court. The trial
arbitration].... 11
court overruled the objection, confirmed the award, and
added post-judgment interest duplicating that already in
the award; the court of appeals affirmed after deleting the This ban on interlocutory appeals of orders compelling
arbitration was added by Congress in 1988 to prevent
duplicative interest. 6 We granted the Defendants' petition
to consider whether the arbitration award should be set arbitration from bogging down in preliminary appeals. 12
aside because the Culls waived their right to arbitration. We have held that routine mandamus review of such
orders in state court would frustrate this federal law. 13
*587 [8] The Culls assert that post-arbitration review is

II. When Should Orders Compelling
unavailable because an arbitration award can be vacated
Arbitration Be Reviewed?
only for statutory grounds like corruption, fraud, or
[3] [4] At the outset, the Culls assert it is too late evident partiality. 14 But reviewing the trial court's initial
to review the trial court's order referring this case referral to arbitration is not the same as reviewing the
to arbitration. First, they argue the pre-arbitration arbitrator's final award; as the United States Supreme
mandamus proceedings establish the law of the case Court has held, courts conduct ordinary review of the
*586 and preclude the Defendants from raising the former and deferential review only of the latter. 15
same arguments now. We recently rejected this argument,
holding that as mandamus is a discretionary writ, “its We agree that post-arbitration review of referral may
denial, without comment on the merits, cannot deprive create (as the Culls allege) a “huge waste of the
another appellate court from considering the matter in a parties' resources.” But if review is available before

51 Tex. Sup. Ct. J. 819
arbitration, parties may also waste resources appealing for the NASD arbitrator because “the NASD arbitrators,
every referral when a quick arbitration might settle the comparatively more expert about the meaning of their
matter. Frequent pre-arbitration review would inevitably own rule, are comparatively better able to interpret and to
frustrate Congress's intent “to move the parties to an apply it.” 24 By contrast, when waiver turns on conduct in
arbitrable dispute out of court and into arbitration as court, the court is obviously in a better position to decide
quickly and easily as possible.” 16 We recognize the whether it amounts to waiver. 25 “Contracting parties
potential for waste, but that is a risk a party must take would expect the court to decide whether one party's
if it moves for arbitration after substantially invoking the
conduct before the court waived the right to arbitrate.” 26
litigation process.
*589 Third, as the Howsam Court itself stated, parties

generally intend arbitrators to decide matters that “grow
III. Do Courts or Arbitrators Decide Waiver? out of the dispute and bear on its final disposition,” while
they intend courts to decide gateway matters regarding
[9] The Culls also assert that waiver of arbitration by “whether the parties have submitted a particular dispute
litigation conduct is an issue to be decided by arbitrators
to arbitration.” 27 Waiver of a substantive claim or
rather than courts. To the contrary, this Court and the
delay beyond a limitations deadline could affect final
federal courts have held it is a question of law for the
disposition, but waiver by litigation conduct affects only
court. 17 Rather than referring such claims to arbitrators,
the gateway matter of where the case is tried. 28
we have decided them ourselves at least eight times, 18 as
does every federal circuit court. 19 [10] Finally, arbitrators generally must decide defenses
that apply to the whole contract, while courts decide
*588 The Culls argue this was all changed in 2002 by defenses relating solely to the arbitration clause. 29 Thus,
Howsam v. Dean Witter Reynolds, in which the United for example, arbitrators must decide if an entire contract
States Supreme Court said the “presumption is that the was fraudulently induced, while courts must decide if an
arbitrator should decide ‘allegation[s] of waiver, delay, or
arbitration clause was. 30 As waiver by litigation conduct
a like defense to arbitrability.’ ” 20 For several reasons, goes solely to the arbitration clause rather than the whole
we disagree that this single sentence changed the federal contract, consistency suggests it is an issue for the courts.
arbitration landscape.
Every federal circuit court that has addressed this issue
First, “waiver” and “delay” are broad terms used in since Howsam has continued to hold that substantial
many different contexts. Howsam involved the National invocation of the litigation process is a question for
Association of Securities Dealers' six-year limitations the court rather than the arbitrator—including the
period for arbitration claims, not waiver by litigation
First, 31 Third, 32 Fifth, 33 and Eighth Circuits. 34 Legal
conduct; indeed, it does not appear the United States
Supreme Court has ever addressed the latter kind of commentators appear to agree. 35 So do we.
waiver. Although the federal courts do not defer to
arbitrators when waiver is a question of litigation conduct,
they consistently do so when waiver concerns limitations IV. When Is the Litigation Process Substantially Invoked?
21
periods or waiver of particular claims or defenses. As
22 We have said on many occasions that a party waives
Howsam involved the latter rather than the former, its
an arbitration clause by substantially *590 invoking
reference to waiver must be read in that context.
the judicial process to the other party's detriment or
Second, the Howsam court specifically stated that “parties prejudice. 36 Due to the strong presumption against
to an arbitration contract would normally expect a waiver of arbitration, this hurdle is a high one. 37 To date,
forum-based decisionmaker to decide forum-specific we have never found such a waiver, holding in a series of
procedural gateway matters.” 23 Thus, the NASD's six- cases that parties did not waive arbitration by:
year limitations rule in that case was a gateway matter

51 Tex. Sup. Ct. J. 819
• filing suit; 38 • how much pretrial activity related to the merits rather
than arbitrability or jurisdiction; 51
39
• moving to dismiss a claim for lack of standing;
• how much time and expense has been incurred in
• moving to set aside a default judgment and requesting litigation; 52
40
a new trial;
• whether the movant sought or opposed arbitration
• opposing a trial setting and seeking to move the earlier in the case; 53
litigation to federal court; 41
• whether the movant filed affirmative claims or
• moving to strike an intervention and opposing dispositive motions; 54
42
discovery;
• what discovery would be unavailable in arbitration; 55
• sending 18 interrogatories and 19 requests for
production; 43 • whether activity in court would be duplicated in
arbitration; 56 and
• requesting an initial round of discovery, noticing (but
not taking) a single deposition, and agreeing to a trial • when the case was to be tried. 57
resetting; 44 or Of course, all these factors are rarely presented in a single
case. Federal courts have found waiver based on a few, or
• seeking initial discovery, taking four depositions, and
even a single one. 58
moving for dismissal based on standing. 45
These cases well illustrate the kind of conduct that falls [11] We agree waiver must be decided on a case-by-
short. But because none amounted to a waiver, they are case basis, and that courts should look to the totality of
less instructive about what conduct suffices. We have the circumstances. Like the federal courts, this Court has
stated that “allowing a party to conduct full discovery, file considered factors such as:
motions going to the merits, and seek arbitration only on
the eve of trial” would be sufficient. 46 But what if (as in • when the movant knew of the arbitration clause; 59
this case) only two out of these three are met? And how
much is “full discovery”?
*592 • how much discovery has been conducted; 60
We begin by looking to the standards imposed by
the federal courts. They decide questions of waiver by • who initiated it; 61
applying a totality-of-the-circumstances test on a case-by-
• whether it related to the merits rather than arbitrability
case basis. 47 In doing so, they *591 consider a wide
variety of factors including: or standing; 62
• how much of it would be useful in arbitration; 63 and

• whether the movant was plaintiff (who chose to file in
court) or defendant (who merely responded); 48 • whether the movant sought judgment on the merits. 64
[12] [13] Thus, we disagree with the court of appeals that
• how long the movant delayed before seeking waiver is ruled out in this case solely because the Culls “did
arbitration; 49 not ask the court to make any judicial decisions on the
merits of their case.” 65 While this is surely a factor, 66 it is
• whether the movant knew of the arbitration clause all not the only one. Waiver involves substantial invocation
along; 50 of the judicial process, not just judgment on the merits.

51 Tex. Sup. Ct. J. 819
[14] [15] We also disagree with the Defendants although that conduct must be unequivocal. 77 And in
that different standards should apply to plaintiffs and close cases, the “strong presumption against waiver”
defendants. As parties may begin arbitration without a
should govern. 78
court order, it is certainly relevant that a plaintiff chose
to file suit instead. But Texas procedure also contemplates
that parties may file suit in order to compel arbitration. 67
Thus, while the movant's status is a factor to consider, it V. Is a Showing of Prejudice Required?
does not alone justify a finding of waiver or change the
Although convinced that the Culls had substantially
basic nature of the totality-of-the-circumstances test. 68 invoked the litigation process, the trial court compelled
arbitration because the Defendants did not prove an
[16] We recognize, as we have noted before, “the arbitrator would not have allowed the same discovery.
difficulty of uniformly applying a test based on nothing “Even substantially invoking the judicial process does not
more than the totality of the circumstances.” 69 But waive a party's arbitration rights unless the opposing party
there appears to be no better test for “substantial proves that it suffered prejudice as a result.” 79 On at
invocation.” 70 As the United States Supreme Court least eight occasions, we have said prejudice is a necessary
has said about minimum contacts, tests based on requirement of waiver by litigation *594 conduct. 80
“reasonableness” are never susceptible to mechanical
application—“few answers will be written in black and [22] The Defendants ask us to reconsider this
white [;] [t]he greys are dominant *593 and even requirement. They point out that Texas law does not
among them the shades are innumerable.” 71 How much require a showing of prejudice for waiver, but only an
litigation conduct will be “substantial” depends very much intentional relinquishment of a known right. 81 Waiver “is
on the context; three or four depositions may be all the essentially unilateral in its character” and “no act of the
discovery needed in one case, 72 but purely preliminary in party in whose favor it is made is necessary to complete
another. 73 it.” 82 Thus, they argue we cannot impose a waiver rule for
arbitration contracts that does not apply to all others. 83
[17] [18] Moreover, this test is quite similar to
one we have long recognized and recently applied to We decline the Defendants' invitation based on both
arbitration—estoppel. Estoppel is a defensive theory federal and state law. The Defendants say the federal
barring parties from asserting a claim or defense when courts are split on the issue, but the split is not very wide.
their representations have induced “action or forbearance Of the twelve regional circuit courts, ten require a showing
of a definite and substantial character” and “injustice
of prejudice, 84 and the other two treat it as a factor
74
can be avoided only by enforcement.” In arbitration
to consider. 85 We have noted before the importance of
cases, we have held a nonparty who enjoys substantial
direct benefits from a contract may be estopped from keeping federal and state arbitration law consistent. 86
denying an arbitration clause in the same contract. 75 By

*595 [23] Under Texas law, waiver may not include
the same token, a party who enjoys substantial direct
a prejudice requirement, but estoppel does. In cases of
benefits by gaining an advantage in the pretrial litigation
waiver by litigation conduct, the precise question is not so
process should be barred from turning around and seeking
much when waiver occurs as when a party can no longer
arbitration with the spoils.
take it back. As noted above, Texas estoppel law does
not allow a party to withdraw a representation once the
[19] [20] [21] The answer to most questions regarding
other party takes “action or forbearance of a definite and
arbitration “flow inexorably from the fact that arbitration
substantial character.” 87 Using precisely the same terms,
is simply a matter of contract between the parties.” 76
the Restatement does not allow a party to withdraw an
Like any other contract right, arbitration can be waived
option contract when the offeree has taken substantial
if the parties agree instead to resolve a dispute in court.
Such waiver can be implied from a party's conduct, action based upon it. 88 In these contexts, prejudice is an
element of the normal contract rules.

51 Tex. Sup. Ct. J. 819
all persons they had studied under, and all reference

[24] Thus, we agree with the courts below that waiver of books or treatises in their libraries).
arbitration requires a showing of prejudice.
There is simply no question on this record that the Culls
conducted extensive discovery about every aspect of the
merits. 89
VI. Was Arbitration Waived Here?
[26] But under the totality-of-the-circumstances test,

A. Did the Culls Waive Arbitration? discovery is not the only measure of waiver. Here,
when the warranty defendants initially moved to compel
It remains only to apply these rules to this case. arbitration, the Culls filed a 79–page response opposing
it, asserting that the AAA “is incompetent, is biased, and
[25] Unquestionably, the Culls substantially invoked fails to provide fair and appropriate arbitration panels.”
the litigation process, as their conduct here far exceeds They complained of the AAA's fees, and asserted that as a
anything we have reviewed before. Before arbitration was result the “purported arbitration clause is unconscionable
ordered, the Culls did not deny taking ten depositions, and unenforceable, and this Court's enforcement of such
and the court's file (of which the trial judge took judicial would be nothing short of ridiculous and absurd.” This,
notice) included: plus their prayer asking the trial court to deny the motion
to compel arbitration “in its entirety,” belies the court of
• their initial objection to arbitration covering 79 pages;
appeals' conclusion that “the Culls merely opposed the
• the Defendants' responses to requests for disclosure; use of the AAA” rather than arbitration itself. 90 In some
federal courts, the Culls' objection alone could suffice to
• the Culls' five motions to compel, attached to
which were 76 requests for production of documents waive arbitration. 91
regarding complaints, inspections, repairs, and
settlements relating to eight other homes in the same [27] The Culls also moved for arbitration very late in
subdivision; the trial process. It is true that Perry Homes moved
to continue the trial setting when the Culls sought
• Perry Homes' two motions for protective orders arbitration, requesting about ten weeks to finish deposing
regarding six designees noticed for deposition by experts. Because the trial court ordered arbitration, no
the Culls on nine issues (including purchase and one knows whether the case would have gone to trial
preparation of the lot, design and construction of (including the unnamed court clerk cited by the dissent).
the foundation, sale of this home and others in the But in view of the written discovery and depositions
subdivision, and attempts to deal with the Culls' and already completed, the record is nevertheless clear that
other foundation complaints), with an attachment most of the discovery in the case had already been
requesting 67 categories of documents (including all completed before the Culls requested arbitration. The rule
photos, videos, correspondence, insurance policies, that one cannot wait until “the eve of trial” to request
plans, soil tests, permits, subcontractors, contracts arbitration is not limited to the evening before trial; it is a
for sale, and repairs relating to the house or the suit, rule of proportion that is implicated here. 92
all complaints about any house in the subdivision,
and Perry Homes' articles of incorporation, by-laws, Then 14 months after filing suit and shortly before the
minutes, and financials); and December 2001 trial setting, the Culls changed their minds
and requested arbitration. They justified their change of
• the Culls' notices of depositions for three of the
heart on the basis that they wanted to avoid the delays
Defendants' experts with 24 categories of documents
of an appeal. But their change unquestionably delayed
requested from each (including all documents
adjudication of the merits; instead of a trial beginning in a
relating to this case, all their articles, *596
few days or weeks, the plenary arbitration hearing did not
publications, or speeches given in their fields of
begin until late September of 2002—almost ten months
expertise, all courses or seminars they had attended,
after the Culls abandoned their trial setting. Moreover,
to the extent arbitration reduces delay, it does so by

51 Tex. Sup. Ct. J. 819
severely limiting both pretrial discovery and post-trial it enacted the FAA. 96 Indeed, one dissent cannot even
review. Having enjoyed the benefits of extensive discovery bring itself to say the Culls substantially invoked the
for 14 *597 months, the Culls could not decide only then litigation process. If the litigation conduct here is not
that they were in a hurry. enough, it is hard to imagine what would be.
[28] [29] [30] It is also unquestionably true that this [31] [32] The dissents make several mistakes in their
conduct prejudiced the Defendants. “Prejudice” has many analyses. First, they misconstrue the standard of review.
meanings, but in the context of waiver under the FAA it Every *598 abuse-of-discretion review is not identical
relates to inherent unfairness—that is, a party's attempt because “a trial judge's discretion may be applied to
scores of situations and in many different ways.” 97
arbitration to its own advantage:
Reviewing a declaratory judgment fee award (where trial
[F]or purposes of a waiver of an judges have broad discretion) 98 is not the same as
arbitration agreement[,] prejudice reviewing admission of hearsay (where trial judges follow
refers to the inherent unfairness in detailed rules), 99 even though an abuse-of-discretion
terms of delay, expense, or damage
standard applies to both. 100 Moreover, a totality-of-
to a party's legal position that occurs
the-circumstances test presumes a multitude of potential
when the party's opponent forces it
factors and a balancing of evidence on either side;
to litigate an issue and later seeks to
if appellate courts must affirm every time there is
arbitrate that same issue. 93 some factor that was not negated or some evidence on
either side, then no ruling based on the totality-of-the-
Thus, “a party should not be allowed purposefully and circumstances could ever be reversed. That standard of
unjustifiably to manipulate the exercise of its arbitral review would be the same as no review at all. By applying
rights simply to gain an unfair tactical advantage over the such a standard, both dissents would allow trial judges to
opposing party.” 94 send any case to arbitration no matter what has occurred
in court.
Here, the record before the trial court showed that the
Culls objected to arbitration initially, and then insisted [33] [34] Under a proper abuse-of-discretion review,
on it after the Defendants acquiesced in litigation. They waiver is a question of law for the court, 101 and we do
got extensive discovery under one set of rules and then not defer to the trial court on questions of law. 102 We do
sought to arbitrate the case under another. They delayed defer to a trial court's factual findings if they are supported
disposition by switching to arbitration when trial was
by evidence, 103 but there was no factual dispute here
imminent and arbitration was not. They got the court to
regarding whether the Culls initially opposed arbitration,
order discovery for them and then limited their opponents'
whether they conducted extensive merits discovery, or
rights to appellate review. Such manipulation of litigation
whether they sought arbitration late in the litigation
for one party's advantage and another's detriment is
process. This leaves only the conclusion whether such
precisely the kind of inherent unfairness that constitutes
conduct constitutes prejudice, a legal question we cannot
prejudice under federal and state law.
simply abandon to the trial court. 104
*599 [35] Second, the dissents define prejudice in a

B. A Response to the Dissents
way that makes it impossible to prove. While recognizing
Although we have repeatedly said arbitration agreements that “waiver” has a special definition in the arbitration
can be waived, today's dissents would effectively hold they context, the dissents overlook that “prejudice” does too.
cannot. That would favor arbitration too much; because Instead of the inherent-unfairness standard used by the
most agreements can be waived by the parties' conduct, 95 federal courts, 105 they impose what appears to be an
arbitration contracts should not be more enforceable than irretrievable-loss standard. One dissent would go so far
other contracts. That is not what Congress intended when as to hold that no amount of discovery, no matter how
extensive, can show prejudice if the fees incurred might

51 Tex. Sup. Ct. J. 819
be compensated in the final arbitration award, even if to demand arbitration affects the
erroneously. 106
No one could ever show prejudice under burden placed upon the party
this standard, because even if a contract allowed no opposing waiver. When a timely
demand for arbitration was made,
reimbursement of discovery costs (as in this case), 107 it
the burden of proving waiver falls
is always hypothetically possible that a rogue arbitrator
even more heavily on the shoulders
might reimburse costs regardless. The same dissent would
of the party seeking to prove
find no prejudice from extensive discovery without proof
waiver. A demand for arbitration
that an arbitrator would have prohibited it. That again is
puts a party on notice that
impossible; arbitrators have almost unbridled discretion
arbitration may be forthcoming, and
regarding discovery, so no one can predict what they
therefore, affords that party the
might do in advance. Presuming (as the dissents do)
opportunity to avoid compromising
that broad discovery is generally available in arbitration
its position with respect to
simply ignores one of its most distinctive features. 108 arbitrable and nonarbitrable claims.
In contrast, where a party fails
[36] [37] Third, both dissents quibble with the to demand arbitration ... and in
Defendants' proof of prejudice because it was the meantime engages in pretrial
insufficiently detailed. 109 This confuses proof of the fact activity inconsistent with an intent
of prejudice with proof of its extent; the Defendants had to arbitrate, the party later opposing
to show substantial invocation that prejudiced them, not a motion to compel arbitration
precisely how much it all was. Referral to arbitration may more easily show that its
should be decided summarily with the evidence limited to position has been compromised, i.e.,
disputed facts; 110 as the Culls did not dispute that the prejudiced. 111
parties had conducted more than a dozen depositions and
other extensive discovery on the merits, requiring proof [40] It is these other circumstances that make this
of each one would have merely made the referral hearing
case different from In re Vesta. 112 The parties seeking
longer and more *600 expensive. The pre-arbitration
arbitration in Vesta had not opposed arbitration from the
record proved that discovery was extensive; the evidence
outset and then invoked it after getting all the discovery
demanded by the dissents would have merely showed how
much it cost. they wanted. 113 Nor was the Vesta case close to trial, as
was the case here. The parties in Vesta had taken four
[38] [39] Finally, the dissents' focus on discovery depositions (rather than 15); they had also exchanged
ignores all the other circumstances that the totality-of- standard requests for disclosure and one request for
the-circumstances test requires us to consider. Because production, but only one of those documents was in the
we must consider all the circumstances, the amount of record so there was no evidence whether this limited
discovery needed to show prejudice will vary depending on discovery related to the merits (as the extensive discovery
what the other circumstances are. As the Fifth Circuit has here clearly did). 114 And while the party opposing
held, prejudice should be easier to show against a party arbitration in Vesta allegedly incurred more than $200,000
that initially opposed arbitration than against one who in expenses, most of that was incurred in getting discovery
sought it from the start: rather than providing it; 115 a party who requests lots of
discovery is not prejudiced by getting it and taking it to
While the mere failure to assert the
arbitration in the same way that a party who produces
right to demand arbitration does
lots of discovery outside the stricter discovery limits in
not alone translate into a waiver of
that right, such failure does bear on arbitration. 116
the question of prejudice, and may,
along with other considerations, Applying the proper standard of review and the proper
require a court to conclude that definition of prejudice, we disagree with the dissents that
waiver has occurred. The failure the Defendants have failed to show prejudice here.

51 Tex. Sup. Ct. J. 819
*601 C. Did the Warranty Justice O'NEILL, concurring.

Companies Waive Arbitration? Most members of the Court agree that the Culls
substantially invoked the litigation process before
[41] Finally, the Culls argue the warranty companies requesting arbitration; the point of disagreement is
cannot object to arbitration for two reasons. whether Perry Homes adequately proved it suffered
prejudice as a result. I join the Court's opinion, but
First, the warranty companies originally requested write separately to note that I believe the proof required
arbitration (which the Culls opposed), so it could be to demonstrate prejudice in any given case should be
argued that it is unfair to hold the Culls to their original measured by the degree to which the litigation process has
position without holding the warranty companies to been invoked. In some circumstances, a party's invocation
theirs. Of course, we cannot hold both parties to their of the judicial process may be so substantial that a court
original positions as those positions were contradictory. could presume the party resisting arbitration has been
More important, while the parties' original demands prejudiced and the right to arbitration has been waived.
are relevant factors, the test is the totality of the In my view, such a presumption may easily be drawn on
circumstances. Looking to all the circumstances, it is this record.
quite clear from the parties' extensive co-participation in
months of discovery that everyone waived their right to
arbitration—whether they asserted that right early (as did
the warranty companies) or late (as did the Culls). Justice JOHNSON, joined by Chief Justice JEFFERSON
and Justice GREEN, concurring in part and dissenting in
[42] Second, the Culls argue that the only objection to part.
the trial court's order compelling arbitration was filed I disagree that the trial court abused its discretion in
by Perry Homes, not the warranty companies. It is true compelling arbitration. I concur with the disposition of
that only Perry Homes' attorneys signed the motion, part VI–C. I dissent from parts VI–A and VI–B of the
but in that motion and at the hearing held on it they Court's opinion and dissent from its judgment.
represented that they were authorized to do so on behalf
of all the Defendants. If the Culls wanted to question The parties agree that their arbitration agreement covers
their authority to speak for the warranty companies, they the dispute and that the Federal Arbitration Act (FAA)
applies. Thus, whether the Culls waived the right to
should have done so by sworn motion. 117
arbitrate is a question of law. *602 In re Oakwood Mobile
Homes, Inc., 987 S.W.2d 571, 574 (Tex.1999); In re Bruce
Terminix Co., 988 S.W.2d 702, 703–04 (Tex.1998). The
*** Court has said previously, and says again today, that
prejudice is a required element of waiver of the right to
Accordingly, we reverse the court of appeals' judgment, arbitrate cases subject to the FAA. 258 S.W.3d at 595; see
vacate the arbitration award, and remand this case to the In re Bank One, N.A., 216 S.W.3d 825, 827 (Tex.2007). The
trial court for a prompt trial. party asserting waiver has the burden to prove prejudice.
See In re FirstMerit Bank, N.A., 52 S.W.3d 749, 753–
54 (Tex.2001) (noting that if an agreement to arbitrate
Justice O'NEILL filed a concurring opinion. exists and the party opposing arbitration fails to prove
its defenses, then a trial court has no discretion and its
Justice JOHNSON filed an opinion concurring in part and only option is to compel arbitration); In re Bruce Terminix
dissenting in part, in which Chief Justice JEFFERSON Co., 988 S.W.2d at 704 (“Even substantially invoking
and Justice GREEN joined. the judicial process does not waive a party's arbitration
rights unless the opposing party proves that it suffered
Justice WILLETT filed an opinion concurring in part and
prejudice as a result.”). In the context of the issue before
dissenting in part.
us, prejudice means detriment. See In re Bank One, 216
S.W.3d at 827 (“A party waives an arbitration clause

51 Tex. Sup. Ct. J. 819
when it substantially invokes the judicial process to the existing right, benefit, or advantage held by a party; (2)
other party's detriment.”). We review a trial court's order the party's actual or constructive knowledge *603 of its
compelling arbitration for an abuse of discretion. See In existence; and (3) the party's actual intent to relinquish the
re Bruce Terminix Co., 988 S.W.2d at 705. That standard right or intentional conduct inconsistent with the right.
is in accord with the general practice of reviewing a See Tenneco Inc. v. Enter. Prods. Co., 925 S.W.2d 640,
trial court's actions for an abuse of discretion when a 643 (Tex.1996). The Culls' actions and their attorneys'
trial court has discretion to grant or deny relief based statements in court, taken as a whole, present compelling
on its factual determinations. See Bocquet v. Herring, evidence of those elements.
972 S.W.2d 19, 20–21 (Tex.1998) (noting that the abuse
of discretion standard of review as to a trial court's Waiver as that term is used in regard to arbitration
factual determinations applies when a trial court has agreements subject to the FAA, however, requires more
discretion either to grant or deny relief based on its factual than is required for general waiver—it requires proof that
determinations). The test for abuse of discretion is not the party asserting waiver as a defense to arbitration has
whether, in the opinion of the reviewing court, the trial suffered detriment. 258 S.W.3d at 589–90; In re Bank
court's ruling was proper, but whether the trial court One, 216 S.W.3d at 827. So, when the Culls finally moved
acted without reference to guiding rules and principles. to compel arbitration and proved applicability of an
See Cire v. Cummings, 134 S.W.3d 835, 838–39 (Tex.2004). arbitration agreement, Defendants unquestionably had
The trial court's ruling should be reversed only if it was the burden to raise and prove their defense of waiver,
arbitrary or unreasonable. Id. at 839. Generally, if there including prejudice, if they wanted to avoid arbitration. In
is any evidence to support the trial court's ruling then the re Bruce Terminix Co., 988 S.W.2d at 704.
court did not abuse its discretion. See In re BP Prods. N.
Am., Inc., 244 S.W.3d 840, 848 (Tex.2008) (citing Butnaru Defendants recognized that to avoid arbitration they
v. Ford Motor Co., 84 S.W.3d 198, 211 (Tex.2002)). That had to prove a defense to the arbitration agreement. As
is because it is only when the evidence is such that the part of their response to the Culls' motion to compel
trial court could have made but one decision, yet made arbitration, Defendants pled that (1) after suit was filed,
another, that we say the trial court abused its discretion. all parties conducted written and oral discovery, (2) the
Id. Our decisions affording deference to trial court rulings Culls filed several motions and obtained two hearings and
when evidence supports those rulings comport with the court rulings on discovery-related issues, and (3) a trial
standard of review utilized by the United States Fifth setting was imminent. Defendants conceded applicability
Circuit Court of Appeals in regard to whether a party of the arbitration clause, then cited authorities for and
has suffered prejudice for purposes of waiving arbitration took the position that “Plaintiffs have waived arbitration
rights subject to the FAA. The Fifth Circuit's position because they substantially invoked the judicial process to
is that trial court findings on which the legal conclusion the detriment of Defendants.” Subsequently, Defendants
of waiver is based are predicate questions of fact “which more clearly detailed the detriment they were claiming:
may not be overturned unless clearly erroneous.” Price v.
Drexel Burnham Lambert, Inc., 791 F.2d 1156, 1159 (5th In this case, the costs incurred
Cir.1986); see also Republic Ins. Co. v. Paico Receivables, by Defendants in responding to the
LLC, 383 F.3d 341, 347 (5th Cir.2004) (“[T]he district motions to compel filed by Plaintiffs
court's finding that PRLLC would suffer prejudice if would not have been incurred during
arbitration was compelled is not clearly erroneous.”). the course of arbitration. Similarly,
defendants are prejudiced by the
The waiver issue in this matter is not determined by fact that it [sic] was required to
general waiver elements, but by waiver as that term comply with the Court's orders
is used in regard to avoiding arbitration agreements on such motions to compel, when
subject to the FAA. Generally, “waiver” is the intentional such means and methods would not
relinquishment of a right actually or constructively have been available in arbitration.
known, or intentional conduct inconsistent with claiming Because of Plaintiffs' delay in
that right. See Jernigan v. Langley, 111 S.W.3d 153, seeking arbitration, coupled with
156 (Tex.2003). The elements of waiver include (1) an the resulting prejudice by Defendants
being required to respond to multiple

51 Tex. Sup. Ct. J. 819
discovery motions and comply with Court has no alternative but to order the case abated for
orders thereon, Plaintiffs cannot arbitration purposes.
now rely on the Limited Warranty
Agreement to compel arbitration. And, [counsel for Defendants], all I have heard from
you insofar as what is the prejudice suffered by
(Emphasis added). A second part of Defendants' response people you represent is that they have participated
was a motion for continuance of trial to complete in litigation activities that may or may not have
discovery. been required by the arbitrator. So without anything
further, I'm going to grant the motion to abate the
At the hearing on the Culls' motion to compel arbitration, case for arbitration. 2
the trial judge, who noted at the end of the hearing (Emphasis added).
that “I just finished [an arbitration] with the American
Arbitration Association,” admitted all the evidence Perry Homes filed a motion for reconsideration. In their
offered, and took judicial notice of the court file as motion, Perry Homes again asserted that “all parties have
requested by Defendants. After evidence was introduced conducted written and oral discovery under the Texas
at the hearing, Defendants again argued that there were Rules of Civil Procedure” but did not complain that they
two factors involved: “whether or not the parties have had been denied any discovery. Perry Homes' motion
acted inconsistently with the agreement to arbitrate and recapped the prejudice they were claiming:
then whether those actions and the actions that were taken
actually worked to the detriment or prejudice of the party Defendants have in fact been
that's opposing transference to arbitration.” prejudiced by Plaintiffs' last-minute
attempt to disclaim their election
During the hearing, the trial judge expressed considerable to file suit and instead choose
concern over the Culls' conduct. He discussed the Culls' arbitration. In this case, the costs
testimony that they had knowledge of the arbitration incurred by Defendants—including
clause before suit was filed, the extended time for attorneys' fees and man hours
which the case had been filed, and the impending trial —in attending 16 depositions,
setting. He also discussed the arbitration provision itself, 1 responding to multiple sets of
its mandatory nature, and pressed *604 the Culls' written discovery and responding
attorney about the reason for the delay in requesting to the motions to compel filed
arbitration. Finally, he asked about a provision in by Plaintiffs would not have been
the arbitration provision that provided “if any party incurred during the course of
commences litigation in violation of this Agreement, such arbitration. Similarly, Defendants
party shall reimburse the other parties to the litigation for are prejudiced by the fact that
their costs and expenses including attorney's fees incurred they were required to comply with
in seeking dismissal of such litigation.” The Culls' attorney the Court's orders on such motions
acknowledged the provision and asserted that it would be to compel, when such means and
up to the arbitrator to determine whether the Culls would methods would not have been
be responsible for such fees and costs of Defendants. available in arbitration. The amount
Defendants did not dispute the Culls' position. Then, of attorney time Perry Homes
agreeing with the assertions of the parties, the trial has invested in responding to
judge did not address whether the judicial process had Plaintiffs' discovery requests and
been substantially invoked; rather, the court concluded related motions thus far is 122
Defendants had not shown the prejudice they claimed and attorney hours and 20 paralegal
granted the Culls' motion: hours.
*605 (Emphasis added). An affidavit was attached

The question is, I think, when it deals with waiver is are setting out that the law firm representing Perry Homes
the defendants prejudiced by this delay, and if they are not had spent 122 attorney hours and 20 paralegal hours in
prejudiced or if there is not proof of prejudice, then the responding to the Culls' discovery requests and related

51 Tex. Sup. Ct. J. 819
motions. 3 The hours were not broken down and no dates, when the next setting actually would have been, much less
times, or tasks were set out. There was no specification when the case would have gone to trial if the motion for
as to time spent on actions Defendants claimed as continuance had been granted. The Court speculates that
prejudice—responding to motions to compel discovery trial would have occurred sooner than arbitration took
and complying with court orders compelling discovery place. To the extent a resetting or actual future trial date
that would not have been available in arbitration. The should be considered, however, the trial court was in the
docket sheet reflects that the trial court denied the motion, best position to determine when any new setting would
but the record contains neither a transcript from the have occurred—whether days, weeks, or months in the
hearing nor an order ruling on the motion. future—and to determine the weight to give the setting and
a potential trial date along with the other factors.
The Court agrees that the standard of review applicable
to the trial court's order compelling arbitration is abuse of *606 Further, the Court discounts evidence of a
discretion, but its holding that the Culls waived their right contractual provision in the arbitration clause requiring
to arbitrate misses the mark. In reaching its conclusion, any party that commenced litigation in violation of the
the Court says the question of prejudice is a matter of law arbitration clause to reimburse other parties' litigation
because all the relevant facts were undisputed. It seems to expenses and costs. The clause is not a model of clarity as
me that (1) there was evidence requiring the trial court to to exactly what was recoverable:
make evidentiary determinations as to prejudice, and (2)
Inasmuch as this Agreement
Defendants did not prove that they were prejudiced or that
provides for mandatory arbitration
the Culls obtained an advantage because of the litigation
of disputes, if any party commences
process.
litigation in violation of this
Agreement, such party shall
As to the evidence that the trial court was required to
reimburse the other parties to
weigh and make evidentiary determinations on, the record
the litigation for their costs and
reveals that Defendants took depositions and engaged in
expenses including attorney's fees
written discovery, as did the Culls. Yet Defendants did
incurred in seeking dismissal of such
not claim prejudice due to the Culls somehow reaping
litigation.
an unfair advantage through discovery. The trial court
could have considered the advantages accruing to all
parties by depositions and bilateral written discovery It was the trial court's goal, just as it is ours, to ascertain
and determined that no prejudice was shown because the true intent of the parties to the agreement. See J.M.
all parties were more fully prepared to proceed with Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex.2003).
dispute resolution by knowing what the testimony of The language used in the agreement is the primary
witnesses would be, and that such knowledge would evidence of that intent. See id.; National Union Fire Ins.
shorten arbitration and reduce further costs. Co. of Pittsburgh, Pa. v. CBI Indus., Inc., 907 S.W.2d 517,
520 (Tex.1995). If the contract is subject to two or more
Next, at the time of the hearing on the motion to compel reasonable interpretations after applying the pertinent
there was an imminent trial setting. But Defendants did rules of construction, the contract is ambiguous, creating
not claim they had spent time preparing to go to trial at the a fact issue on the parties' intent. See J.M. Davidson, 128
December 10 setting and that those hours would be wasted S.W.3d at 229.
unless they went to trial immediately. At the December
6 hearing on the motion to compel, the parties agreed The Court construes the clause as allowing reimbursement
the case would not be ready for trial at the December 10 for expenses and attorneys' fees incurred in seeking
setting, and the Culls' attorney stated that, according to dismissal of the lawsuit, but not for expenses and fees
the court clerk, the case probably would not be reached in preparing the suit for trial. However, the clause can
for trial. In any event, a trial setting and actually going also be read as requiring reimbursement of all litigation
to trial are different matters. Even though Defendants costs and expenses, including but not limited to attorneys'
moved for a continuance and requested the case to be fees incurred in seeking dismissal of the litigation. And
reset in two months, there is nothing in the record to show that, apparently, is how the parties interpreted the

51 Tex. Sup. Ct. J. 819
agreement. The trial court questioned the Culls' attorney requires our deferring to the trial court's findings and
about whether the Culls would be responsible for the order when the standard of review is abuse of discretion.
Defendants' attorneys' fees and costs. When the Culls'
attorney replied that it was an issue for the arbitrator, Despite evidentiary matters the trial court had before
the Defendants' attorney did not contend otherwise. See it which warrant our deferring to its implied and
Mathis v. Lockwood, 166 S.W.3d 743, 744–45 (Tex.2005); stated findings, the Court sets out factors that
Banda v. Garcia, 955 S.W.2d 270 (Tex.1997). The Culls' were uncontroverted, then concludes, without ever
attorney's representations and lack of protestation by saying exactly how, that Plaintiffs were advantaged or
Defendants' attorney is the only evidence in the hearing Defendants were prejudiced by the “inherent unfairness”
record about the parties' intent as to the language in of it all:
the clause. 4 Under the abuse of discretion standard by
Here, the record before the trial
which we review the trial court's order, the reimbursement
court showed that the Culls objected
clause and the attorneys' respective representations and
to arbitration initially, and then
silence is part of the entire record which we must consider
insisted on it after the Defendants
in determining whether the trial court followed guiding
acquiesced in litigation. They got
rules and principles. See Chrysler Corp. v. Blackmon, 841
extensive discovery under one set of
S.W.2d 844, 852 (Tex.1992); Walker v. Packer, 827 S.W.2d
rules and then sought to arbitrate
833, 839–40 (Tex.1992).
the case under another. They
delayed disposition by switching to
But even if the Court is right and the reimbursement
arbitration when trial was imminent
clause does not allow for *607 recovery of all Defendants'
and arbitration was not. They got
litigation attorney's fees, an arbitration award would not
the court to order discovery for them
be subject to being vacated if an arbitrator interpreted
and then limited their opponents'
the clause to allow recovery of all the fees. If arbitrators
rights to appellate review. Such
simply misinterpret a contractual clause such as the
manipulation of litigation for one
reimbursement clause, that type of error is not one which
party's advantage and another's
will justify setting aside an award. 5 See Wise v. Wachovia detriment is precisely the kind of
Securities, LLC, 450 F.3d 265, 269 (7th Cir.2006) (noting inherent unfairness that constitutes
that in reviewing an arbitration award under the FAA, prejudice under federal and state
“the issue for the court is not whether the contract law.
interpretation is incorrect or even wacky but whether
the arbitrators had failed to interpret the contract at 258 S.W.3d at 597. No one (but the Culls and their
all”). Under the circumstances, it was proper for the attorneys) could seriously disagree that the Culls' conduct
trial court to weigh, and the record shows it did, the smacks of inequity. But even disregarding the evidentiary
reimbursement provision and the parties' representations questions the trial court had to resolve as set out above,
in deciding that Defendants had not proved they suffered when the record is searched for evidence that Defendants
prejudice. Regardless of the trial court's interpretation suffered prejudice as Defendants *608 claimed—by
of what costs and expenses would be recoverable under incurring expenses in discovery proceedings, responding
the reimbursement provision, the mere existence of the to discovery motions, and complying with court orders on
provision and its reimbursement requirement comprise discovery when that type of activity would not be available
evidence supporting the decision to order arbitration and in arbitration—there is none. Nor is there evidence that
properly leave construction and application of the clause the Culls were unfairly advantaged. The fact of the matter
to the arbitrator. is that all parties took part in litigation discovery as part
of the process to resolve their dispute. The Court discusses
In sum, there were decisions for the trial court to make at length how the facts are undisputed, how ordering the
based upon weighing evidence, drawing inferences from it parties to arbitration resulted in “inherent unfairness”
in light of the parties' contentions, determining what the to Defendants, and that such “inherent unfairness”
evidence and inferences proved, and drawing a conclusion equates to prejudice to Defendants, or conversely, unfair
as to Defendants' claims of prejudice. That situation advantage to the Culls. However, the authorities used

51 Tex. Sup. Ct. J. 819
to support the Court's statements do not cut nearly so court. Defendants claimed prejudice because of discovery
broadly as the Court indicates. The cases cited incorporate and court hearings that would not have occurred in
elements such as delay, expense, damage to a party's legal arbitration. But contrary to the Court's conclusion that
position, or “tactical advantage” by which to measure discovery would have been limited in arbitration, the
prejudice to one party or unfairness to the other party. 258 broad arbitration clause did not preclude any particular
S.W.3d at 597 n. 94 (citing In re Tyco Int'l Ltd. Sec. Litig., type or level of discovery. It provided that arbitration
422 F.3d 41, 46 n. 5 (1st Cir.2005) (“[A] party should not would be conducted according to the arbitrator's rules so
be allowed purposefully and unjustifiably to manipulate long as they did not conflict with the FAA. Specifically,
the exercise of its arbitral rights simply to gain an unfair and by way of example, Defendants did not claim
tactical advantage over the opposing party.” (emphasis prejudice from or prove that (1) delay because of litigation
added))); Doctor's Assocs. v. Distajo, 107 F.3d 126, 134 (2d interfered with *609 their business activities, caused
Cir.1997) (“[P]rejudice as defined by our cases refers to the them loss of evidence, or interfered with their ability to
inherent unfairness—in terms of delay, expense, or damage arbitrate; (2) if an arbitrator had ordered the lawsuit
to a party's legal position—that occurs when the party's discovery pursuant to the arbitration clause, the order
opponent forces it to litigate an issue and later seeks to would have violated the arbitration clause; (3) had
arbitrate that same issue.” (emphasis added)). the litigation discovery been requested in arbitration,
Defendants would have agreed to it and conferences
The following passage embodies the substance of the with the arbitrator would not have been necessary; (4)
Court's opinion as to prejudice or unfair advantage: the litigation discovery was not useable in arbitration;
(5) Defendants had already begun trial preparations or
It is also unquestionably true that [the Cull's] conduct taken other litigation related actions that would have
prejudiced the Defendants. “Prejudice” has many been wasted effort if the case went to arbitration; or (6)
meanings, but in the context of waiver under the FAA it Defendants suffered compromise of their legal position on
relates to inherent unfairness—that is, a party's attempt the merits of the Culls' claims.
arbitration to its own advantage: There was not an offer of proof such as by expert
testimony, Defendants themselves, their attorneys or
[F]or purposes of a waiver of an arbitration
otherwise, that all, some, or any arbitrators probably
agreement[,] prejudice refers to the inherent
would not have allowed the discovery, that their
unfairness in terms of delay, expense, or damage to
agreement or a rule limited discovery in arbitration, or
a party's legal position that occurs when the party's
Defendants wasted any litigation discovery effort. And to
opponent forces it to litigate an issue and later seeks
boot, arbitrators do not come free. Disclosure conferences
to arbitrate that same issue.
in arbitration might well have cost more than discovery
Thus, “a party should not be allowed purposefully and hearings in litigation because arbitrators generally charge
unjustifiably to manipulate the exercise of its arbitral for preparing for and attending conferences while trial
rights simply to gain an unfair tactical advantage over judges do not. Nor have Defendants claimed that their
the opposing party.” attorneys would not have charged fees for arbitration
discovery activities. So the possibility exists that the
... Such manipulation of litigation for one party's disclosure process in arbitration could have ended up
advantage and another's detriment is precisely the kind costing more than litigation discovery.
of inherent unfairness that constitutes prejudice under
federal and state law. The Court questions whether broad discovery is generally
available in arbitration, but the parties here do not argue
258 S.W.3d at 597 (citations omitted). As noted that it is. What is argued here is that the parties' contract
previously, the Court does not specify how Defendants provided how the arbitration was to be conducted—
proved, at the hearing on the Culls' motion to compel through adherence to the arbitrator's rules so long as those
arbitration, detriment from delay, damage to Defendants' rules do not conflict with the FAA—and that Defendants
legal position or a tactical advantage achieved by the did not prove any litigation discovery that would have
Culls, which perhaps is just as well because Defendants been in violation of the contract. The Court says that
did not claim those types of prejudice in the trial

51 Tex. Sup. Ct. J. 819
as of the time of the hearing on the Culls' motion to Evidence at the hearing on the Culls' motion to compel
compel arbitration, what discovery an arbitrator would arbitration consisted only of testimony by the Culls
allow was purely speculative. But arbitration is not and five documents they introduced: the earnest money
new; Defendants could have at least attempted to prove contract, the application for warranty, the limited
the custom and practice, if any, of arbitrators as to warranty agreement containing the arbitration provision,
discovery in arbitration, even though each arbitration a letter from the warranty company, and a copy of one
is governed by the particular agreement between the of Defendants' original answers. The Culls acknowledged
parties. Even if such evidence might have been ruled in their testimony that discovery and depositions had
speculative, as the Court concludes it would have been, occurred, but they were unsure of how many depositions
the obligation to overcome the burden of proof still lay and how much discovery. Defendants requested the trial
with Defendants. See Borg–Warner Corp. v. Flores, 232 court to take judicial notice of “five separate motions
S.W.3d 765, 772–74 (Tex.2007) (recognizing difficulties of to compel discovery and two separate orders on some,
proving asbestos claims against individual defendants, yet but not all, of the motions to compel.” The court took
requiring plaintiffs to meet that burden). notice of “its file,” which at that time mostly consisted
of copies of pleadings and discovery requests attached
The Court says that “a party who enjoys substantial as exhibits to motions. The file contained only one or
direct benefits by gaining an advantage in the pretrial two of the documents actually produced in discovery.
litigation process should be barred from turning around There were two orders on the Culls' motions to compel
and seeking arbitration with the spoils.” 258 S.W.3d at discovery. The second order referred only to the Kunkel
593. I agree with that statement. The problem is that the defendants who were not ordered to arbitration. Because
Court does not apply the statement in its entirety to this the Kunkel defendants were not ordered to arbitration,
case. The Court assumes, without requiring Defendants to the trial court could have determined that any orders or
prove, that the Culls obtained some advantage or caused motions relating solely to them should not be considered
detriment to Defendants by both parties having engaged in regard to prejudice as to the other Defendants. In short,
in discovery activities. It is hard to see how discovery the record on which the trial court ruled on December
of facts, witness names, documents, and testimony about 6 was not extensive, and although it showed what the
the controversy can prejudice either party. See Jampole Culls requested, practically none of the record was of
v. Touchy, 673 S.W.2d 569, 573 (Tex.1984) (noting that what Defendants produced in discovery, which was filed
discovery is done so disputes may be decided by what the later when Defendants sought to set aside the arbitration
facts are, not by what facts are concealed). Defendants award. And Defendants did not allege in the trial court
neither alleged nor proved that they were prejudiced that some or even any of the discovery would not be
because some privileged, proprietary, or confidential useful in arbitration, only that the discovery would not be
matter had been disclosed. Discovery in both judicial available in arbitration.
proceedings and in arbitration facilitates just *610 and
reasonable resolutions of disputes and helps prevent Last, the Court says that requiring Defendants to file
unjust and unreasonable resolutions because of ambush, detailed proof of the discovery would have made the
surprise, or concealment of relevant, nonprotected, record more cumbersome and would have entailed more
nonprivileged evidence which could sway the outcome. expense, and that to show prejudice, Defendants only had
Furthermore, I disagree with the idea that merely making to show substantial wasted effort anyway. The Court then
discovery disclosures is evidence of wasted effort or other concludes that the record before the trial court at the time
prejudice. Although the extent to which a party engages in of the hearing showed substantial wasted effort, and thus
litigation discovery plays a significant part in determining detriment, to Defendants. But in In re Vesta Ins. Group,
whether that party substantially engaged the litigation Inc., 192 S.W.3d 759 (Tex.2006), the Court declined to
process, disclosure of relevant, nonprivileged evidence, determine that waiver of the right to arbitrate occurred
names of witnesses, and information makes just and when the party opposing arbitration failed to introduce
reasonable dispute resolution more likely regardless of any of the discovery documents, present details about
whether disclosure is strictly voluntary or is made in them, or contend that the discovery would not be useful
judicial discovery proceedings or arbitration proceedings. in arbitration. The record, the Court stated,

51 Tex. Sup. Ct. J. 819
they were prejudiced because during post-arbitration

does not show whether these proceedings, the Culls' attorney testified that he reviewed
requests were limited or extensive, deposition testimony in preparing for the arbitration and
whether they sought information for
depositions are not generally available in arbitration. 6
affirmative claims or defensive ones,
First, Defendants did not introduce the AAA rules
or even whether they addressed the
into evidence at the hearing or ask the trial court to
merits or merely the arbitration
take judicial notice of them. Second, to the extent the
issue. Further, [plaintiff] does not
arguments encompass discovery depositions, Defendants
allege that the discovery already
did not complain in the trial court that they were
conducted would not be useful in
prejudiced by the taking of depositions or that the Culls
arbitration; to the contrary, he
planned to use them in arbitration, and the argument
concedes *611 it would be useful
cannot be raised here. See TEX.R.APP. P. 33.1; Mack
whether the case is arbitrated or
Trucks, Inc. v. Tamez, 206 S.W.3d 572, 577 (Tex.2006)
tried.
(noting that except for fundamental error, appellate courts
Id. at 763. are not authorized to consider issues not properly raised
by the parties). Third, even if the AAA rules had been
Neither party here claimed before arbitration (nor, for before the trial court, there was no evidence that all, most,
that matter, after arbitration) that the litigation discovery or any arbitrators would have refused to require disclosure
would not be useful in arbitration. On the other hand, and of any of the matters disclosed by Defendants. Finally,
as addressed below, Defendants claimed after arbitration Defendants' attorneys had access to the same deposition
that they suffered prejudice because Plaintiffs' attorney testimony to use for arbitration preparation, so there
used the discovery depositions to prepare for arbitration. could not have been an unfair advantage to the Culls by
In this regard, there are further inferences from the record use of the depositions.
that the Court does not credit but that the trial court
could have made when it compelled arbitration: both I conclude the record is not conclusive either that
parties would use the litigation discovery and depositions Defendants suffered prejudice as they claimed or that the
to prepare for arbitration, the discovery would be useful Culls obtained an unfair advantage by litigation conduct
in arbitration, and neither party was unfairly advantaged as the Court holds. I also conclude that evidence before the
or suffered detriment from the discovery. trial court required the court to weigh and draw inferences
from it and that some evidence supports the trial court's
In summary, the Court (1) does not limit its review determination that Defendants did not prove prejudice to
to Defendants' claims of prejudice made in the trial themselves *612 or unfair advantage to the Culls by use
court, (2) disregards factors that presented the trial court of the litigation process. Accordingly, I would hold that
with decisions to make based on evidence allowing for the trial court did not abuse its discretion by compelling
different interpretations and inferences, and (3) assumes the parties to arbitrate and I would affirm the judgment
“inherent unfairness” equates to Defendants' prejudice or of the court of appeals.
the Culls' unfair advantage from litigation conduct and
effectively forgives Defendants' failure to prove detriment
Justice WILLETT, concurring in part and dissenting in
to themselves or advantage to the Culls.
part.
Arbitration has become a hot-button topic for the Court
Defendants make other contentions not reached by the
of late—in this Term alone we have decided at least three
Court, but none of them warrant holding that the trial
court abused its discretion. In their brief to this Court, arbitration-related cases 1 and heard argument in four
Defendants reference rules of the American Arbitration more. 2 As the range of opinions in this case demonstrates,
Association and urge that the AAA Rules of Procedure the invocation and operation of arbitration provisions can
provide for limited discovery in that the arbitrator is present tricky legal questions that spark honest differences
limited to directing “(i) the production of documents of opinion. I agree with Parts I–V of the Court's decision,
and other information, and (ii) the identification of and also with much of Part VI regarding waiver. However,
any witnesses to be called.” Defendants also assert that I respectfully dissent from the Court's ultimate result, not

51 Tex. Sup. Ct. J. 819
on an arbitration law issue, but on a much more old- arbitration. I believe in waiver-by-conduct, but Perry
Homes bore the threshold responsibility of building a
fashioned ground—the applicable standard of review.
record upon which the trial court could find prejudice. The
record on appeal is far more extensive than what the trial
The Court properly acknowledges that a trial court's order
court considered (and the arguments far more refined),
compelling arbitration is reviewed for abuse of discretion.
but I agree with JUSTICE JOHNSON that the trial court
Under this standard, we will reverse the trial court only
—sitting where it sat, seeing what it saw, hearing what
when “it acts in an arbitrary or unreasonable manner,
it heard, reviewing what it reviewed—did not abuse its
without reference to any guiding rules or principles.” 3 I
discretion in concluding “no prejudice.” Trial courts do
agree with the Court, and the trial judge for that matter,
not have carte blanche “to send any case to arbitration
that the record clearly shows that the Culls substantially
no matter what has occurred in court,” 4 but I cannot
invoked the judicial process. I also agree with the Court
conclude that this trial court acted “without reference to
that the cost-reimbursement provision in the arbitration
agreement does not prevent Perry Homes from showing any *613 guiding rules or principles” 5 in ruling that
prejudice resulting from the Culls' arbitration flip-flop. Perry Homes fell short of building a trial-court record that
JUSTICE JOHNSON is comforted by the possibility that showed prejudice. This is admittedly a close call, and the
an arbitrator might (mis)construe this provision to award Court makes the best possible case for going the other
Perry Homes all its litigation-related costs and fees, but way. Given the relevant record, however, I have a difficult
I am not. The provision limits reimbursement to “costs time saying the trial court acted arbitrarily or disregarded
and expenses including attorney's fees incurred in seeking all guiding standards in not reaching the opposite result.
dismissal of such litigation,” and we cannot plausibly say Accordingly, I dissent from the Court's decision vacating
Perry Homes fails on prejudice because an arbitrator may the arbitration award and remanding for trial.
misread the agreement.
All Citations
Having said all that, I cannot conclude, as does the Court,
that the trial court abused its discretion by compelling 258 S.W.3d 580, 51 Tex. Sup. Ct. J. 819
Footnotes
1 See L.H. Lacy Co. v. City of Lubbock, 559 S.W.2d 348, 351 (Tex.1977).
2 See Republic Ins. Co. v. PAICO Receivables, LLC, 383 F.3d 341, 348 (5th Cir.2004); Com–Tech Assocs. v. Computer
Assocs. Int'l, Inc., 938 F.2d 1574, 1576–77 (2d Cir.1991); Price v. Drexel Burnham Lambert, Inc., 791 F.2d 1156, 1160
(5th Cir.1986); In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 764 (Tex.2006).
3 See, e.g., In re Vesta, 192 S.W.3d at 763; In re Bruce Terminix Co., 988 S.W.2d 702, 704–05 (Tex.1998); EZ Pawn Corp.
v. Mancias, 934 S.W.2d 87, 89–90 (Tex.1996).
4 The warranty provided:
Any “unresolved dispute” (defined below) that you may have with [Perry Homes or the warranty companies] shall
be submitted to binding arbitration governed by the procedures of the Federal Arbitration Act, 9 U.S.C. § 1 et seq....
The dispute will be submitted to the American Arbitration Association, or such other independent arbitration service
as is agreeable to the [warranty administrator] and you....
5 Perry Homes sought mandamus in the court of appeals on April 11, 2002, and was denied 7 days later. It refiled in this
Court on April 26, and was denied 13 days later.
6 173 S.W.3d 565, 568.
7 Chambers v. O'Quinn, 242 S.W.3d 30, 32 (Tex.2007).
8 In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135–36 (Tex.2004); Walker v. Packer, 827 S.W.2d 833, 840 (Tex.1992).
9 See Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 89, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000); Chambers, 242
S.W.3d at 31; see also Gulf Oil Corp. v. Guidry, 160 Tex. 139, 327 S.W.2d 406, 408 (1959) (invalidating portion of award
regarding nonarbitrable issues); Fortune v. Killebrew, 86 Tex. 172, 23 S.W. 976, 978 (1893) (same).
10 Pope v. Stephenson, 787 S.W.2d 953, 954 (Tex.1990) (“The decision not to pursue the extraordinary remedy of
mandamus does not prejudice or waive a party's right to complain on appeal.”); accord, City of San Benito v. Rio Grande
Valley Gas Co., 109 S.W.3d 750, 756 (Tex.2003); Walker v. Packer, 827 S.W.2d 833, 842 n.9 (Tex.1992).

51 Tex. Sup. Ct. J. 819
11 See 9 U.S.C. § 16(b)(2); see also TEX. CIV. PRAC. & REM.CODE § 171.098 (providing for interlocutory appeal only of
orders denying motion to compel arbitration).
12 See David D. Siegel, Appeals from Arbitrability Determinations, Practice Commentary to 9 U.S.C. § 16 (“The mission
of § 16 is to assure that if the district court does determine that arbitration is called for, the court system's interference
with the arbitral process will terminate then and there, leaving the arbitration free to go forward. To accomplish this, §
16 provides in general that there may be no appeal from the pro-arbitration determination until after the arbitration has
gone forward to a final award.”); see also CHARLES ALAN WRIGHT, ARTHUR R. MILLER & EDWARD H. COOPER,
FEDERAL PRACTICE AND PROCEDURE § 3914.17 (2d ed.1992).
13 In re Palacios, 221 S.W.3d 564, 565 (Tex.2006). Courts may review an order compelling arbitration if the order also
dismisses the underlying litigation so it is final rather than interlocutory. See Green Tree Fin. Corp.-Ala., 531 U.S. at 87
n.2, 121 S.Ct. 513; Childers v. Advanced Found. Repair, L.P., 193 S.W.3d 897, 898 (Tex.2006). As we noted in Palacios,
the Fifth Circuit has indicated it may review a district court's decision to stay rather than dismiss if a petitioner shows
“clearly and indisputably that the district court did not have the discretion to stay the proceedings pending arbitration.” Id.
(citing Apache Bohai Corp., LDC v. Texaco China, B.V., 330 F.3d 307, 310–11 (5th Cir.2003)).
14 See 9 U.S.C. § 10(a).
15 First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 947–48, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995). The Court noted that
a different rule would apply if the parties clearly and unmistakably indicated in the arbitration contract that the arbitrator
should decide arbitrability, id., but there is no such indication in this contract.
16 Preston v. Ferrer, 552 U.S. 346, 128 S.Ct. 978, 169 L.Ed.2d 917 (2008) (quoting Moses H. Cone Mem'l Hosp. v. Mercury
Constr. Corp., 460 U.S. 1, 22, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)).
17 In re Serv. Corp. Int'l, 85 S.W.3d 171, 174 (Tex.2002); In re Bruce Terminix Co., 988 S.W.2d 702, 703–04 (Tex.1998);
accord, In re Citigroup, Inc., 376 F.3d 23, 26 (1st Cir.2004); Thyssen, Inc. v. Calypso Shipping Corp., S.A., 310 F.3d
102, 104 (2d Cir.2002); Ivax Corp. v. B. Braun of Am., Inc., 286 F.3d 1309, 1316 n. 18 (11th Cir.2002); Price v. Drexel
Burnham Lambert, Inc., 791 F.2d 1156, 1159 (5th Cir.1986).
18 See In re Bank One, N.A., 216 S.W.3d 825, 827 (Tex.2007) (finding no waiver under FAA); In re D. Wilson Constr. Co.,
196 S.W.3d 774, 783 (Tex.2006) (same); In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 764 (Tex.2006) (same); In re Serv.
Corp. Int'l, 85 S.W.3d at 174 (same); In re Bruce Terminix Co., 988 S.W.2d at 704–05 (same); In re Oakwood Mobile
Homes, Inc., 987 S.W.2d 571, 574 (Tex.1999) (same); EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 89–90 (Tex.1996)
(same); Prudential Sec. Inc. v. Marshall, 909 S.W.2d 896, 899 (Tex.1995).
19 See, e.g., Creative Solutions Group, Inc. v. Pentzer Corp., 252 F.3d 28, 32–34 (1st Cir.2001); Doctor's Assocs., Inc.
v. Distajo, 66 F.3d 438, 456 (2d Cir.1995); Wood v. Prudential Ins. Co. of Am., 207 F.3d 674, 680 (3d Cir.2000); Am.
Recovery Corp. v. Computerized Thermal Imaging, Inc., 96 F.3d 88, 96 (4th Cir.1996); Subway Equip. Leasing Corp. v.
Forte, 169 F.3d 324, 329 (5th Cir.1999); Germany v. River Terminal Ry. Co., 477 F.2d 546, 547 (6th Cir.1973); Ernst &
Young LLP v. Baker O'Neal Holdings, Inc., 304 F.3d 753, 758 (7th Cir.2002); Ritzel Commc'ns v. Mid–American Cellular,
989 F.2d 966, 969–71 (8th Cir.1993); Martin Marietta Aluminum, Inc. v. Gen. Elec. Co., 586 F.2d 143, 146 (9th Cir.1978);
Metz v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 39 F.3d 1482, 1489–90 (10th Cir.1994); Ivax Corp., 286 F.3d at 1316;
Nat'l Found. for Cancer Research v. A.G. Edwards & Sons, Inc., 821 F.2d 772, 777–78 (D.C.Cir.1987).
20 537 U.S. 79, 84, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp.,
460 U.S. 1, 24–25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)).
21 See, e.g., Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444, 447, 123 S.Ct. 2402, 156 L.Ed.2d 414 (2003) (holding whether
arbitration could proceed by class action was question for arbitrator); John Wiley & Sons, Inc. v. Livingston, 376 U.S.
543, 557, 84 S.Ct. 909, 11 L.Ed.2d 898 (1964) (holding question whether steps of grievance procedure prerequisite to
arbitration had been completed was for arbitrator); Sleeper Farms v. Agway, Inc., 506 F.3d 98, 104 (1st Cir.2007) (noting
question whether breach of contract voided arbitration clause would normally be for arbitrator); United Steelworkers of
Am. v. Saint Gobain Ceramics & Plastics, Inc., 505 F.3d 417, 422 (6th Cir.2007) (holding question of timely demand
for arbitration was for arbitrator); Ansari v. Qwest Commc'ns Corp., 414 F.3d 1214, 1220–21 (10th Cir.2005) (holding
question whether plaintiffs waived forum selection clause by filing suit elsewhere was for arbitrator); Pro Tech Indus.,
Inc. v. URS Corp., 377 F.3d 868, 871–72 (8th Cir.2004) (holding questions of timely demand and waiver by failing to
initiate arbitration were for arbitrator); Glass v. Kidder Peabody & Co., 114 F.3d 446, 457 (4th Cir.1997) (holding question
of timely demand for arbitration was for arbitrator); Great W. Mortgage Corp. v. Peacock, 110 F.3d 222, 231–32 (3d
Cir.1997) (holding question of waiver of substantive state law rights was for arbitrator).
22 See Howsam, 537 U.S. at 81–82, 123 S.Ct. 588.
23 Id. at 86, 123 S.Ct. 588.

51 Tex. Sup. Ct. J. 819
24 Id. at 85, 123 S.Ct. 588.

25 Tristar Fin. Ins. Agency, Inc. v. Equicredit Corp. of Am., 97 Fed.Appx. 462, 464 (5th Cir.2004).
26 Id.
27 Howsam, 537 U.S. at 83–84, 123 S.Ct. 588 (internal quotations omitted); see also Green Tree Fin. Corp. v. Bazzle, 539
U.S. 444, 451–52, 123 S.Ct. 2402, 156 L.Ed.2d 414 (2003).
28 See Marie v. Allied Home Mortgage Corp., 402 F.3d 1, 13 (1st Cir.2005).
29 Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 449, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006) (“We reaffirm
today that ... a challenge to the validity of the contract as a whole, and not specifically to the arbitration clause, must
go to the arbitrator.”).
30 In re Merrill Lynch Trust Co. FSB, 235 S.W.3d 185, 190 (Tex.2007) (holding claim that contract was illusory went to
contract as a whole and thus was for arbitrators); In re FirstMerit Bank, N.A., 52 S.W.3d 749, 756 (Tex.2001) (“The de
los Santoses assert the defenses of unconscionability, duress, fraudulent inducement, and revocation. We again note
that these defenses must specifically relate to the Arbitration Addendum itself, not the contract as a whole, if they are
to defeat arbitration.”); see also In re Kaplan Higher Educ. Corp., 235 S.W.3d 206, 210 (Tex.2007) (holding claim of
“unclean hands” that went to contract as a whole rather than arbitration clause was question for arbitrators).
31 In re Tyco Int'l Ltd. Sec. Litig., 422 F.3d 41, 45–47 (1st Cir.2005); Marie, 402 F.3d at 13–14; In re Citigroup, Inc., 376
F.3d 23, 27–29 (1st Cir.2004); Rankin v. Allstate Ins. Co., 336 F.3d 8, 12–14 (1st Cir.2003); Restoration Pres. Masonry,
Inc. v. Grove Eur. Ltd., 325 F.3d 54, 61–63 (1st Cir.2003).
32 Ehleiter v. Grapetree Shores, Inc., 482 F.3d 207, 217–21 (3d Cir.2007).
33 Republic Ins. Co. v. PAICO Receivables, LLC, 383 F.3d 341, 344–47 (5th Cir.2004); Tristar Fin. Ins. Agency, Inc. v.
Equicredit Corp. of Am., 97 Fed.Appx. 462, 464 (5th Cir.2004).
34 Lewallen v. Green Tree Servicing, L.L.C., 487 F.3d 1085, 1090–94 (8th Cir.2007); Kelly v. Golden, 352 F.3d 344, 349–
50 (8th Cir.2003). The Eighth Circuit did refer to Howsam in one case as requiring waiver to be referred to arbitrators, but
that case involved an allegation of waiver by previous arbitration, not litigation. See Nat'l Am. Ins. Co. v. Transamerica
Occidental Life Ins. Co., 328 F.3d 462, 463–66 (8th Cir.2003).
35 See David LeFevre, Note, Whose Finding is it Anyway?: The Division of Labor Between Courts and Arbitrators with
Respect to Waiver, 2006 J. DISP. RESOL.. 305, 316–17 (2006); Stephen K. Huber, The Arbitration Jurisprudence of the
Fifth Circuit, Round II, 37 TEX. TECH L.REV. 531, 542 (2005).
36 In re Bank One, N.A., 216 S.W.3d 825, 827 (Tex.2007); In re D. Wilson Constr. Co., 196 S.W.3d 774, 783 (Tex.2006);
In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 763 (Tex.2006); In re Serv. Corp. Int'l, 85 S.W.3d 171, 174 (Tex.2002);
In re Oakwood Mobile Homes, Inc., 987 S.W.2d 571, 574 (Tex.1999); In re Bruce Terminix Co., 988 S.W.2d 702, 704
(Tex.1998); EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 89 (Tex.1996); Prudential Sec. Inc. v. Marshall, 909 S.W.2d
896, 898–99 (Tex.1995).
37 In re Bank One, N.A., 216 S.W.3d at 827; In re D. Wilson Constr. Co., 196 S.W.3d at 783; In re Vesta Ins. Group, Inc.,
192 S.W.3d at 763; In re Serv. Corp. Int'l, 85 S.W.3d at 174; In re Bruce Terminix Co., 988 S.W.2d at 704; EZ Pawn
Corp., 934 S.W.2d at 89.
38 In re D. Wilson Constr. Co., 196 S.W.3d at 783.
39 In re Vesta Ins. Group, Inc., 192 S.W.3d at 764.
40 In re Bank One, N.A., 216 S.W.3d at 827.
41 In re Serv. Corp. Int'l, 85 S.W.3d at 174–75.
42 Prudential Sec. Inc. v. Marshall, 909 S.W.2d 896, 898–99 (Tex.1995).
44 EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 90 (Tex.1996).
45 In re Vesta Ins. Group, Inc., 192 S.W.3d at 763 (holding requests for disclosure, four depositions, and request for
production did not waive arbitration absent proof regarding extent of requests and whether they addressed merits or
arbitrability).
46 Id. at 764.
47 In re Tyco Int'l Ltd. Sec. Litig., 422 F.3d 41, 46 (1st Cir.2005) (“[E]ach case is to be judged on its particular facts.”);
Republic Ins. Co. v. PAICO Receivables, LLC, 383 F.3d 341, 346 (5th Cir.2004) (“Ultimately, however, the question of
what constitutes a waiver of the right of arbitration depends on the facts of each case.”); accord, Ivax Corp. v. B. Braun
of Am., Inc., 286 F.3d 1309, 1315 (11th Cir.2002); Grumhaus v. Comerica Sec., Inc., 223 F.3d 648, 650 (7th Cir.2000);

51 Tex. Sup. Ct. J. 819
Nat'l Found. for Cancer Research v. A.G. Edwards & Sons, Inc., 821 F.2d 772, 774 (D.C.Cir.1987); Tenneco Resins,
Inc. v. Davy Int'l, AG, 770 F.2d 416, 420 (5th Cir.1985).
48 Grumhaus, 223 F.3d at 650; see also Cabinetree of Wis., Inc. v. Kraftmaid Cabinetry, Inc., 50 F.3d 388, 391 (7th Cir.1995).
49 PAICO, 383 F.3d at 346; In re Citigroup, Inc., 376 F.3d 23, 26 (1st Cir.2004); Metz v. Merrill Lynch, Pierce, Fenner &
Smith, Inc., 39 F.3d 1482, 1489 (10th Cir.1994); Hoxworth v. Blinder, Robinson & Co., 980 F.2d 912, 926 (3d Cir.1992).
50 Brown v. Dillard's, Inc., 430 F.3d 1004, 1012 (9th Cir.2005); Patten Grading & Paving, Inc. v. Skanska USA Bldg., Inc.,
380 F.3d 200, 206 (4th Cir.2004).
51 PAICO, 383 F.3d at 346; Kelly v. Golden, 352 F.3d 344, 349 (8th Cir.2003); Hoxworth, 980 F.2d at 926; Gilmore v.
Shearson/American Express Inc., 811 F.2d 108, 112 (2d Cir.1987); Sedco, Inc. v. Petroleos Mexicanos Mexican Nat'l
Oil Co., 767 F.2d 1140, 1150–51 (5th Cir.1985).
52 PAICO, 383 F.3d at 346; Patten Grading, 380 F.3d at 205; In re Citigroup, 376 F.3d at 26; Metz, 39 F.3d at 1489;
Hoxworth, 980 F.2d at 927.
53 Hoxworth, 980 F.2d at 927; Com–Tech Assocs. v. Computer Assocs. Int'l, Inc., 938 F.2d 1574, 1577 (2d Cir.1991); E.C.
Ernst, Inc. v. Manhattan Constr. Co., 551 F.2d 1026, 1040–41 (5th Cir.1977); Blake Constr. Co. v. U.S. for Use and
Benefit of Lichter, 252 F.2d 658, 662 (5th Cir.1958).
54 In re Citigroup, 376 F.3d at 26; Metz, 39 F.3d at 1489.
55 In re Citigroup, 376 F.3d at 26; Kelly, 352 F.3d at 349; Metz, 39 F.3d at 1489.
56 Kelly, 352 F.3d at 349; Metz, 39 F.3d at 1489.
57 Leadertex, Inc. v. Morganton Dyeing & Finishing Corp., 67 F.3d 20, 25 (2d Cir.1995); Peterson v. Shearson/American
Express, Inc., 849 F.2d 464, 468 (10th Cir.1988) (finding waiver as movant waited until five weeks before trial date to
move to compel).
58 See, e.g., Restoration Preserv. Masonry, Inc. v. Grove Eur. Ltd., 325 F.3d 54, 62 (1st Cir.2003) (finding three-year delay
alone sufficient to establish waiver); Cabinetree of Wis., Inc. v. Kraftmaid Cabinetry, Inc., 50 F.3d 388, 391 (7th Cir.1995)
(finding removal to federal court alone sufficient to establish waiver).
59 See EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 88–89 (Tex.1996) (finding no waiver as defendant did not discover
existence of arbitration agreement for almost a year).
60 In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 763 (Tex.2006).
61 Id.
62 Id.
63 Id.; In re Bruce Terminix Co., 988 S.W.2d 702, 704 (Tex.1998).
65 173 S.W.3d at 570.
66 See In re Bruce Terminix Co., 988 S.W.2d at 704.
67 See, e.g., TEX. CIV. PRAC. & REM.CODE § 171.021(a) (“A court shall order the parties to arbitrate on application of a
party showing: (1) an agreement to arbitrate; and (2) the opposing party's refusal to arbitrate.”).
68 In re D. Wilson Constr. Co., 196 S.W.3d 774, 783 (Tex.2006); accord, United Computer Sys., Inc. v. AT & T Corp., 298
F.3d 756, 764 (9th Cir.2002).
69 See R.R. St. & Co. v. Pilgrim Enters., Inc., 166 S.W.3d 232, 242–43 (Tex.2005) (quotation marks omitted) (applying
totality-of-the-circumstances test in determining whether party “otherwise arranged” to dispose of hazardous waste).
70 See Burton–Dixie Corp. v. Timothy McCarthy Constr. Co., 436 F.2d 405, 407–08 (5th Cir.1971) (“There is no set rule,
however, as to what constitutes a waiver or abandonment of the arbitration agreement. The question depends upon
the facts of each case and usually must be determined by the trier of facts.”); Joel E. Smith, Annotation, Defendant's
Participation in Action as Waiver of Right to Arbitration of Dispute Involved Therein, 98 A.L.R.3d 767, 771 (1980) (“In
those cases involving the issue of whether the defendant's participation in an action constitutes a waiver of the right to
arbitrate the dispute involved therein, no general rules are readily apparent for determining waiver other than the general
adherence by the courts to the principle that waiver is to be determined from the particular facts and circumstances of
each case....”).
71 Kulko v. Superior Court of Cal., 436 U.S. 84, 92, 98 S.Ct. 1690, 56 L.Ed.2d 132 (1978) (quoting Estin v. Estin, 334 U.S.
541, 545, 68 S.Ct. 1213, 92 L.Ed. 1561 (1948)).
72 See, e.g., TEX.R. CIV. P. 190.2(c)(2) (limiting parties in Level 1 cases to six hours of depositions).
73 See, e.g., In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 763 (Tex.2006) (holding four depositions did not waive arbitration
as record did not show whether they were limited or extensive or whether they addressed merits or merely arbitrability).

51 Tex. Sup. Ct. J. 819
74 Trammell Crow Co. No. 60 v. Harkinson, 944 S.W.2d 631, 636 (Tex.1997); see English v. Fischer, 660 S.W.2d 521, 524
(Tex.1983); Moore Burger, Inc. v. Phillips Petroleum Co., 492 S.W.2d 934, 936–37 (Tex.1972); Wheeler v. White, 398
75 In re Weekley Homes, L.P., 180 S.W.3d 127, 133–35 (Tex.2005); accord, Meyer v. WMCO–GP, LLC, 211 S.W.3d 302,
305 (Tex.2006).
76 First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 943, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995).
77 See Van Indep. Sch. Dist. v. McCarty, 165 S.W.3d 351, 353 (Tex.2005); First Valley Bank of Los Fresnos v. Martin, 144
S.W.3d 466, 471 (Tex.2004); Jernigan v. Langley, 111 S.W.3d 153, 156 (Tex.2003); Equitable Life Assurance Soc'y of
U.S. v. Ellis, 105 Tex. 526, 152 S.W. 625, 628 (1913).
78 In re D. Wilson Constr. Co., 196 S.W.3d 774, 783 (Tex.2006); EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 89 (Tex.1996).
79 In re Bruce Terminix Co., 988 S.W.2d 702, 704 (Tex.1998).
80 In re Bank One, N.A., 216 S.W.3d 825, 827 (Tex.2007); In re D. Wilson Constr. Co., 196 S.W.3d at 783; In re Vesta
Ins. Group, Inc., 192 S.W.3d 759, 763 (Tex.2006); In re Serv. Corp. Int'l, 85 S.W.3d 171, 174 (Tex.2002); In re Bruce
Terminix Co., 988 S.W.2d at 704; In re Oakwood Mobile Homes, Inc., 987 S.W.2d 571, 574 (Tex.1999); EZ Pawn Corp.,
934 S.W.2d at 89; Prudential Sec. Inc. v. Marshall, 909 S.W.2d 896, 898–99 (Tex.1995).
81 See In re Gen. Elec. Capital Corp., 203 S.W.3d 314, 316 (Tex.2006); Sun Exploration & Prod. Co. v. Benton, 728 S.W.2d
35, 37 (Tex.1987); Bocanegra v. Aetna Life Ins. Co., 605 S.W.2d 848, 851 (Tex.1980); Mass. Bonding & Ins. Co. v.
Orkin Exterminating Co., 416 S.W.2d 396, 401 (Tex.1967); Texas & P. Ry. Co. v. Wood, 145 Tex. 534, 199 S.W.2d
652, 656 (1947); Kennedy v. Bender, 104 Tex. 149, 135 S.W. 524, 526 (1911); see also Cabinetree of Wis., Inc. v.
Kraftmaid Cabinetry, Inc., 50 F.3d 388, 390 (7th Cir.1995) (citing authorities showing that contract law generally holds
waiver effective without proof of detrimental reliance).
82 Mass. Bonding & Ins. Co. v. Orkin Exterminating Co., 416 S.W.2d 396, 401 (Tex.1967).
83 See Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 686–87, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996); Allied–Bruce
Terminix Cos. v. Dobson, 513 U.S. 265, 281, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995).
84 In re Citigroup, Inc., 376 F.3d 23, 26 (1st Cir.2004) (“We have emphasized that, to succeed on a claim of waiver, plaintiffs
must show prejudice.”); Thyssen, Inc. v. Calypso Shipping Corp., S.A., 310 F.3d 102, 105 (2d Cir.2002); Hoxworth v.
Blinder, Robinson & Co., 980 F.2d 912, 925 (3d Cir.1992) (“[P]rejudice is the touchstone for determining whether the
right to arbitrate has been waived....”); Patten Grading & Paving, Inc. v. Skanska USA Bldg., Inc., 380 F.3d 200, 206
(4th Cir.2004) ( “[T]he dispositive question is whether the party objecting to arbitration has suffered actual prejudice.”)
(internal quotations and italics omitted); Republic Ins. Co. v. PAICO Receivables, LLC, 383 F.3d 341, 346 (5th Cir.2004)
(“In addition to the invocation of the judicial process, there must be prejudice to the party opposing arbitration before we
will find that the right to arbitrate has been waived.”); O.J. Distrib., Inc. v. Hornell Brewing Co., 340 F.3d 345, 356 (6th
Cir.2003); Kelly v. Golden, 352 F.3d 344, 349 (8th Cir.2003) (“The actions must result in prejudice to the other party for
waiver to have occurred.”); Brown v. Dillard's, Inc., 430 F.3d 1004, 1012 (9th Cir.2005); Metz v. Merrill Lynch, Pierce,
Fenner & Smith, Inc., 39 F.3d 1482, 1490 (10th Cir.1994); Ivax Corp. v. B. Braun of Am., Inc., 286 F.3d 1309, 1316 (11th
Cir.2002) (“[W]e look to see whether, by [invoking the litigation process], that party has in some way prejudiced the other
party.”) (internal quotations omitted).
85 St. Mary's Med. Ctr. of Evansville, Inc. v. Disco Aluminum Prods. Co., 969 F.2d 585, 590–91 (7th Cir.1992); Nat'l Found.
for Cancer Research v. A.G. Edwards & Sons, Inc., 821 F.2d 772, 777 (D.C.Cir.1987) (holding “a court may consider
prejudice to the objecting party as a relevant factor among the circumstances that the court examines in deciding whether
the moving party has taken action inconsistent with the agreement to arbitrate”).
86 In re Weekley Homes, L.P., 180 S.W.3d 127, 130–31 (Tex.2005); In re Kellogg Brown & Root, Inc., 166 S.W.3d 732,
738–39 (Tex.2005); see also Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 87, 123 S.Ct. 588, 154 L.Ed.2d 491
(2002) (Thomas, J., concurring) (suggesting Supreme Court sometimes looks to federal law and sometimes law chosen
by parties); Wash. Mut. Fin. Group, LLC v. Bailey, 364 F.3d 260, 267 n. 6 (5th Cir.2004) (noting that whether state or
federal law of arbitrability applies “is often an uncertain question”).
87 Trammell Crow Co. No. 60 v. Harkinson, 944 S.W.2d 631, 636 (Tex.1997); see English v. Fischer, 660 S.W.2d 521,
524 (Tex.1983); Moore Burger, Inc. v. Phillips Petroleum Co., 492 S.W.2d 934, 936 (Tex.1972); Wheeler v. White, 398
88 RESTATEMENT (SECOND) OF CONTRACTS § 87(2) (1981) (“An offer which the offeror should reasonably expect to
induce action or forbearance of a substantial character on the part of the offeree before acceptance and which does
induce such action or forbearance is binding as an option contract to the extent necessary to avoid injustice.”).

51 Tex. Sup. Ct. J. 819
89 Because we limit our review to the record before the trial judge, we do not consider the Defendants' additional seven
volumes of discovery exhibits filed after the arbitration award.
90 173 S.W.3d 565, 570; see also Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 89, 121 S.Ct. 513, 148 L.Ed.2d
373 (2000) (holding that unconscionable arbitration fee would render clause unenforceable).
91 See In re Tyco Int'l Ltd. Sec. Litig., 422 F.3d 41, 46 (1st Cir.2005) (holding defendant's objections to arbitration before
criminal trial waived his right to arbitration); Gilmore v. Shearson/American Exp. Inc., 811 F.2d 108, 112 (2d Cir.1987)
(holding party's withdrawal of its prior motion to compel arbitration constituted express waiver of that right).
92 See In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 764 (Tex.2006) (citing Com–Tech Assocs. v. Computer Assocs. Int'l,
Inc., 938 F.2d 1574, 1576–77 (2d Cir.1991), in which arbitration was waived by request that did not come until 18 months
after filing and 4 months before trial).
93 Republic Ins. Co. v. PAICO Receivables, LLC, 383 F.3d 341, 346 (5th Cir.2004) (punctuation omitted); accord, In re Tyco,
422 F.3d at 46 n. 5 (“[A] party should not be allowed purposefully and unjustifiably to manipulate the exercise of its arbitral
rights simply to gain an unfair tactical advantage over the opposing party.”); In re Citigroup, Inc., 376 F.3d 23, 28 (1st
Cir.2004); Subway Equip. Leasing Corp. v. Forte, 169 F.3d 324, 327 (5th Cir.1999); PPG Indus., Inc. v. Webster Auto
Parts, Inc., 128 F.3d 103, 107 (2d Cir.1997); Doctor's Assocs. v. Distajo, 107 F.3d 126, 134 (2d Cir.1997) (“[P]rejudice as
defined by our cases refers to the inherent unfairness-in terms of delay, expense, or damage to a party's legal position-
that occurs when the party's opponent forces it to litigate an issue and later seeks to arbitrate that same issue.”).
94 In re Tyco, 422 F.3d at 46 n. 5.
95 See, e.g., Tenneco Inc. v. Enter. Prods. Co., 925 S.W.2d 640, 643 (Tex.1996) (holding companies waived contractual
right to approve assignments by treating assignee as full partner); Ford v. State Farm Mut. Auto. Ins. Co., 550 S.W.2d
663, 666 (Tex.1977) (holding insurer waived contractual right to consent to settlement by denying liability under policy).
96 See Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404 n. 12, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967) (“[T]he
purpose of Congress in 1925 was to make arbitration agreements as enforceable as other contracts, but not more so.”).
97 W. Wendell Hall, Standards of Review in Texas, 38 ST. MARY'S L.J . 43, 67 (2006).
98 TEX. CIV. PRAC. & REM.CODE § 37.009 (“In any proceeding under this chapter, the court may award costs and
reasonable and necessary attorney's fees as are equitable and just.” (emphasis added)).
99 See TEX.R. EVID. 801–806.
100 See Nat'l Liab. and Fire Ins. Co. v. Allen, 15 S.W.3d 525, 529 (Tex.2000) (hearsay); Bocquet v. Herring, 972 S.W.2d
19, 21 (Tex.1998) (declaratory fee award).
101 In re Serv. Corp. Int'l, 85 S.W.3d 171, 174 (Tex.2002); In re Oakwood Mobile Homes, Inc., 987 S.W.2d 571, 574
(Tex.1999); In re Bruce Terminix Co., 988 S.W.2d 702, 703–04 (Tex.1998).
102 Brainard v. State, 12 S.W.3d 6, 30 (Tex.1999) (holding that in abuse-of-discretion standard “we defer to the trial court's
factual determinations if they are supported by the evidence and review its legal determinations de novo”); Walker v.
Packer, 827 S.W.2d 833, 840 (Tex.1992) (“A trial court has no ‘discretion’ in determining what the law is or applying the
law to the facts. Thus, a clear failure by the trial court to analyze or apply the law correctly will constitute an abuse of
discretion ....”); see Hall, supra note 97, at 284 (“When the trial court's findings involve [mixed] questions of law and fact,
the appellate court reviews the trial court's decision for an abuse of discretion. In applying the standard, the reviewing
court defers to the trial court's factual determinations if supported by the evidence and reviews its legal determinations
de novo.”); cf. Gulf Guar. Life Ins. Co. v. Conn. Gen. Life Ins. Co., 304 F.3d 476, 484 (5th Cir.2002) (“This court reviews
de novo a district court's dismissal of a claim that a party waived its right to arbitrate.”); accord, Ivax Corp. v. B. Braun of
Am., Inc., 286 F.3d 1309, 1316 (11th Cir.2002); Subway Equip. Leasing Corp. v. Forte, 169 F.3d 324, 326 (5th Cir.1999).
103 Brainard, 12 S.W.3d at 30; Walker, 827 S.W.2d at 840; see Hall, supra note 97, at 284; cf. Gulf Guar., 304 F.3d at 484;
accord, Ivax Corp., 286 F.3d at 1316; Subway Equip., 169 F.3d at 326.
104 See Reliance Nat'l Indem. Co. v. Advance'd Temps., Inc., 227 S.W.3d 46, 50 (Tex.2007) (“What might otherwise be a
question of fact becomes one of law when the fact is not in dispute or is conclusively established.”); Hall, supra note 97,
at 284 (“[A] trial court abuses its discretion [if the court] ... fails to properly apply the law to the undisputed facts....”).
105 See supra Part VI.A.
106 258 S.W.3d at 606–07 (“But even if the Court is right and the reimbursement clause does not allow for recovery of all
Defendants' litigation attorney's fees, an arbitration award would not be subject to being vacated if an arbitrator interpreted
it to allow recovery of all the fees.”).
107 The parties contract limited reimbursement to costs incurred in “seeking dismissal” of litigation, not costs incurred in
preparing it for trial:

51 Tex. Sup. Ct. J. 819
Inasmuch as this Agreement provides for mandatory arbitration of disputes, if any party commences litigation in
violation of this Agreement, such party shall reimburse the other parties to the litigation for their costs and expenses
including attorney's fees incurred in seeking dismissal of such litigation.
(emphasis added).
108 See Preston v. Ferrer, 552 U.S. 346, 128 S.Ct. 978, 986, 169 L.Ed.2d 917 (2008) (“A prime objective of an agreement to
arbitrate is to achieve streamlined proceedings and expeditious results.”); Cabinetree of Wis., Inc. v. Kraftmaid Cabinetry,
Inc., 50 F.3d 388, 391 (7th Cir.1995) (noting that “the discovery provisions of the Federal Rules of Civil Procedure are
more generous than those of the American Arbitration Association”); cf. Price v. Drexel Burnham Lambert, Inc., 791 F.2d
1156, 1160 (5th Cir.1986) (finding prejudice due to discovery as “discovery—whether meaningful or otherwise—is not
available in arbitration”); Miller Brewing Co. v. Fort Worth Distrib. Co., 781 F.2d 494, 498 (5th Cir.1986) (“A party to
arbitration does not have a right to the pre-trial discovery procedures that are used in a case at law.”); Developments in the
Law–Discovery, 74 HARV. L.REV.. 940, 943 (1961) (noting expense of discovery as inconsistent with desire to arbitrate).
109 The court of appeals affirmed on this basis. 173 S.W.3d at 570 (“Appellants did not provide any evidence of the work
done, time spent, or costs incurred that would not have been done or incurred in anticipation of an arbitration hearing.”).
110 TEX. CIV. PRAC. & REM.CODE § 171.021(b); see Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 269 (Tex.1992).
111 Republic Ins. Co. v. PAICO Receivables, LLC, 383 F.3d 341, 346 (5th Cir.2004) (internal citations and punctuation
omitted).
112 In re Vesta Ins. Group, Inc., 192 S.W.3d 759 (Tex.2006).
113 Two of the numerous defendants in Vesta initially objected to the remaining defendants' motion to compel arbitration, but
withdrew that objection before the hearing on the motion.
114 Id. at 763.
115 Id.
116 The defendants in Vesta had stipulated that all discovery obtained so far could be used in arbitration.
117 See TEX.R. CIV. P. 12.
1 In relevant part, the provision provided for the homeowners, the builder, the administrator of the warranty program, and
the warranty insurer to submit to arbitration
all claims, demands, disputes, controversies, and differences that may arise between the parties to this Agreement
of whatever kind or nature, including without limitation, disputes: (1) as to events, representations, or omissions
which pre-date this Agreement; (2) arising out of this Agreement or other action performed or to be performed by
the Builder, the Administrator or the Insurer pursuant to this Agreement.
As to procedures in arbitration, the arbitration provision provided that “The Arbitration shall be conducted in accordance
with the Arbitrator's rules and regulations to the extent that they are not in conflict with the Federal Arbitration Act.”
2 The trial court did not order arbitration as to defendants Jerald W. Kunkel, the foundation engineer, and his firm. The Culls
agreed the Kunkel defendants were not covered by the arbitration agreement. The Kunkel defendants are not parties
to this appeal.
3 Defendants referenced depositions in their motion for rehearing. They did not take the position or offer proof at the hearing
on the Culls' motion to compel arbitration that depositions would not have occurred in arbitration either by permission
of the arbitrator or by agreement.
4 Although not before the trial court when it ordered arbitration, the arbitration record now before us shows that Defendants
considered the clause to provide for recovery of all litigation costs and attorneys' fees, not just those incurred in seeking
dismissal of the lawsuit. The arbitration record shows Defendants claimed that pursuant to the reimbursement clause
they were “entitled to recover or setoff [their] attorney's fees from [the Culls], which were incurred in connection, with the
litigation.” Perry Homes' attorney submitted an affidavit to the arbitrator in support of the claim for attorneys' fees recovery
or setoff. The affidavit mirrored the affidavit submitted as part of Defendants' motion for reconsideration that was earlier
filed in the lawsuit. The arbitration affidavit claimed that
Prior to the Court's order compelling arbitration, Perry Homes incurred one-hundred-twenty-two (122) attorney
hours and twenty (20) paralegal hours responding to Claimants' discovery requests and discovery-related motions.
Accordingly, Perry Homes is entitled to an offset in the amount of $26,400.00 against any damages awarded to
Claimants, due to their violation of the arbitration agreement.
5 The Federal Arbitration Act provides that an arbitration award may be set aside for limited reasons:

51 Tex. Sup. Ct. J. 819
9 U.S.C. § 10(a).
6 Of course, that argument cuts against the idea that discovery was not usable in arbitration.
1 See Chambers v. O'Quinn, 242 S.W.3d 30 (Tex.2007); In re U.S. Home Corp., 236 S.W.3d 761 (Tex.2007). This case
is the third.
2 In re Great Western Drilling, Ltd., 211 S.W.3d 828 (Tex.App.–Eastland 2006), pet. granted, 51 Tex. Sup.Ct. J. 77 (Nov.
2, 2007); Werline v. E. Tex. Salt Water Disposal Co., 209 S.W.3d 888 (Tex.App.–Texarkana 2006), pet. granted, 51 Tex.
Sup.Ct. J. 77 (Nov. 2, 2007); Bison Bldg. Materials v. Aldridge, 2006 WL 2641280 (Tex.App.–Houston [1st Dist.] 2006),
pet. granted, 51 Tex. Sup.Ct. J. 77 (Nov. 2, 2007); Forest Oil Corp. v. McAllen, 2005 WL 3435061 (Tex.App.–Corpus
Christi 2005), pet. granted, 51 Tex. Sup.Ct. J. 667 (Apr. 27, 2007).
3 In re Nitla, 92 S.W.3d 419, 422 (Tex.2002) (citing Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241–42
(Tex.1985)).
4 258 S.W.3d at 598.
5 Nitla, 92 S.W.3d at 422.

[6] employer did not “substantially invoke” litigation

416 S.W.3d 168
process, as required to establish waiver of employer's
contractual right to arbitration; and
Dallas.
PILOT TRAVEL CENTERS, LLC, Appellant [7] employee did not qualify as “transportation worker”
v. within meaning of FAA provision exempting contracts of
Joan McCRAY, James McCray, and employment of workers engaged in foreign or interstate
commerce from FAA's coverage.
Shamekia Gullatte, as Next Friend
of Brandon Gullatte, Appellees.
No. 05–13–00002–CV.
|
Nov. 5, 2013.
West Headnotes (30)
Synopsis
Background: Wrongful death beneficiaries of employee
who died as a result of injuries sustained within course [1] Alternative Dispute Resolution
and scope of his employment as a maintenance worker Review
brought wrongful death action against employer, alleging Employer who sought to compel arbitration
that employer's negligence proximately caused employee's in wrongful death action brought by estate of
death. Employer filed motion to compel arbitration and deceased employee was entitled to extension
to stay litigation. The 298th Judicial District Court, of time limit for filing interlocutory appeal
Dallas County, Emily G. Tobolowsky, J., denied motion. from trial court's order denying employer's
Employer appealed. motion to compel arbitration, pursuant to rule
extending time within which to file appeal
when a party does not receive notice or
knowledge of the judgment within 20 days
Holdings: The Court of Appeals, Fillmore, J., held that:
after judgment was signed, where employer
obtained requisite finding from trial court
[1] valid agreement to arbitrate all claims arising from
that it did not receive notice of trial court's
a work-related injury or illness under the Federal
original order within 20 days after order was
Arbitration Act (FAA) existed between employer and
signed. Rules App.Proc., Rule 4.2; Vernon's
employee;
Ann.Texas Rules Civ.Proc., Rule 306a(5).
[2] employee's wrongful death beneficiaries were bound by 1 Cases that cite this headnote
employee's agreement to arbitrate;
[3] mere inequality of bargaining power was not [2] Appeal and Error
sufficient render arbitration agreement procedurally Extension of Time
unconscionable; In order to invoke benefit of rule extending
time within which to file appeal when a party
[4] fee provision of arbitration agreement, which required does not receive notice or knowledge of the
that party seeking arbitration pay filing fee and that judgment within 20 days after judgment was
arbitrators' costs and fees be borne equally by the parties, signed, party must obtain an order from the
was not substantively unconscionable; trial court that reflects the date the party or the
party's attorney first either received notice or
[5] provision of arbitration agreement limiting amount acquired actual knowledge that the order was
of discovery to be conducted was not substantively signed. Vernon's Ann.Texas Rules Civ.Proc.,
unconscionable; Rules 306a(4, 5).


What law governs Remedies and Proceedings for
When a party asserts a right to arbitrate Enforcement in General
under the Federal Arbitration Act (FAA), the A court has no discretion and must compel
question of whether the dispute is subject to arbitration under the Federal Arbitration Act
arbitration is determined under federal law. 9 (FAA) if it is established that there is a valid
U.S.C.A. § 1 et seq. arbitration agreement and the claims raised
fall within the scope of that agreement. 9
Cases that cite this headnote U.S.C.A. § 1 et seq.

As a matter of federal law under the [8] Alternative Dispute Resolution
Federal Arbitration Act (FAA), any doubts Disputes and Matters Arbitrable Under
concerning the scope of arbitrable issues Agreement
are resolved in favor of arbitration, whether Under Federal Arbitration Act (FAA), an
pertaining to the construction of the contract order to arbitrate should not be denied unless
or a defense to arbitrability. 9 U.S.C.A. § 1 et it can be said with positive assurance that
seq. the arbitration cause is not susceptible of an
Cases that cite this headnote 9 U.S.C.A. § 1 et seq.

Validity
Alternative Dispute Resolution [9] Alternative Dispute Resolution
Disputes and Matters Arbitrable Under Disputes and Matters Arbitrable Under
Agreement Agreement
In general, a party seeking to compel To determine if a claim falls within the scope
arbitration under the Federal Arbitration Act of an arbitration agreement under the Federal
(FAA) must establish (1) the existence of a Arbitration Act (FAA), the court focuses on
valid, enforceable arbitration agreement and the facts alleged, not the causes of action
(2) that the claims at issue fall within that asserted. 9 U.S.C.A. § 1 et seq.
agreement's scope. 9 U.S.C.A. § 1 et seq.
[6] Alternative Dispute Resolution Employment disputes
Evidence Under terms of employer's occupational
Party seeking to avoid arbitration under the injury benefit plan, valid agreement to
Federal Arbitration Act (FAA) bears the arbitrate all claims arising from a work-
burden of raising an affirmative defense to related injury or illness under the Federal
enforcement of the otherwise valid arbitration Arbitration Act (FAA) existed between
provision. 9 U.S.C.A. § 1 et seq. employer and employee who died as a
result of injuries sustained within the
course of his employment, even though

employee's wrongful death beneficiaries refers to the fairness of the arbitration

challenged the validity of employee's provision itself.
signature on document acknowledging
employee's receipt of mandatory arbitration 3 Cases that cite this headnote
provision of occupational injury benefit
plan in their wrongful death action [14] Alternative Dispute Resolution
against employer, where wrongful death Unconscionability
beneficiaries failed to file verified pleading
Mere inequality of bargaining power is
denying that employee had executed
not a sufficient reason to hold an
challenged document acknowledging receipt
arbitration agreement unenforceable, on
of arbitration agreement. 9 U.S.C.A. § 1 et
grounds of procedural unconscionability, in
seq.; Vernon's Ann.Texas Rules Civ.Proc.,
the employment context.
Rule 93(7).

Unconscionability
Fee provision of arbitration agreement
Employee's wrongful death beneficiaries,
between employer and employee who died
as derivative claimants, were bound by
as a result of injuries sustained within the
employee's agreement to arbitrate, pursuant
course of his employment, which required
to employer's occupational injury benefit plan
that parties arbitrate all claims arising
that contained an agreement to arbitrate all
from a work-related injury or illness, that
claims arising from a work-related injury
party seeking arbitration pay filing fee,
or illness under the Federal Arbitration
and that arbitrators' costs and fees be
Act (FAA), even though wrongful death
borne equally by the parties, was not
beneficiaries had not signed the arbitration
substantively unconscionable, as a defense to
agreement. 9 U.S.C.A. § 1 et seq.
enforcement of agreement in wrongful death
Cases that cite this headnote action by deceased employee's wrongful death
beneficiaries; although beneficiaries resided
in Alabama and employer requested that
[12] Alternative Dispute Resolution arbitration be held in Texas, beneficiaries filed
Evidence wrongful death action in Texas and failed to
Because the law favors arbitration, the party demonstrate that cost of arbitration in Texas
opposing arbitration bears the burden to would be greater than cost of litigation in
prove unconscionability. Texas, and beneficiaries failed to demonstrate
that they lacked financial ability to pay a
2 Cases that cite this headnote portion of arbitrator's fees.

Unconscionability
Unconscionability of an arbitration [16] Alternative Dispute Resolution
agreement may exist in one or both of Unconscionability
two forms: (1) procedural unconscionability, An arbitration agreement that provides for
which refers to the circumstances surrounding fee-splitting is not, by itself, unconscionable.
the adoption of the arbitration provision,
and (2) substantive unconscionability, which 3 Cases that cite this headnote


Unconscionability Evidence
Provision of arbitration agreement between When presented with question of whether a
employer and employee, who died as a result party waived its contractual arbitration rights,
of injuries sustained within the course of his court is required to resolve any doubts in favor
employment, limiting amount of discovery to of arbitration.
be conducted during arbitration proceedings
in a matter involving work-related injury or Cases that cite this headnote
illness was not substantively unconscionable,
as a defense to enforcement of agreement [22] Alternative Dispute Resolution
in wrongful death action by deceased Evidence
employee's wrongful death beneficiaries,
Waiver of a party's contractual arbitration
where agreement permitted each party the
rights may be implied from the party's
same amount of discovery, and agreement
conduct, so long as that conduct is
provided that, upon a showing of good cause,
unequivocal, and in close cases, the strong
either party could obtain an order from the
arbitrator for taking additional depositions
and could obtain approval from the arbitrator 1 Cases that cite this headnote
to utilize requests for production and for
admissions.
Cases that cite this headnote Suing or participating in suit
The judicial process is “substantially
invoked,” as required to establish waiver of
arbitration by litigation conduct, when the
Unconscionability
party seeking arbitration has taken specific
Substantive unconscionability refers to
and deliberate actions, after the filing of the
fairness of an arbitration provision.
suit, that are inconsistent with the right to
3 Cases that cite this headnote arbitrate or has actively tried, but failed, to
achieve a satisfactory result through litigation
before turning to arbitration.
Suing or participating in suit 2 Cases that cite this headnote
A party may waive contractual arbitration
rights by substantially invoking the judicial [24] Alternative Dispute Resolution
process to the detriment of the other party. Suing or participating in suit
1 Cases that cite this headnote Factors considered in determining whether a

movant has substantially invoked the judicial
process, as required to establish waiver of
[20] Alternative Dispute Resolution arbitration by litigation conduct, include
Evidence when the movant knew of the arbitration
Because public policy favors resolving clause, how much discovery has been initiated
disputes through arbitration, the law imposes and who initiated it, the extent to which
a strong presumption against the waiver of discovery related to the merits rather than
contractual arbitration rights. arbitrability or standing, how much of the
discovery would be useful in arbitration,
Cases that cite this headnote whether the movant sought judgment on the

merits, and whether the movant sought to Delay alone generally does not establish
compel arbitration on the eve of trial. waiver of right to arbitration.
2 Cases that cite this headnote Cases that cite this headnote

Suing or participating in suit Suing or participating in suit
“Prejudice,” as required to establish waiver of Litigation conduct of employer of employee
arbitration by litigation conduct, refers to the who died from injuries sustained within the
inherent unfairness in terms of delay, expense, course of his employee did not prejudice
or damage to a party's legal position that employee's wrongful death beneficiaries in
occurs when the party's opponent forces it to their wrongful death action against employer,
litigate an issue and later seeks to arbitrate as required to establish waiver of employer's
that same issue; thus, a party should not contractual right to arbitration pursuant to
be allowed purposefully and unjustifiably to agreement in which employer and employee
manipulate the exercise of its arbitral rights agreed to arbitrate all claims arising from
simply to gain an unfair tactical advantage a work-related injury or illness; although
over the opposing party. employer waited over one year to file motion
to compel arbitration, discovery that had been
Cases that cite this headnote conducted in judicial proceedings would be
useful in arbitration, employer did not seek
[26] Alternative Dispute Resolution to compel arbitration in order to gain an
Suing or participating in suit unfair tactical advantage, and record failed
to demonstrate other detriment suffered by
Employer of employee who died from
beneficiaries.
injuries sustained within the course of his
employee did not “substantially invoke” the Cases that cite this headnote
litigation process in wrongful death action
by employee's wrongful death beneficiaries,
as required to establish waiver of employer's [29] Alternative Dispute Resolution
contractual right to arbitration pursuant to Employment disputes
agreement in which employer and employee Commerce
agreed to arbitrate all claims arising from a Arbitration
work-related injury or illness, even though Truck stop maintenance worker who
employer waited over one year to file maintained parking lots and facilities within
motion to compel arbitration, where employer one state did not qualify as “transportation
asserted affirmative defense that wrongful worker,” within meaning of provision of
death claims were the subject of a binding Federal Arbitration Act (FAA) exempting
arbitration agreement in its original answer, contracts of employment of workers engaged
did not file any motions on the merits, and in foreign or interstate commerce from its
did not engage in extensive discovery, but coverage, since maintenance worker was
rather participated in discovery initiated by not engaged in the movement of goods in
employer's co-defendants. interstate commerce. 9 U.S.C.A. § 1.

Waiver or Estoppel Employment disputes
Commerce

Arbitration or illness, and neither an employee nor Pilot Travel “may

Federal Arbitration Act's (FAA) exclusion of bring a lawsuit in any state or federal court against the
“contracts of employment of workers engaged other regarding a work related injury or illness or the
in foreign or interstate commerce” from the severity of alleged damages arising from a work related
Act's coverage applies only to employment injury or illness.” More specifically, paragraph 1.05 of the
contracts of those workers actually engaged in arbitration agreement provides:
movement of goods in interstate commerce. 9
U.S.C.A. § 1.
All employees, by applying for, accepting or by
Cases that cite this headnote continuing employment after the implementation of
this Plan, shall be required to submit any legally
recognized claim for a work related injury or illness
to arbitration, rather than to litigation, according to
this Plan and the rules established for its enforcement.
The Company shall also be required to proceed to
*172 Carl Evans Jr., Stephanie Almeter, Jeffrey C. arbitration on all work related injury or illness matters
Wright, McCathern, PLLC, Dallas, TX, for Appellant. brought for arbitration by an employee. The duty
imposed on both the Company and Employee to
Augustus Corbett, The Corbett Law Firm, Dallas, TX, for arbitrate all legally recognized claims arising from a
Appellees. work related injury or illness shall continue beyond and
not be affected by, the termination of an employee's
Before Justices MOSELEY, FILLMORE, and MYERS.
employment.
A document captioned “Employer Notice to Current
Texas Employees” (Employer Notice), dated January 18,
OPINION 2011, contains Tony's signature, initialing of paragraphs,
and social security number, as well as the witness
Opinion by Justice FILLMORE.
signature of Pilot Travel's representative, Brandy Allen.
In this interlocutory appeal, Pilot Travel Centers, LLC The Employer Notice contains an “Acknowledgment
(Pilot Travel) asserts the trial court erred by denying its Receipt Regarding Mandatory Arbitration Plan for Texas
motion to compel arbitration and for a stay of the trial Employees” which provides:
court proceedings against it. We reverse the trial court's
I, James McCray hereby certify
order denying Pilot Travel's motion to compel arbitration
by my initials and signature below
and for stay of the trial court proceedings.
that I have received a copy of
the Mandatory Arbitration Plan. I
also understand that ALL issues
Background related to the work related injury
or illness or benefits pertaining
On January 18, 2011, James Antonio McCray (Tony) 1 thereto MUST be settled through
began employment with *173 Pilot Travel as a binding arbitration, not litigation,
maintenance worker. Pilot Travel was a non-subscriber per Pilot Travel Centers' Mandatory
to the Texas Workers' Compensation insurance system; Arbitration Plan. Neither party shall
it provided an Occupational Injury Benefit Plan (Benefit have the right to file a suit in
Plan) for its Texas employees. Amendment 1 to the Benefit any state or federal court. Any
Plan is a Mandatory Arbitration Plan for Resolution such arbitration will be governed
of Work Related Injury or Illness Claims of Texas by the Federal Arbitration Act
Employees (arbitration agreement). By its terms, the and administered by the American
arbitration agreement indicates it is the exclusive and Mediation Association.
mandatory means for an employee and Pilot Travel to
resolve their disputes arising from a work-related injury (Emphasis in original.)

signature date of December 12, 2012, the December 12,

On January 26, 2011, Tony was working within the course 2012 Order is identical to the November 12, 2012 Order.
and scope of his employment with Pilot Travel at a truck On December 28, 2012, Pilot Travel filed its notice of
stop in Dallas, Texas, when he was struck by a tractor interlocutory appeal of the denial of its motion to compel
trailer rig owned by Smile Transportation and operated arbitration.
by Ljubo Dilber. Tony died several weeks later as a result
of the injuries he sustained. At the time of his death, On January 16, 2013, the trial judge signed an order
Tony was survived by his parents, appellees Joan and granting appellees' “Motion for Judgment Nunc Pro
James McCray, and his son, appellee Brandon Gullatte, Tunc” (January 16, 2013 Order). 2 In the January 16,
as represented by his next friend, Shamekia Gullatte. 2013 Order, the trial court found that the December 12,
2012 Order contained a clerical error; according to the
The record contains Pilot Travel's July 20, 2011 trial court, the signature date of December 12, 2012 was
demand for arbitration before the American Mediation incorrect and should have been November 16, 2012. In
Association, which was received by the American the January 16, 2013 Order, the trial court ordered the
Mediation *174 Association on July 21, 2011. Pilot December 12, 2012 Order corrected to reflect the finding
Travel referenced the “respondents in this arbitration” that the date of the trial judge's signature should be
as “Joan and James McCray, Individually and as Next November 16, 2012.
Friends of James Antonio McCray, Deceased; The Estate
of James Antonio McCray; and Shemekia Gullatte, On February 6, 2013, Pilot Travel filed its verified
as next Friend of Brandon Gullatte, a Minor.” Pilot objection to the January 16, 2013 Order and motion to
Travel requested the arbitration be conducted in Dallas,
vacate that order. 3 In its motion to vacate the January
Texas, where the accident occurred and where Tony was
16, 2013 Order, Pilot Travel stated that on December 14,
employed.
2012, it received the trial court's December 12, 2012 Order
denying Pilot Travel's motion to compel arbitration. Pilot
On July 22, 2011, appellees Joan and James McCray,
Travel stated the December 12, 2012 Order was the only
and Shamekia Gullatte, as next friend of Brandon
signed order it received regarding its motion to compel
Gullatte, filed their original petition in a district court of
arbitration. Citing rule of civil procedure 306a and rule of
Dallas County, Texas, against Pilot Travel and others in
appellate procedure 26.1(b), *175 Pilot Travel asserted
the lawsuit underlying this appeal. Appellees allege the
its timetable for filing an interlocutory appeal of the denial
negligence of Pilot Travel and the other named defendants
of its motion to compel arbitration began to run on
proximately caused Tony's death and appellees' damages
December 12, 2012.
resulting from his death. On August 29, 2011, Pilot Travel
filed its answer to appellees' lawsuit. Included in Pilot
On May 1, 2013, the trial court signed an “Order on [Pilot
Travel's answer is the affirmative defense that the claims
Travel's] Motion for Court to Vacate Order Granting
asserted in the lawsuit were the subject of a mandatory
[Appellees'] Judgment Nunc Pro Tunc and Order Denying
arbitration agreement signed by Tony. On September 6,
Motion to Compel Arbitration” (May 1, 2013 Order). In
2012, Pilot Travel filed its motion to compel arbitration of
the May 1, 2013 Order, the trial court vacated its January
appellees' claims and for a stay of appellees' lawsuit against
16, 2013 Order, and again denied Pilot Travel's motion to
it.
compel arbitration.
By order with a signature date of November 12, 2012,

By letter dated February 19, 2013, this Court
the trial court denied Pilot Travel's motion to compel
communicated to the parties to this interlocutory appeal
arbitration (November 12, 2012 Order). The November
that, after review of the record, it appeared Pilot Travel's
12, 2012 Order indicates that Pilot Travel's motion to
notice of appeal of the trial court's denial of its motion to
compel arbitration was considered on November 16, 2012.
compel arbitration was untimely under rule of appellate
By order with a signature date of December 12, 2012, the
procedure 26.1(b) and requested that the parties file
trial court again denied Pilot Travel's motion to compel
a jurisdictional brief explaining how this Court has
arbitration (December 12, 2012 Order). Other than a mark
jurisdiction over this appeal. See TEX.R.APP. P. 26.1(b).
through the November 12, 2012 date and a handwritten

[1] If applicable, rule of civil procedure 306a may operate

Jurisdiction
to extend the deadline for filing a notice of appeal of an
Section 51.016 of the civil practice and remedies code interlocutory order. See TEX.R. CIV. P. 306a; see also
provides that in a matter subject to the Federal John v. Marshall Health Servs., Inc., 58 S.W.3d 738, 740
Arbitration Act (FAA), a party may appeal from an (Tex.2001). If a party affected by an appealable order or
interlocutory order of a district court “under the same the party's attorney has not, within twenty days after the
circumstances that an appeal from a federal district court's order was signed, either received notice required by rule
order ... would be permitted by 9 U.S.C. Section 16.” of civil procedure 306a(3) or acquired actual knowledge
TEX. CIV. PRAC. & REM.CODE ANN. § 51.016 (West of the signing, then any period that, under the rules of
Supp.2012); see CMH Homes v. Perez, 340 S.W.3d 444, appellate procedure, runs from the signing of the order
448–49 (Tex.2011) (explaining that section 51.016 of the will begin on the earlier of the date when the party or
civil practice and remedies code provides for interlocutory the party's attorney receives notice or acquires actual
appeals in FAA cases so long as “it would be permitted knowledge of the signed order; however, no such period
under the same circumstances in federal court under [9 may begin to run more than ninety days after the judgment
U.S.C] section 16”). Section 16 of the FAA provides or order was signed. TEX.R.APP. P. 4.2(a)(1); see also
an appeal may be taken from an order “denying an TEX.R.CIV.P. 306a(4).
application under section 206 of this title to compel
arbitration.” 9 U.S.CA. § 16(a)(1)(C) (West 2009); Austin [2] Subsection (5) of rule of civil procedure 306a provides
Commercial Contractors, L.P. v. Carter & Burgess, Inc., a procedure that enables the trial court to change the date
347 S.W.3d 897, 900 (Tex.App.-Dallas 2011, pet. denied); the appellate timetable begins to run from the actual date
Texas La Fiesta Auto Sales, LLC v. Belk, 349 S.W.3d 872, of the interlocutory order to the date on which the party or
877 (Tex.App.-Houston [14th Dist.] 2011, no pet.). the party's attorney received the clerk's notice or acquired
actual knowledge that the trial court signed the order,
An appeal from an interlocutory order denying a motion whichever occurs first, as long as that date is not more than
to compel arbitration is an accelerated appeal. See ninety days after the trial court signed the interlocutory
TEX.R.APP. P. 28.1 (“Appeals from interlocutory orders order. TEX.R. CIV. P. 306a(5). A party must obtain
(when allowed by statute) ... are accelerated appeals.”). an order from the trial court that reflects the date the
In an accelerated appeal, absent a rule of appellate party or the party's attorney first either received notice
procedure 26.3 motion, the deadline for filing a notice of or acquired actual knowledge that the order was signed.
appeal is strictly set at twenty days after the appealable Hone v. Hanafin, 105 S.W.3d 15, 18 (Tex.App.-Dallas
interlocutory order is signed. TEX.R.APP. P. 26.1(b); 2002), rev'd on other grounds, 104 S.W.3d 884 (Tex.2003)
TEX.R.APP. P. 26.3; see also In re K.A.F., 160 S.W.3d (per curiam); see TEX.R.APP. P. 4.2(c); Moore Landrey,
923, 927 (Tex.2005); Iron Mountain Bison Ranch, Inc. v. L.L.P. v. Hirsch & Westheimer, P.C., 126 S.W.3d 536,
Easley Trailer Mfg., Inc., 964 S.W.2d 762, 763 (Tex.App.- 540 (Tex.App.-Houston [1st Dist.] 2003, no pet.); Nedd–
Amarillo 1998, no pet.) (interlocutory appeal is perfected Johnson v. Wells Fargo Bank, N.A., 338 S.W.3d 612, 613
by filing notice of appeal with trial court within twenty (Tex.App.-Dallas 2010, no pet.); Mem'l Hosp. of Galveston
days after judgment or order is signed). Cnty. v. Gillis, 741 S.W.2d 364, 366 (Tex.1987) ( “Rule
306a plainly requires that this proof be made in the trial
The notice of accelerated appeal of the November 12, 2012 court, not the court of appeals.”).
Order denying Pilot Travel's motion to compel arbitration
and for stay had to be filed within twenty days after the On September 25, 2013, the trial court signed an order on
date the order was signed. Because the twentieth day after Pilot Travel's motion to reconsider Pilot Travel's request
the November 12, 2012 Order fell on Sunday, December 2, for factual finding under rule of civil procedure 306a(5).
2012, Pilot Travel's deadline for perfecting the appeal from In that order, the trial court found that the date Pilot
that order fell on the following day, Monday, December Travel or its attorney first received notice or acquired
actual knowledge of a signed order denying its motion to
3, 2012. See TEX.R.APP. P. 4.1(a). 4 Pilot *176 Travel
compel arbitration and for stay was December 11, 2012,
filed its notice of appeal on December 28, 2012, more than
more than twenty days after the November 12, 2012 Order
twenty days after the November 12, 2012 Order.

denying Pilot Travel's motion to compel arbitration was (1) the existence of a valid, enforceable arbitration
signed by the trial court. Therefore, pursuant to rule of agreement and (2) that the claims at issue fall within
civil procedure 306a(4) and rule of appellate procedure that agreement's scope. In re Kellogg Brown & Root, Inc.,
4.2(a)(1), the twenty-day deadline for filing Pilot Travel's 166 S.W.3d 732, 737 (Tex.2005) (orig. proceeding); see
notice of appeal of the denial of its motion to compel also J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223,
arbitration and for stay began on December 11, 2012. See 227 (Tex.2003) (although there is strong presumption
TEX.R. CIV. P. 306a(4); TEX.R.APP. P. 4.2(a)(1). favoring arbitration, presumption arises only after party
seeking to compel arbitration proves a valid arbitration
Pilot Travel's notice of appeal was filed December 28, agreement exists). The party seeking to avoid arbitration
2012, within twenty days from the date Pilot Travel then bears the burden of raising an affirmative defense to
or its attorney first received notice or acquired actual enforcement of the otherwise valid arbitration provision.
knowledge of a signed order denying its motion to compel In re AdvancePCS Health, 172 S.W.3d at 607. A court
arbitration and for stay. Thus, Pilot Travel's notice of has no discretion and must compel arbitration if it is
appeal was timely perfected and this Court has jurisdiction established that there is a valid arbitration agreement and
over the accelerated appeal. the claims raised fall within the scope of that agreement. In
re Tenet Healthcare, Ltd., 84 S.W.3d 760, 765 (Tex.App.-
Houston [1st Dist.] 2002, orig. proceeding). “An order
to arbitrate should not be denied unless it can be said
*177 Motion to Compel Arbitration
with positive assurance that the arbitration cause is not
and to Stay Trial Court Proceedings
susceptible of an interpretation that covers the asserted
In a single issue, Pilot Travel asserts that, because a dispute.” Hou–Scape, Inc. v. Lloyd, 945 S.W.2d 202,
valid arbitration agreement exists that is applicable to 205 (Tex.App.-Houston [1st Dist.] 1997, no writ) (citing
appellees' pleaded claims, the trial court erred in denying United Steelworkers v. Warrior & Gulf Navigation Co.,
its motion to compel arbitration and to stay the trial court 363 U.S. 574, 582–83, 80 S.Ct. 1347, 4 L.Ed.2d 1409
proceedings. (1960)). To determine if a claim falls within the scope of an
arbitration agreement, we focus on the facts alleged, not
[3] [4] The arbitration agreement provides that the the causes of action asserted. Hou–Scape, 945 S.W.2d at
FAA applies to and governs any matter submitted to 205.
arbitration. See In re AdvancePCS Health, L.P., 172
S.W.3d 603, 605–06 & n. 3 (Tex.2005) (orig. proceeding) We review de novo whether an enforceable agreement to
(per curiam) (FAA governs arbitration in Texas if arbitrate exits. In re Jindal Saw, Ltd., 264 S.W.3d 755, 761
parties expressly contracted for FAA's application); In re (Tex.App.-Houston [1st Dist.] 2008, orig. proceeding). We
ReadyOne Indus., Inc., 294 S.W.3d 764, 769 (Tex.App.- defer to the trial court's factual determinations if they
El Paso 2009, orig. proceeding) (if parties expressly are supported by evidence, but we review the trial court's
choose for arbitration agreement to be governed by FAA, legal determinations de novo. In re Labatt Food Serv.,
agreement should be enforced regardless of parties' nexus L.P., 279 S.W.3d 640, 643 (Tex.2009) (orig. proceeding);
to interstate commerce). When a party asserts a right see also J.M. Davidson, 128 S.W.3d at 227 (whether an
to arbitrate under the FAA, the question of whether agreement imposes a duty to arbitrate is question of law
the dispute is subject to arbitration is determined under which is reviewed de novo); Trammell v. Galaxy Ranch
federal law. Prudential Secs. Inc. v. Marshall, 909 S.W.2d Sch., L.P., 246 S.W.3d 815, 820 (Tex.App.-Dallas 2008,
896, 899 (Tex.1995). As a matter of federal law, any no pet.). “This *178 standard is the same as the abuse
doubts concerning the scope of arbitrable issues are of discretion standard of review and we will apply that
resolved in favor of arbitration, whether pertaining to the standard of review to interlocutory appeals under section
construction of the contract or a defense to arbitrability. 51.016.” Sidley Austin Brown & Wood, LLP v. J.A. Green
See Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., Dev. Corp., 327 S.W.3d 859, 863 (Tex.App.-Dallas 2010,
460 U.S. 1, 24–25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). no pet.).
[5] [6] [7] [8] [9] In general, a party seeking

to compel arbitration under the FAA must establish

instrument in writing shall be verified by affidavit; where

party denying execution of a document by person then
Arbitration Agreement
deceased, affidavit shall be sufficient if it states affiant has
reason to believe and does believe that such instrument
Existence of Arbitration Agreement was not executed by the decedent or by his authority);
Between Pilot Travel and Tony TEX.R. EVID. 601(b) (Dead Man's Rule); Munden v.
Chambless, 315 S.W.2d 355, 358 (Tex.Civ.App.-Dallas
[10] Pilot Travel argues that it established a valid 1958, writ ref'd n.r.e.) (test of whether evidence should
arbitration agreement existed between it and Tony. The be excluded under Dead Man's Statute is whether, “in
record contains the “Acknowledgment Receipt Regarding case the witness testified falsely, the deceased, if living
Mandatory Arbitration Plan for Texas Employees” could contradict the testimony of his own knowledge”).
reflecting Tony's certification “by [his] initials and Based on the documentation in the record, we agree with
signature” on the date he was hired by Pilot Travel Pilot Travel that it established a valid and enforceable
that he received a copy of the arbitration agreement arbitration agreement existed between it and Tony.
and understood that all issues “related to the work
related injury or illness or benefits pertaining thereto
must be settled through binding arbitration” governed by
the FAA and administered by the American Mediation Appellees as Non–Signatories to Arbitration Agreement
Association, and that neither he nor Pilot Travel had
[11] Appellees Joan and James McCray are Tony's
the right to file suit in any state or federal court.
surviving parents, and appellee Brandon Gullatte,
Further, that Acknowledgment was signed by a company
represented by his mother as his next friend, is Tony's
representative.
*179 surviving son. Appellees' wrongful death claims
against Pilot Travel are made in their capacities as the
While appellees do not contest that the arbitration
surviving parents and child of Tony. See TEX. CIV.
agreement was incorporated into Pilot Travel's Benefit
PRAC. & REM.CODE ANN. § 71.004 (West 2008)
Plan, appellees contend Pilot Travel failed to establish
(action to recover damages as provided by this subchapter
the arbitration agreement was signed by Tony
is for exclusive benefit of surviving spouse, children, and
or that he “assented to arbitration.” Pilot Travel
parents of the deceased). Appellees argue that as non-
is unable to “authenticate” Tony's signature on
signatories to the arbitration agreement between Pilot
the “Acknowledgement Receipt Regarding Mandatory
Travel and Tony, their claims are not subject to the
Arbitration Plan for Texas Employees” through
arbitration agreement. They argue their claims are not
questioning him. Cf. In re Halliburton Co., 80 S.W.3d
derivative of any rights that belonged to Tony had he
566, 568 n. 2 (Tex.2002) (orig. proceeding) (in response
survived.
to motion to compel arbitration of employee's claim of
employment discrimination, employee asserted signature
Paragraph 1.02 of the arbitration agreement defines the
on a document agreeing to binding arbitration was
term “employee” to include the employee and “any
not his). During her deposition, appellee Joan McCray
individual, child, dependent, spouse, relative, executor,
testified she recognized Tony's signature on the arbitration
estate or guardian which would have the legal standing
agreement, although she later apparently “disavowed” her
required to bring a lawsuit for damages arising out of
answer “since she is neither a handwriting expert nor had
a claim.” Paragraph 1.04 of the arbitration agreement
she paid close attention to [Tony's] signature in more than
provides as follows with regard to claims arising from
ten years.”
work-related injuries or illnesses:
Ultimately, appellees' argument fails because their As used in this Plan, “Claim,” “Controversy,”
response in opposition to Pilot Travel's motion to “Dispute” or “Difference” means any claim, dispute,
compel arbitration is unverified. Appellees have cited no disagreement, contention, or grievance arising from
authority, and we are aware of none, requiring Pilot a work related injury or illness which an Employee
Travel in this circumstance to “authenticate” Tony's has with the Company, or the Company has with the
signature on the arbitration agreement. See TEX.R. CIV. Employee, which could normally be made the basis of a
P. 93(7) (pleading setting up denial of execution of

lawsuit in a State or Federal Court. This pertains only to arbitration bears the burden to prove unconscionability.
those claims, controversies, disputes or differences for See In re FirstMerit Bank, N.A., 52 S.W.3d 749, 756
work related injuries and illnesses. (Tex.2001); see also In re Oakwood Mobile Homes, Inc.,
This Plan DOES NOT provide for resolution of curiam) (once party establishes a claim within scope
disputes arising from any claim, dispute, disagreement, of an arbitration agreement, trial court must compel
contention or grievance other than those arising from a arbitration unless other party presents evidence agreement
work related injury or illness. was procured in unconscionable manner, induced or
procured by fraud or duress, or waived), abrogated in
(Emphasis in original.)
part on other grounds by In re Halliburton, 80 S.W.3d
at 572. Unconscionability of an arbitration agreement
The Texas Supreme Court has held that wrongful death
may exist in one or both of two forms: (1) procedural
beneficiaries, as derivative claimants, are bound by the
unconscionability, which refers to the circumstances
decedent's agreement to arbitrate. In re Golden Peanut
surrounding the adoption of the arbitration provision,
Co., 298 S.W.3d 629, 630 (Tex.2009) (orig. proceeding);
and (2) substantive unconscionability, which refers to
In re Labatt Food Serv., 279 S.W.3d at 646 (decedent's
the fairness of the arbitration provision itself. In re
pre-death arbitration agreement binds his wrongful death
Halliburton, 80 S.W.3d at 571. Whether a contract is
beneficiaries because, under Texas law, the wrongful
unconscionable at the time it is formed is a question of law.
death cause of action is entirely derivative of the decedent's
In re Poly–America, L.P., 262 S.W.3d 337, 349 (Tex.2008)
rights); Arredondo v. Dugger, 347 S.W.3d 757, 764
(orig. proceeding). A trial court has no discretion to
(Tex.App.-Dallas 2011) (citing In re Golden Peanut Co.,
determine what the law is or to apply the law incorrectly,
298 S.W.3d at 631), aff'd on other grounds, Dugger v.
and a failure to properly analyze or apply the law of
Arredondo, 408 S.W.3d 825 (Tex.2013). 5 unconscionability constitutes an abuse of discretion. Id.
Pursuant to the arbitration agreement, if Tony sued Pilot

Travel for his own injuries prior to his death, he would
have been compelled to arbitrate his claims. Texas law Procedural Unconscionability
and the arbitration agreement therefore provide that all
In response to Pilot Travel's motion to compel
of the claims asserted by appellees against Pilot Travel
arbitration, appellees argued the arbitration agreement is
are subject to mandatory binding arbitration as agreed to
procedurally unconscionable because it was difficult for
by Tony. Accordingly, appellees' argument that they are
an unsophisticated man like Tony to understand, and
not bound to arbitrate because they are not signatories
Pilot Travel knew Tony's level of education, and was
to Tony's arbitration agreement with Pilot Travel is not
aware of his lack of sophistication, based on information
persuasive.
contained in his application for employment. Appellees
further argue the procedural unconscionability of the
arbitration agreement based on Tony's lack of input
Conclusion concerning the terms of the agreement and the one-sided
character of the agreement which Tony had to accept or
We conclude Pilot Travel established the existence of an forego employment by Pilot Travel.
arbitration agreement and *180 that appellees' claims
against it fall within that agreement's scope. [14] Appellees' unverified response to Pilot Travel's
motion to compel arbitration contained no evidence the
arbitration agreement is procedurally unconscionable.
Unconscionability of Arbitration Agreement Further, there is no evidence in the record establishing
Tony's lack of education and “sophistication” as argued
[12] [13] Appellees contend the arbitration agreement is by appellees. With regard to appellees' argument that the
invalid and unenforceable because under Texas contract arbitration agreement was procedurally unconscionable
law it is procedurally and substantively unconscionable. because Tony had to accept the arbitration agreement
Because the law favors arbitration, the party opposing terms to be employed by Pilot Travel, the Texas Supreme

Court has recognized that an employer may make no event would an employee be assessed more than one-
precisely such a “take it or leave it” offer to its at- half of the arbitration fees (except attorney fees) and
will employees. See In re Halliburton, 80 S.W.3d at costs.” An agreement that provides for fee-splitting is not,
572 (rejecting argument that disparity in bargaining by itself, unconscionable. In re Weeks Marine, Inc., 242
power between employer and employee rendered S.W.3d 849, 860 (Tex.App.-Houston [14th Dist.] 2007,
arbitration agreement procedurally unconscionable) orig. proceeding). There is no evidence in the record that
(citing Hathaway v. Gen. Mills, Inc., 711 S.W.2d 227, 228– appellees do not have the financial ability to pay a portion
29 (Tex.1986)). Mere inequality of bargaining power is of the arbitrator's fees. Appellees admit in their brief
not a sufficient reason to hold an arbitration agreement that appellee James McCray makes a living wage and
unenforceable in the employment context. Gilmer v. that “Appellee Shamekia Gullatte is a registered nurse.”
Interstate/Johnson Lane Corp., 500 U.S. 20, 33, 111 Appellees cannot point to evidence of severe monetary
S.Ct. 1647, 114 L.Ed.2d 26 (1991). On this record, constraints that would effectively preclude participation
nothing about the specific circumstances surrounding the in arbitration. Further, there is no evidence in the record
adoption of the arbitration agreement shows it to be supporting appellees' assertion an arbitration will be more
procedurally unconscionable. costly than litigating appellees' wrongful death claims in
state court.
[17] By the express terms of the arbitration agreement,

*181 Substantive Unconscionability
remedies available to appellees in arbitration shall be
With regard to their argument the arbitration agreement the same remedies available to them in a state court
is substantively unconscionable, appellees contended proceeding. With regard to the amount of discovery
in their response to Pilot Travel's motion to compel permitted, paragraph 1.17 of the arbitration agreement
arbitration that the costs and fees to arbitrate their provides:
wrongful death claims effectively preclude them from
Unless so ordered by the arbitrator,
vindicating their rights because they are indigent. Further,
and only upon a showing of good
appellees stated they live in Alabama and the travel
cause, no more than three (3)
expenses to Texas are more than they can bear; yet
depositions, excluding depositions
appellees also indicated that “court costs” to litigate
of expert witnesses, may be taken
before a jury have been “very costly but manageable.”
by any party. No single deposition
Finally, appellees argued the limitations on discovery
may exceed four (4) hours.
contained in the arbitration agreement are substantively
Interrogatories may be utilized by
unconscionable.
any party. Each party is allowed
two (2) sets of Interrogatories
[15] [16] Addressing first appellees' argument that
requiring no more than twenty
arbitration conducted in Texas will be prohibitively
(20) separate responses per set
expensive for them, we note appellees filed their wrongful
(subset requests such as IA, IB
death lawsuit in Texas, and there is no evidence in the
or questions requesting multiple
record that arbitration in Texas will entail greater travel
answers shall each count as one
expense than litigation of the wrongful death case in a
response). The arbitrator shall have
Texas state court. Moreover, the arbitration agreement
sole authority to determine which
indicates that the party seeking arbitration (Pilot Travel)
discovery procedures are necessary
shall pay the American Mediation Association filing fee.
and appropriate in the case to
The arbitration agreement further provides that the costs
reduce the time, cost and expense
and fees charged by the arbitrator shall be borne equally
of the discovery process, while
by the parties; however, the arbitrator shall have the
still affording each party a fair
discretion, upon request of a party and for good cause, “to
opportunity to prepare its case.
reapportion the arbitration fees (except attorney fees) and
Requests for Production may be
costs in a manner which the arbitrator deems equitable.”
utilized by any party upon approval
According to the terms of the arbitration agreement, “in
by the arbitrator. Requests for

Admission may be utilized by any

party upon *182 approval by
Waiver of Arbitration Agreement
the arbitrator. Unless a greater
time is allowed by the requesting [19] A party may waive contractual arbitration rights by
party, Interrogatories, Requests substantially invoking the judicial process to the detriment
for Production and Requests for of the other party. Perry Homes v. Cull, 258 S.W.3d
Admission shall be answered or 580, 589–90 (Tex.2008). As a defense to Pilot Travel's
objected to within thirty (30) days motion to compel arbitration, appellees contend Pilot
from the date of service. Travel waived arbitration and that they were prejudiced
by Pilot Travel invoking the judicial process.
Under the arbitration agreement, the parties are permitted
the same amount of discovery. See In re Poly–America,
262 S.W.3d at 357–58 (discovery limitations in arbitration
agreement applied equally to both sides and were not Standard of Review and Applicable Law
per se substantively unconscionable; limitations that
[20] [21] [22] Waiver of contractual arbitration rights
operate to prevent effective presentation of claim are
is a question of law that this Court reviews de novo.
unenforceable, but that determination is best left to
Id. at 598; see also Small v. Specialty Contractors, Inc.,
arbitrator as case unfolds). Appellees contend they need
310 S.W.3d 639, 644 (Tex.App.-Dallas 2010, no pet.).
to conduct discovery beyond that contemplated by the
Because public policy favors resolving disputes through
arbitration agreement. However, appellees acknowledge
arbitration, the law imposes a strong presumption against
written discovery has been exchanged and depositions
the waiver of contractual arbitration rights. See In re
have previously been taken in the lawsuit. In addition,
Bruce Terminix Co., 988 S.W.2d 702, 704 (Tex.1998)
the arbitration agreement provides that upon a showing
(orig. proceeding); see also In re Vesta Ins. Group, Inc.,
of good cause, a party may obtain an order from the
arbitrator for taking additional depositions, and may
curiam) (there is a strong presumption against waiver
obtain approval from the arbitrator to utilize requests
under the FAA). When presented with questions of
for production and for admissions. At this point in
waiver, we are required to resolve any doubts in favor
the proceeding, we cannot conclude that the evidence
of arbitration. In re Oakwood Mobile Homes, 987 S.W.2d
presented to the trial court compelled a finding that the
at 574. The standard for determining waiver is the same
discovery limitations were per se unconscionable. See id.
under federal and state law. See Holmes, Woods &
at 358.
Diggs v. Gentry, 333 S.W.3d 650, 654 (Tex.App.-Dallas
2009, no pet.). Waiver may be implied from a party's
[18] Substantive unconscionability refers to fairness of
an arbitration provision. See In re Halliburton, 80 S.W.3d *183 conduct, so long as that conduct is unequivocal.
Perry Homes, 258 S.W.3d at 593. In “close cases, the
at 571. Here, the terms of the arbitration agreement do
‘strong presumption against waiver’ should govern.” Id.
not favor either party. Appellees have not established
(quoting In re D. Wilson Constr. Co., 196 S.W.3d 774, 783
that the cost of arbitration or the discovery limitations
contained in the arbitration agreement will prevent them (Tex.2006) (orig. proceeding)).
from effectively presenting their wrongful death claims.
[23] [24] As the parties claiming waiver, appellees had
On this record, appellees failed to establish the terms of the
the heavy burden of establishing Pilot Travel substantially
arbitration agreement arc substantively unconscionable.
invoked the judicial process. See Bruce Terminix, 988
S.W.2d at 704; Adams v. StaxxRing, Inc., 344 S.W.3d 641,
648 (Tex.App.-Dallas 2011, pet. denied). In determining
Conclusion whether appellees met their burden, we must examine
the case-specific facts and look to the totality of the
Appellees failed to establish procedural or substantive
circumstances. See Perry Homes, 258 S.W.3d at 591
unconscionability as a defense to Pilot Travel's motion to
(whether a party has waived arbitration must be decided
compel arbitration.
on a case-by-case basis, based upon an examination of
the totality of the circumstances). The judicial process is

substantially invoked when the party seeking arbitration USA, Inc. v. Ain Temouchent M/V, 404 F.3d 891, 897
has taken specific and deliberate actions, after the filing (5th Cir.2005)). Pilot Travel filed its motion to compel
of the suit, that are inconsistent with the right to arbitration and for stay of the trial court proceedings
arbitrate or has actively tried, but failed, to achieve a against it on September 6, 2012. Appellees filed their
satisfactory result through litigation before turning to response to Pilot Travel's motion to compel arbitration on
arbitration. In re Vesta Ins. Group, Inc., 192 S.W.3d at 763. October 11, 2012.
Factors considered in determining whether a movant has
substantially invoked the judicial process include when *184 Appellees assert they have expended considerable
the movant knew of the arbitration clause, how much time and resources responding to Pilot Travel's “actions
discovery has been initiated and who initiated it, the in litigation.” According to appellees, Pilot Travel gained
extent to which discovery related to the merits rather valuable information “during discovery,” especially from
than arbitrability or standing, how much of the discovery depositions that “potentially” would not have been
would be useful in arbitration, whether the movant sought available in arbitration. Appellees also state their “pretrial
judgment on the merits, and whether the movant sought strategy would have been substantially different” had
to compel arbitration on the “eve of trial.” Perry Homes, Pilot Travel filed its motion to compel arbitration earlier.
258 S.W.3d at 590–92. Appellees state they have “endured two years of litigation
including being deposed, answering interrogatories,
[25] In addition to their burden of showing Pilot Travel interstate traveling and so forth.”
substantially invoked the judicial process, appellees had
the burden to show prejudice. See id. at 595 (“waiver of [27] With regard to appellees' argument that Pilot Travel
arbitration requires a showing of prejudice”). “Prejudice” waived arbitration by its delay in seeking an order
in the context of waiver of contractual arbitration rights from the trial court compelling arbitration, delay alone
“refers to the inherent unfairness in terms of delay, generally does not establish waiver. See In re Vesta Ins.
expense, or damage to a party's legal position that occurs Group, 192 S.W.3d at 763. The record shows a period
when the party's opponent forces it to litigate an issue and of approximately one year between the time Pilot Travel
later seeks to arbitrate that same issue.” Id. at 597 (quoting answered the lawsuit and the time it filed its motion to
Republic Ins. Co. v. PAICO Receivables, LLC, 383 F.3d compel arbitration. Greater delays in moving to compel
341, 346 (5th Cir.2004)). “Thus, ‘a party should not be arbitration have been insufficient to constitute waiver of
allowed purposefully and unjustifiably to manipulate the arbitration rights. See, e.g., id. (litigating for two years in
exercise of its arbitral rights simply to gain an unfair trial court insufficient to overcome presumption against
tactical advantage over the opposing party.’ ” Id. (quoting waiver). We must consider this delay in the context of
In re Tyco Inti'l Ltd. Sec. Litig., 422 F.3d 41, 46 n. 5 (1st other factors affecting the litigation process. Small, 310
Cir.2005)). S.W.3d at 639.
We note there was no evidentiary hearing and no

reporter's record of argument before the trial court
Substantial Invocation of Judicial Process
concerning Pilot Travel's motion to compel arbitration.
[26] On July 20, 2011, Pilot Travel demanded arbitration The trial court made no findings pertinent to the merits
before the American Mediation Association. On July 22, of Pilot Travel's motion to compel arbitration. Appellees
2011, appellees filed their original petition and request do not cite to evidence purportedly presented to the trial
for disclosures. Pilot Travel's original answer filed on court, nor can appellees cite to any evidence in the record,
August 29, 2011 included the affirmative defense that that demonstrates Pilot Travel substantially invoked the
appellees' claims against Pilot Travel were the subject judicial process. See Small, 310 S.W.3d at 645–46, 649
of a binding arbitration agreement. See In re H & R (record did not support argument that movants had
Block Fin. Advisors, Inc., 262 S.W.3d 896, 901 (Tex.App.- waived their right to arbitration by invoking the judicial
Houston [14th Dist.] 2008, orig. proceeding) (burden of process to the prejudice of nonmovant; record contained
demonstrating waiver “falls even more heavily” when no reporter's record of argument before the trial court,
the party seeking arbitration included a demand for no evidentiary hearing regarding the motion to compel
arbitration in its original answer) (quoting Keytrade arbitration, and no trial court findings).

argue that by merely participating in the depositions, Pilot

The quantum of litigation conduct that will be deemed Travel invoked the judicial process.
“substantial” depends very much on the context. See
Perry Homes, 258 S.W.3d at 593; EZ Pawn Corp. v. Appellees' arguments regarding discovery concern matters
Mancias, 934 S.W.2d 87, 89–90 (Tex.1996) (per curiam) that are not reflected in the record. No discovery was
(party did not waive arbitration right by answering admitted into evidence or attached to appellees' response
the suit, participating in docket control conference, to Pilot Travel's motion to compel arbitration. Because
propounding requests for production and interrogatories, appellees offered none of the discovery documents as
noticing plaintiff's deposition, and entering into an agreed evidence in the trial court and presented no details about
order to reset the original trial date); Walker v. J.C. any of them, the record does not show whether the written
Bradford & Co., 938 F.2d 575, 576–78 (5th Cir.1991) discovery was limited or extensive, sought information for
(party did not waive arbitration right by propounding affirmative or defensive issues, or whether the discovery
interrogatories and requests for production, attending addressed the merits of the lawsuit. Further, appellees
pretrial conference, and delaying thirteen months before do not allege that the discovery already conducted
filing motion to compel arbitration). would not be useful in arbitration. See In re Vesta Ins.
Group, 192 S.W.3d at 763 (noting that no prejudice from
In response to Pilot Travel's motion to compel arbitration, allegedly “extensive discovery” was shown where party
appellees argued Pilot Travel invoked the judicial process opposing arbitration failed to present evidence detailing
by consenting to co-defendants' removal of the state court the discovery conducted and failed to allege discovery
litigation to federal court, participating in scheduling already conducted would not be useful in arbitration); see
conferences in federal and state court, agreeing to trial Small, 310 S.W.3d at 648 (appellee did not claim discovery
dates in state and federal court, and signing scheduling already exchanged could not be used in arbitration).
orders in federal and state court. 6 By appellees' own
admission, Pilot *185 Travel did not “invoke” the The supreme court in Perry Homes emphasized facts that
judicial process with regard to removal of the case to would constitute waiver: “allowing a party to conduct
federal court, but rather consented to co-defendants' full discovery, file motions going to the merits, and seek
removal of the case. We disagree that by purported arbitration only on the eve of trial.” Perry Homes, 258
agreement to trial settings, Pilot Travel “sought judgment S.W.3d at 590 (quoting In re Vesta Ins. Group, 192 S.W.3d
on the merits” as argued by appellees. Further, the record at 764). Here, the record does not show Pilot Travel filed
contains no evidence of scheduling orders or trial dates in a motion on the merits, engaged in extensive discovery,
the lawsuit during its pendency in either federal or state or sought arbitration on the eve of trial. See Small, 310
S.W.3d at 645–47.
court. 7
In their appellate brief, appellees state the discovery in

this lawsuit “has been pretty extensive” between appellees Prejudice
and Pilot Travel's co-defendants, and the exchange
of discovery between appellees and Pilot Travel's co- [28] Additionally, appellees did not present any evidence
defendants has “greatly benefitted” Pilot Travel because it that they suffered *186 prejudice. “Prejudice” in the
received copies of the discovery exchanged. Appellees do context of waiver of a contractual right to arbitration
not contend Pilot Travel has initiated discovery; instead, means “the inherent unfairness in terms of delay, expense,
they argue Pilot Travel has not needed to initiate discovery or damage to a party's legal position that occurs when
because of the discovery exchanged between appellees the party's opponent forces it to litigate an issue and later
and Pilot Travel's co-defendants. Further, appellees assert seeks to arbitrate that same issue.” Perry Homes, 258
Pilot Travel participated in discovery by “significantly” S.W.3d at 597; see also In re Bruce Terminix Co., 988
deposing three parties, co-defendant Dilber and appellees S.W.2d at 704 (noting that even substantial invocation
Joan McCray and Shamekia Gullatte. However, appellees of judicial process does not constitute waiver absent
do not contend Pilot Travel invoked the judicial process proof of prejudice). In appellees' brief they state Pilot
by noticing any of the parties for deposition; instead, they Travel's “delay” and “actions” caused them “detriment
and prejudice in terms of burgeoning and unnecessary

legal fees, etc.” We question whether this argument was daily” and. “[b]y extension, workers who maintain the
made before the trial court. In their response to Pilot parking lots and facilities that service these trucks as
Travel's motion to compel arbitration, appellees state well as providing other services to these truckers and
Pilot Travel delayed in moving to compel arbitration their trucking companies are directly engaged in interstate
which resulted in appellees “expending considerable time commerce.”
and resources.” Assuming this argument can be construed
to comport with appellees' argument on appeal, the record [30] Appellee's argument that “nothing in the FAA
is void of evidence relating to legal fees and expenses applies to employment contracts of workers engaged in
incurred as a result of Pilot Travel's allegedly invoking interstate commerce” has been previously rejected by the
the litigation process to appellees' detriment. See id. United States Supreme Court and by this Court. The
Further, although appellees argue their “pretrial strategy” United States Supreme Court has held that “[s]ection 1
would have been “substantially different” had Pilot Travel exempts from the FAA only contracts of employment of
filed its motion to compel arbitration earlier, appellees transportation workers.” *187 Circuit City Stores, Inc.
have not established how their legal position has been v. Adams, 532 U.S. 105, 119, 121 S.Ct. 1302, 149 L.Ed.2d
prejudiced. Appellees have not carried their burden to 234 (2001). Many years prior to the decision in Adams, this
establish expense or damage to their legal position as a Court concluded that section 1's exemption related only
result of Pilot Travel's alleged invoking the judicial process to employment contracts of workers “actually engaged
to appellees' detriment. in the movement of goods in interstate commerce.”
White–Weld & Co. Inc. v. Mosser, 587 S.W.2d 485, 487
(Tex.Civ.App.-Dallas 1979, writ ref'd n.r.e.) (employee
who sold government bonds not engaged in movement of
Conclusion
goods in interstate commerce for purposes of section 1
On this record and considering the totality of the exclusion) (citing Dickstein v. duPont, 443 F.2d 783, 785
circumstances in this case, we conclude appellees have (1st Cir.1971)).
not met their heavy burden of establishing Pilot Travel
waived arbitration by substantially invoking the judicial While appellees also argue that workers who maintain
process, nor have they demonstrated sufficient prejudice parking lots and facilities at a truck stop are “by
to overcome the strong presumption against waiver of extension” engaged in interstate commerce, there is no
arbitration. evidence in this record to support an argument Tony was a
transportation worker actually engaged in the movement
of goods in interstate commerce within the meaning of
the exemption of section 1 of the FAA. See Adams, 532
Section 1 of the FAA U.S. at 119, 121 S.Ct. 1302; Mosser, 587 S.W.2d at 487.
Instead, the record indicates Tony was employed as a
[29] According to appellees, the arbitration agreement
truck stop maintenance worker, and as a maintenance
is unenforceable under section 1 of the FAA. Section
worker Tony was no more engaged in the movement of
1 is an exemption provision and it provides the FAA
goods in interstate commerce than a clerk in a truck stop
does not apply “to contracts of employment of seamen,
convenience store or wait staff in a truck stop restaurant.
railroad employees, or any other class of worker engaged
The facts on this record are insufficient to trigger the
in foreign or interstate commerce.” 9 U.S.C.A. § 1
exemption in section 1 of the FAA. See Cole v. Burns Int'l
(West 2009). Appellees argued to the trial court in their
Sec. Servs., 105 F.3d 1465, 1472 (D.C.Cir.1997) (security
response to Pilot Travel's motion to compel arbitration
guard at Union Station in Washington, D.C. not engaged
that “nothing in the FAA applies to employment contracts
in transportation of goods in commerce for purposes of
of workers engaged in interstate commerce.” More
section 1 exclusion). Accordingly, we are not persuaded
specifically, appellees argued to the trial court that Tony
by appellees' defense to Pilot Travel's motion to compel
was a maintenance worker for Pilot Travel and a large
arbitration based on section 1 of the FAA.
portion of Pilot Travel's business “involves providing fuel,
rest facilities, food, etc. for truck drivers of 18–wheeler
tractor trailers.” According to appellees, “these drivers
and their trucks are engaged in interstate commerce

Section 171.002 of the Texas Arbitration Act Travel does not contend Tony was represented by an
attorney at the time of signing the arbitration agreement
The arbitration agreement provides the FAA shall apply or that an attorney *188 for Tony signed the arbitration
to and govern any matter submitted to arbitration agreement. However, as discussed above, we conclude
pursuant to Pilot Travel's Benefit Plan, and that in the section 1 of the FAA does not exempt this matter from
event or to the extent the FAA may be determined arbitration. Therefore, appellees' argument that section
to be inapplicable, “and only in such an event,” the 171.002 of the TAA exempts this matter from arbitration
Texas General Arbitration Act (TAA) shall apply. In is unpersuasive.
defense to Pilot Travel's motion to compel arbitration,
appellees assert that because section 1 of the FAA
does not apply to employment contracts of workers Conclusion
engaged in interstate commerce, section 171.002 of the
TAA applies and exempts this matter from arbitration. The trial court abused its discretion by refusing to compel
Section 171.002 of the TAA excludes claims for personal arbitration of appellees' claims against Pilot Travel. Under
injury from arbitration under the TAA unless each the FAA, a trial court must stay the litigation of issues
party to the claim, on the advice of counsel, agrees in that are subject to arbitration. See 9 U.S.C.A. § 3 (West
writing to arbitrate and the agreement is signed by each 2009). The trial court's order denied Pilot Travel's motion
party and each party's attorney. TEX. CIV. PRAC. & to compel arbitration and for stay in “all respects.”
REM.CODE ANN. § 171.002(a)(3), (c) (West 2011); see Therefore, it appears the trial court, in addition to denying
also In re Nexion Health at Humble, Inc., 173 S.W.3d Pilot Travel's motion to compel arbitration, also denied
67, 69 (Tex.2005) (orig. proceeding) (TAA interfered Pilot Travel's motion to stay further litigation of appellees'
with enforceability of arbitration agreement governed by claims against it. Having concluded the trial court erred in
FAA by adding requirement of signature of a party's failing to compel arbitration of appellees' claims asserted
counsel to arbitration agreements in personal injury cases, against Pilot Travel, the trial court also erred in failing
and FAA preempts the TAA); Doctor's Assocs., Inc. v. to stay further litigation of those claims. See Courtland
Casarotto, 517 U.S. 681, 686–87, 116 S.Ct. 1652, 134 Bldg. Co., Inc. v. Jalal Family P'ship, Ltd., 403 S.W.3d
L.Ed.2d 902 (1996) (“Courts may not, however, invalidate 265, 276 (Tex.App.-Houston [14th Dist.] 2012, no pet.).
arbitration agreements under state laws applicable only to Accordingly, we reverse the order of the trial court
arbitration provisions.”). Here, the parties do not dispute denying Pilot Travel's motion to compel arbitration and
that appellees' wrongful death claims arc personal injury for stay of the trial court proceedings and remand the case
claims. See TEX. CIV. PRAC. & REM.CODE ANN. § to the trial court for further proceedings consistent with
71.002(b) (West 2008) (person is liable for damages arising this opinion.
from an injury that causes an individual's death if injury
was caused by person's or his agent's or servant's wrongful
act, neglect, carelessness, unskillfulness, or default). Pilot All Citations
416 S.W.3d 168
Footnotes
1 The record indicates James Antonio McCray signed his name on Pilot Travel employment documents as “James McCray.”
In this opinion, we refer to James Antonio McCray as “Tony” in order to avoid confusion with our references to Tony's
father, appellee James McCray.
2 The January 16, 2013 Order states the trial court considered appellees' “Motion for Judgment Nunc Pro Tunc, and the
response thereto.” However, the record contains no motion for judgment nunc pro tunc, nor any response by Pilot Travel
to such a motion. See TEX.R. CIV. P. 316 (permits trial court to correct mistakes and incorrect recitals in judgments but
only after reasonable notice of any application for correction is given to opposing party).
3 In its objection to the January 16, 2013 order and motion to vacate that order, Pilot Travel stated it was never served
with a motion for judgment nunc pro tunc.
4 On appeal, the parties do not dispute the trial court conducted a hearing on Pilot Travel's motion to compel arbitration on
November 16, 2012, However, no reporter's record containing a transcript of the November 16, 2012 hearing has been

filed with this Court, Even assuming the November 12, 2012 date of signature on the order was incorrect and should have
been November 16, 2012, the deadline for filing a notice of accelerated appeal of a November 16, 2012 order denying
Pilot Travel's motion to compel arbitration and for stay would have been December 6, 2012.
5 Appellees assert that even if this Court concludes the arbitration agreement is enforceable, appellees' loss of consortium
claims are not subject to the arbitration agreement. As was explained in In re Labatt Food Service, a tort action seeking
damages for loss of consortium arises from nonfatal injuries to a parent or child and are not entirely derivative as are
wrongful death claims. 279 S.W.3d at 646. However, “[a] wrongful death action is different than a loss of consortium
claim because the Wrongful Death Act expressly conditions the beneficiaries' claims on the decedent's right to maintain
suit for his injuries.” Id.
6 According to appellees, because of a lack of complete diversity jurisdiction, the federal case was remanded to state
court. The record contains no evidence of when the case was removed to federal court or remanded to state court. The
docket sheet from the state court litigation references removal and remand. However, docket sheets are not part of the
record. See Energo Int'l Corp. v. Modern Indus. Heating. Inc., 722 S.W.2d 149, 151 & n. 2 (Tex.App.-Dallas 1986, no
writ) (docket sheet entries are not part of the record which may be considered because they lack the formality of orders
and judgments; rather, docket sheet entry is a memorandum made for the convenience of the trial court and clerk).
7 Appellees state in their response to Pilot Travel's motion to compel arbitration that the case was set for trial on July 23,
2012. However, appellees do not argue that Pilot Travel invoked the judicial process by seeking a continuance of that
trial setting.

2002 WL 31528463
In November 1999, the Parties allegedly negotiated a

new operating agreement (the “November Operating
2002 WL 31528463
Agreement”). The terms of the November Operating
Agreement were substantially different from the March
Operating Agreement, but contained the same dispute
E.D. Louisiana.
resolution clause as the original March Operating
PRESCOTT–FOLLETT & ASSOCIATES, INC. et al Agreement, in that it required the members to resolve “any
v. dispute under this Agreement ... by arbitration in New
DELASA/PRESCOTT York.” 5
FOLLETT & ASSOCIATES, et al
The Delaware Company was ultimately successful in
No. Civ.A. 01–3178. securing the lease and it assumed control of the port
| at Puerto Cabezas in July, 2001. 6 As a prerequisite for
Nov. 8, 2002. doing business in Nicaragua, Nicaraguan law required
the Delaware Company to be registered in Nicaragua
Opinion
and to appoint an agent who resided in Nicaragua. 7 The
AFRICK, J. Delaware Company appointed Arnaldo Talavera to act as
its agent and it granted him power of attorney to handle,
*1 Before this Court is the motion of defendants, Delasa/
inter alia, certain banking transactions for the Delaware
Prescott Follett & Associates, a Delaware limited liability
company, Alma Finance Group, Kris N. Mahabir, Arete, Company. 8
LLC, and Mary Wright, to compel arbitration pursuant
to an operating agreement of Delasa/Prescott Follett & In August, 2001, the majority shareholder of the
Associates. Plaintiffs, Prescott–Follett & Associates, Inc. Delaware Company requested that Talavera provide
and Latin American Energy Development, Inc. d/b/a an accounting of funds he handled on behalf of the
Delasa oppose the motion. For the following reasons, the Delaware Company. 9 Talavera failed to respond to
motion is GRANTED. these requests. Shortly thereafter, it was discovered that
John Wheelock 10 had allegedly opened a bank account
in Nicaragua under the same name as the Delaware
FACTUAL BACKGROUND Company and that he wrongfully deposited checks
belonging to the Delaware Company. 11
In 1999, Prescott–Follett & Associates, Inc., Latin
American Energy Development, Inc. d/b/a Delasa, 1 Consequently, the Delaware Company filed charges in
Alma Finance Group, and Arete, LLC, (the “Parties”) Nicaragua against Talavera on September 18, 2002,
formed a Delaware limited liability company, Delasa/ seeking an accounting of the Delaware Company's
Prescott–Follett & Associates LLC (the “Delaware funds. 12 On December 12, 2001, a judge of the Criminal
Company”), for the purpose of securing a twenty five year Court of Puerto Cabezas convicted Talavera of the
lease of the port facilities at Puerto Cabezas, Nicaragua. 2 crime of theft with abuse of trust in violation of
Shortly after forming the Delaware Company, the Parties the Nicaraguan Criminal Code. 13 In the judgment of
signed an operating agreement dated March 29, 1999, conviction, defendants allege that the judge also set
(the “March Operating Agreement”) to formalize their
forth a criminal complaint 14 against Wheelock for being
3
agreement to work together on the project. The March
presumed to be Talavera's co-conspirator. 15 Plaintiffs
Operating Agreement contained a clause requiring that,
agree that Wheelock was subsequently convicted of this
“[i]n the Event of any dispute under this Agreement, such
dispute shall be settled by arbitration in New York, New alleged crime in absentia. 16
York, in accordance with the rules then promulgated by
*2 On October 19, 2001, plaintiffs filed the present
the American Arbitration Association ...” 4
lawsuit seeking to have the November Operating

2002 WL 31528463
Agreement declared null and void and to reinstate the arbitration provisions. 20 Accordingly, the FAA governs
March Operating Agreement. Plaintiffs also seek damages this Court's determination regarding the arbitrability of
arising from the defendants' alleged breach of the March this dispute.
Operating Agreement.
The FAA expresses a strong presumption favoring
arbitration of disputes and “all doubts concerning the
LAW AND ANALYSIS arbitrability of claims should be resolved in favor of
arbitration.” Primerica Life Insurance Co. v. Brown, 304
The Federal Arbitration Act (“FAA”) applies to written F.3d 469, 471 (5 th Cir.2002). “By its terms, the Act leaves
arbitration provisions contained in contracts involving no place for the exercise of discretion by a district court,
commerce and “its reach is coextensive with the but instead mandates that district courts shall direct the
Congressional power to regulate under the Commerce parties to proceed to arbitration on issues as to which
Clause.” Trapp Chevrolet–Oldsmobile–Cadillac, Inc. v. an arbitration agreement has been signed.” Dean Witter
General Motors Corporation, 2002 WL 11633611, *2 Reynolds, Inc. v. Byrd, 470 U.S. 614, 625–26, 105 S.Ct.
(E.D.La.5/31/02). Specifically, Section 2 of the FAA 1238, 1241, 84 L.Ed.2d 158 (1985)(emphasis added). In
provides: determining whether the parties should be compelled to
arbitrate a dispute, the Court performs a two-step inquiry.
A written provision in any maritime
Primerica Life Insurance Co. v. Brown, 304 F.3d 469, 471
transaction or a contract evidencing
a transaction involving commerce to (5 th Cir.2002). “First, the court must determine whether
settle by arbitration a controversy the parties agreed to arbitrate the dispute. 21 Once the
thereafter arising out of such court finds that the parties agreed to arbitrate, it must
contract or transaction, or the consider whether any federal statute or policy renders
refusal to perform the whole or the claims nonarbitrable.” Id. In conducting this two
any part thereof, or an agreement step analysis, “courts must not consider the merits of the
in writing to submit to arbitration underlying action.” Downer v. Siegel, 2002 WL 31106920,
an existing controversy arising out *2 (E.D .La. 9/19/02).
of such a contract, transaction, or
refusal, shall be valid, irrevocable, *3 Here, plaintiffs do not deny that both the March
and enforceable, save upon such and November operating agreements at issue contain
grounds as exist at law or in equity an identical arbitration clause requiring “any dispute”
for the revocation of any contract. under the agreement to be arbitrated in New York. 22
Likewise, plaintiffs do not contest that their claims
9 U.S.C. § 2. The term “commerce” refers to “commerce
for breach of the original operating agreement (i.e.
among the several States or with foreign nations” 17 and
the March Operating Agreement) fall within the broad
it is to be broadly construed. Atlantic Aviation, Inc. v.
scope 23 of the arbitration clause. 24 Rather, plaintiffs
EBM Group, Inc., 11 F.3d 1276, 1280 (5 th Cir.1994).
sole argument is that they should not be compelled to
Furthermore, it is well established that although the
arbitrate at all because both the March and November
FAA is substantive law, the Act applies “in diversity
agreements are invalid as a whole as a result of fraudulent
cases because Congress ha[s] so intended.” 18 Allied Bruce
misrepresentations by the defendants . 25 Specifically,
Terminex Companies, Inc. v. Dobson, 513 U.S. 265, 271,
plaintiffs contend “that the entire consent to form the
115 S.Ct. 834, 838, 130 L.Ed.2d 753 (1995).
contract initially was obtained by the fraud, manipulation
and misrepresentation” 26 of facts by the defendants
In this case, none of the parties dispute that the operating
“upon which the plaintiffs relied, and without which the
agreements between the parties are contracts involving
entire contract, including the arbitration clause, would
commerce within the meaning of 9 U.S.C. § 2. 19
never have been entered into or agreed to.” 27
Moreover, it is also undisputed that both the March
and November operating agreements contain written

2002 WL 31528463
The Court notes that plaintiffs' arguments, legally and Arnoldo Talavera in matters arising out of the
actionable as they may be, do not render their claims Lease and Operating Agreement; and by their conscious
nonarbitrable. At no time have plaintiffs asserted that and deliberate efforts to violate, illegally modify and
there was fraud in the inducement or misrepresentations undermine the operation of DELASA/Delaware and
relative to the arbitration clause alone. 28 In Prima Paint the proper operation of Puerto Cabezas under the
Corporation v. Flood & Conklin Mfg. Co., 388 U.S. 395, Lease. 34
403–04, 87 S.Ct. 1801, 1806, 18 L.Ed.2d 1270 (1967), “Waiver of arbitration is not a favored finding and there
the United States Supreme Court specifically held that is a presumption against it.” Lawrence v. Comprehensive
pursuant to the FAA, “ ‘if the claim is fraud in the Bus. Servs. Co ., 833 F.2d 1159, 1164 (5 th Cir.1987);
inducement of the arbitration clause itself—an issue which Subway Equipment Leasing v. Forte, 169 F.3d 324, 326
goes to the ‘making’ of the agreement to arbitrate—the
(5 th Cir.1999)(“There is a strong presumption against
federal court may proceed to adjudicate it,' but the federal
waiver of arbitration”); Walker v. J .C. Bradford &
court cannot consider claims of fraud in the inducement of
the contract itself.” Downer v. Siegel, 2002 WL 31106920, Co., 938 F.2d 575, 577 (5 th Cir.1991)(“In general, we
*2 (E.D.La.9/19/02)(citing Prima Paint, 388 U.S. at 403– hesitate to find that a party has waived its contractual
04, 87 S.Ct. at 1806)). Thus, unless a defense relates right to arbitration.”); Moses H. Cone Mem'l Hosp.,
solely to the arbitration clause, it must be submitted to 460 U.S. 1, 24–25, 103 S.Ct. 927, 941, 74 Led.2d 765
the arbitrator for consideration as part of the underlying (1983)(“[A]ny doubts concerning the scope of arbitrable
issues should be resolved in favor of arbitration, whether
dispute between the parties. 29 Primerica Life Insurance
the problem at hand is the construction of the contract
Co. v. Brown, 304 F.3d 469, 471–72 (5 th Cir.2002). itself or an allegation of waiver, delay, or a like defense
to arbitrability”). Accordingly, a party asserting waiver
Plaintiffs in this case seek a declaratory judgment that of arbitration bears a heavy burden of proof. Subway,
the November operating agreement is “null, void, ultra
169 F.3d at 326 (5 th Cir.1999). “Waiver will be found
vires, in violation of the Original Consent and Terms of
when the party seeking arbitration substantially invokes
the Operating Agreement, and of no effect whatsoever”
the judicial process to the detriment or prejudice of
as a result of alleged fraudulent misrepresentations by
the other party.” Miller v. Brewing Co. v. Forth Worth
the defendants. 30 In their opposition to the motion to
Distrib. Co., 781 F.2d 494, 497 (5 th Cir.1986). Waiver
compel arbitration, the plaintiffs further allege that “even
requires a showing of “both a substantial invocation of
th[e] March 29 Operating Agreement was manipulated by
the judicial process and either detriment or prejudice to
defendants” and should be voided. 31 As plaintiffs' fraud
the other party.” 35 Consorcio Rive v. Briggs of Cancun,
defense relates to the operating agreements generally,
Inc., 134 F.Supp.2d 789, 795 (E.D.La.2001). Finally,
the jurisprudence and the FAA mandate that plaintiffs'
it is well established that “a party only invokes the
claims, including the fraud in the inducement defense, be
judicial process to the extent it litigates a specific claim
resolved by the arbitrator. 32 See Prima Paint, 388 U.S. it subsequently wants to arbitrate.” Subway, 169 F.3d at
395, 404, 87 S.Ct. 1801, 1806; Rushe, 2002 WL 575706 at
328; Doctor's Associates v. Distajo, 107 F.3d 126, 134 (2 nd
*7.
Cir.1997)(“[O]nly prior litigation of the same legal and
factual issues as those the party now wants to arbitrate
Plaintiffs next argue that arbitration should be denied
results in a waiver of the right to arbitrate”).
in this case because defendants sought the intervention
of the judicial system in Nicaragua rather than resorting
Defendants' filing of alleged civil and/or criminal matters
to arbitration, thereby waiving their right to compel
in Nicaragua against Talavera and Wheelock did not
arbitration. 33 Specifically, in their supplemental and amount to a substantial invocation of the judicial process
amending complaint plaintiffs aver: and it was not inconsistent with the defendants' desire
to arbitrate the present claims arising out of the parties'
operating agreement. With respect to the alleged civil
*4 Defendants have waived any right to arbitration
and criminal proceedings against Talavera, plaintiffs have
of this claim both by their filing or causing the filing
presented no evidence that Talavera was a member of
of civil and criminal litigation against John Wheelock

2002 WL 31528463
the Delaware Company or a party to the March and/or

In sum, the Court finds that there is no impediment
November agreements. 36 Accordingly, the Court fails to
to the arbitration of plaintiffs' claims. All of the
see how litigation against a non-party to an agreement
parties, including the plaintiffs, admittedly signed the
can result in a waiver of arbitration rights pursuant to
operating agreements. 40 All agreed to arbitrate “any
that agreement. 37 Further, defendants' actions in filing
dispute under th[e] Agreement[s].” 41 Further, plaintiffs
proceedings against Talavera for theft of funds could not
point to no federal statute or policy that may render
have resulted in any detriment or prejudice to plaintiffs
their claims nonarbitrable. Consequently, considering the
with respect to this action. Plaintiffs were not even parties
to the litigation against Talavera and did not have to broad nature of the arbitration clause 42 and the U.S.
bear the expense of burdensome litigation. Plaintiffs' Supreme Court's pronouncement in Prima Paint, this
claims against defendants for breach of the operating Court holds that plaintiffs' claims, including their claim
agreements are unrelated to any claims against Talavera, for fraud in the inducement of the operating agreement,
individually, for alleged theft of funds. Consequently, the must be submitted to arbitration. 43
Court finds that any proceeding by defendants against
Talavera, whether civil or criminal, did not result in a Accordingly,
waiver of arbitration rights in this matter. See Subway,
169 F.2d at 328 (holding that franchisor did not waive IT IS ORDERED that the motion to compel arbitration
right to arbitration under franchise agreement by filing of defendants, Delasa/Prescott Follett & Associates, a
previous lawsuit against franchisees where the earlier Delaware Limited Liability Company, Alma Finance
action involved claims that were different from the one the Group, Kris N. Mahabir, Arete, LLC, and Mary Wright,
franchisor now sought to arbitrate); Amalgamated Local is GRANTED.
No. 55, United Automobile, Aerospace & Agricultural
Implement Workers of America v. Metal and Alloy Division IT IS FURTHER ORDERED that the claims of
of Silver Creek Precision Corporation, 396 F.Supp. 667, plaintiffs, Prescott–Follett & Associates, Inc. and Latin
670 (N.D.N.Y.1975)(finding that union did not waive American Energy Development, Inc. d/b/a Delasa, shall
arbitration under collective bargaining agreement by be submitted to arbitration, in accordance with the parties'
filing criminal charge against one of employer's officers arbitration agreement.
where criminal action was based upon different issues
than those before the court and was brought against an IT IS FURTHER ORDERED that this case BE AND IS
individual and not the defendant corporation). HEREBY STAYED PENDING ARBITRATION.
*5 Similarly, the Court finds that the alleged filing of IT IS FURTHER ORDERED that the Clerk of Court
38 mark this action closed for statistical purposes and place
criminal charges against Wheelock did not amount to
a waiver of defendants' right to arbitrate. Federal courts this matter in a Civil Suspense File;
have held that the FAA, while promoting arbitration, does
not contemplate the arbitration of criminal activity. See IT IS FURTHER ORDERED that the Court shall retain
Myers v. Rosenberg, 1986 WL 3329, *2 (N.D.Ill.3/7/86). jurisdiction and the matter shall be restored to the trial
Therefore, defendants' alleged filing of criminal charges docket if circumstances change this action, upon motion
cannot be held to be inconsistent with their desire to of a party, within thirty (30) days of any such change of
arbitrate. Nor can it be held to have resulted in any circumstances, so that it may proceed to final disposition.
detriment or prejudice to the plaintiffs, particularly in light This order shall not prejudice the rights of the parties to
of the fact that Wheelock “was convicted in absentia, being this litigation.
out of the Country of Nicaragua at the time, never having
been formally faced with his accusers, never having been
All Citations
permitted to go to trial.” 39 Accordingly, plaintiffs fail to
meet their burden of proving a waiver of the arbitration. Not Reported in F.Supp.2d, 2002 WL 31528463

2002 WL 31528463
Footnotes
1 Plaintiffs, Prescott–Follett & Associates, Inc. and Latin American Energy Development, Inc. d/b/a Delasa, are both
Louisiana corporations. Alma Finance Group and Arete LLC are foreign companies. R. Doc. No. 1, ¶ 1.
The purpose of the project was “the commercial, long-term development and privatization of Puerto Cabezas, as a
major port in Nicaragua, on the Atlantic coast, serving the North Atlantic Autonomous Region of Nicaragua.” R. Doc.
No. 1, ¶ 8.
3 Id. at pp. 2–3.
4 R. Doc. No. 5, Exhibit D–1, Article XXII, § 22.1.
5 R. Doc. No. 18, Exhibit 1, Operating Agreement, Article 10, § 10.1.
7 Id.
8 Id. at p. 4.
9 Id.
10 John Wheelock is the principal of Latin American Energy Development d/b/a Delasa, and a member of the Delaware
Company. R. Doc. No. 1, ¶ 8–9.
11 R. Doc. No. 18, p. 4. Plaintiffs dispute that Wheelock wrongfully deposited money into this account.
12 R. Doc. No. 18, p. 5; R. Doc. No. 5, Exhibits M–1, M–2, and N.
13 R. Doc. No. 18, p. 5; R. Doc. No. 32, p. 2.
14 According to the record, the judge ordered that an “instructive of law” be opened against Wheelock. R. Doc. No. 32, p. 5.
15 R. Doc. No. 18, p. 5 and Exhibit 2.
16 R. Doc. No. 23, p. 12. Plaintiffs further argue that the conviction was subsequently overturned by the judge who held that
the charges against Wheelock were civil in nature. Id. However, plaintiffs arguments are unsupported by any evidence
in the record.
17 9 U.S.C. § 1.
18 In fact, the U.S. Supreme Court has made it clear that the FAA preempts state law. Id., 513 U.S. at 272, 115 S.Ct. at 838.
19 R. Doc. No. 18, Memorandum, p. 6; R. Doc. No. 23, pp. 1, 6–7. Although the parties dispute whether the March or
November operating agreement should apply, it is clear that both agreements “involve commerce” as the parties to the
agreements are residents of different states and the agreements relate to the operations of a Delaware Company whose
business was the development of a major foreign port in Nicaragua. As such, they fall under the coverage of the FAA. See
Rushe v. NMTC, Inc., 2002 WL 575706, *5 (E.D.La.4/16/02)(holding that where distributorship agreement was between
residents of different states and involved the distribution of products from outside the State of Louisiana and “where the
claims and allegations of the suit involve[d] meetings and communications which took place between Ohio and Louisiana,”
the agreement was one which involved commerce within the meaning of the FAA).
20 R. Doc. No. 18, Memorandum, p. 6; R. Doc. No. 1, p. 1.
21 This determination involves two considerations: “(1) whether there is a valid agreement to arbitrate between the parties;
and (2) whether the dispute in question falls within the scope of that arbitration agreement.” Webb v. Investacorp, Inc.,
th
89 F.3d 252, 258 (5 Cir.1996).
22 R. Doc. No. 5, Exhibit D–1, Operating Agreement, Article XXII, § 22.1; R. Doc. No. 18, Exhibit 1, Article 10, § 10.1.
23 The Fifth Circuit has differentiated between arbitration clauses which are “broad” and those which are “narrow.” Rushe,
2002 WL 575706 at *5. “Where an arbitration clause is ‘broad,’ the action should be stayed and the arbitrator permitted
to decide if the dispute falls within the clause. Whereas in cases where the clause is ‘narrow,’ the case is not referred
to arbitration or stayed, unless the Court determines that the dispute falls within the clause.” Id. (citing In Re Complaint
th
of Hornbeck Offshore Corp., 981 F.2d 752, 755 (5 Cir.1993)).
Clauses which contain the term “any dispute” have been held to be “broad.” Id.; see also Pennzoil, 139 F.3d at 1067;
th
Mesa Operating Limited Partnership v. Louisiana Intrastate Gas Corporation, 797 F.2d 238, 244 (5 Cir.1986)(finding
that arbitration clause requiring arbitration of “any controversy between the parties ... arising under this Contract” was
th
broad); Rojas v. TK Communications, Inc., 87 F.3f 745 (5 Cir.1996)(“any other dispute” was sufficiently broad); In Re
Complaint of Hornbeck, 981 F.2d at 755 (holding that arbitration clause in towage agreement providing for reference
to arbitration of “any dispute” arising between the parties was broad); Sedco v. Petroleos Mexicanos Mexican Nat'l Oil,

2002 WL 31528463
th
767 F.2d 1140, 1144 (5 Cir.1985)(finding that clause providing for arbitration of “any dispute or difference between
th
the parties” was sufficiently broad); Neal v. Hardee's Food Systems, Inc., 918 F.2d 34, 38 (5 Cir.1990)(clause
governing “any and all disputes” between the parties was broad). In this case, both the March and November Operating
Agreements contain identical arbitration provisions requiring arbitration of “any dispute under this Agreement.” The
Court finds that regardless of which operating agreement is applied, the clauses are of the “broad” type. Therefore, in
accordance with the jurisprudence, the matter should be stayed and submitted to arbitration.
24 In fact, plaintiffs do not even address this issue in their opposition memorandum.
25 R. Doc. No. 23, p. 7–10. The Court notes that plaintiffs' original and first supplemental and amending complaints assert
only that the November Operating Agreement should be voided. R. Doc. No. 1, R. Doc. No. 5. On September 19, 2002,
plaintiffs requested leave to file a second supplemental and amending complaint wherein they asserted claims that the
March operating agreement should also be rescinded on the same basis as the November agreement. R. Doc. No. 27.
Although the Court denied plaintiffs request for leave, the Court, in the interest of justice, nevertheless considers plaintiffs'
arguments with respect to the March Operating Agreement as these are raised in opposition to the present motion to
compel arbitration.
26 R. Doc. No. 23, p. 14.
27 Id. at p. 7.
28 Plaintiffs' contention that the arbitration clause should be voided because the entire contract is null and void is not a
challenge to the arbitration clause, itself, but a challenge to the entire contract, including the arbitration clause.
29 th
See Primerica Life Insurance Company v. Brown, 304 F.3d 469, 471–72 (5 Cir.2002)(holding that where defendant's
capacity defense was a defense to the entire agreement and not a specific challenge to the arbitration clause, the defense
was part of the underlying dispute between the parties which must be submitted to the arbitrator); Snap–On Tools Corp.
th
v. Mason, 18 F .3d 1261, 1267–68 (5 Cir.1994)(submitting allegations of fraud in the inducement to arbitration because
allegations did not concern arbitration clause specifically, but rather was a challenge to the contract in its entirety);
th
Lawrence v. Comprehensive Business Services Company, 833 F.2d 1159, 1162 (5 Cir.1987)(submitting defense of
illegality of the contract to arbitration because it was not a challenge to the arbitration clause, itself, but rather to the
th
contract as a whole); Mesa Operating Limited Partnership v. Louisiana Intrastate Gas Corp., 797 F.2d 238, 244 (5
Cir.1986)(submitting to arbitration a defense that contract was void from its inception because defendant did not argue
“that the agreement to arbitrate [was] invalid separately from the entire contract).
30 R. Doc. No. 1, ¶ 21,
31 R. Doc. No. 23, p. 2.
32 Plaintiffs cite George Engine Co., Inc. v. Southern Shipbuilding Corp., 350 So.2d 881 (La.1977) in support of their
contention that the district court, not the arbitrator, has jurisdiction to decide the issue of fraud in the inducement of a
contract containing an arbitration clause. Id. at 884. In George Engine, the Louisiana Supreme Court declined to follow
Prima Paint. However, in Rushe and Downer, the federal district courts, faced with the same argument presented by the
plaintiffs herein, rejected the holding in George Engine, explaining that in George Engine the Louisiana Supreme Court
“was interpreting the Louisiana Arbitration Act §§ 4201, 4203, not the FAA.” Rushe, 2002 WL 575706 at *6; Downer,
2002 WL 31106920 at *3, n. 3.
33 R. Doc. No. 23, p. 11.
34 R. Doc. No. 5, ¶ 50.
35 “Substantial” invocation of the judicial process requires “active participation in a lawsuit or some other type of act
inconsistent with the desire to arbitrate.” Consorcio Rive v. Briggs of Cancun, Inc., 134 F.Supp.2d 789, 795 (E.D.La.2001).
With respect to the requirement of “prejudice,” the Fifth Circuit has held that, “[w]hen one party reveals a disinclination to
resort to arbitration on any phase of a lawsuit involving all parties, those parties are prejudiced by being forced to bear
the expenses of a trial ... Arbitration is designed to avoid this very expense. Substantially invoking the litigation machinery
qualifies as the kind of prejudice ... that is the essence of waiver.” Id. (quoting E.C. Ernst, Inc. v. Manhattan Construction
th
Co. of Texas, 559 F.2d 268, 269 (5 Cir.1977)).
36 To the contrary, the Operating Agreements themselves show that the only parties to the operating agreements and the
only entities/individuals having an ownership interest in the Delaware Company are Alma Finance (through its principal,
Kris N. Mahabir), Arete LLC (through its principal, Mary A. Wright), Delasa, Inc. (through its principal John F. Wheelock),
Prescott Follett and Associates, Inc. (through its principal, Prescott Follett), Michael Beaury, and Todd Esse. See R. Doc.
No. 18, Exhibit 1, Schedule A.

2002 WL 31528463
37 Clearly, as a non-party to the agreement, there was no duty owed to Talavera to resolve any disputes arising out of the
agreement through arbitration.
38 The Court notes that although plaintiffs argue that civil charges were also filed against Wheelock, the evidence submitted
by plaintiffs to the Court do not reveal the filing of any such civil matters. See R. Doc. No. 5, Exhibits M–1, M–2 and N.
To the contrary, a review of the documents submitted by plaintiffs show that the only matter against Wheelock is/was
pending before the Criminal District Court of Puerto Cabezas. R. Doc. No. 5, Exhibit M–2. Accordingly, any arguments
by plaintiff that a civil lawsuit was filed against Wheelock or, alternatively, that the criminal charges “were purely civil in
nature,” R. Doc. No. 23, p. 12, are merely speculative and unsupported by any evidence in the record.
39 R. Doc. No. 23, p. 12. Because Wheelock was convicted in absentia, there was no “active participation in a lawsuit”
sufficient to amount to substantial invocation of the judicial process. Consorcio Rive, 134 F.Supp.2d at 795.
40 R. Doc. No. 23, p. 2.
41 R. Doc. No. 23, p. 1.
42 In Re Complaint of Hornbeck Offshore Corp., 981 F.2d at 755 (“[A]rbitration clauses containing the ‘any dispute’
language ... are of the broad type.”).
43 th
Id.; Sedco, Inc. v. Petroleos Mexicanos Mexican National Oil Co., 767 F.2d 1140, 1148 (5 Cir.1985)(“ ‘[a]bsent
allegations of fraud in the inducement of the arbitration clause itself, arbitration must proceed when an arbitration clause
on its face appears broad enough to encompass the party's claims.” ’)(quoting Life of America Insurance Co. v. Aetna
th
Life Insurance Co., 744 F.2d 409, 413 (5 Cir.1984)).

Dismiss and Opinion Fited AprilZg,2016
In The
(tuurt uf
^Appeulø
Ifrifitl lBistrîrt uf @exu¡ st Butlnr
No. 05-16-00478-CV
No. 05-16-00479-CV
No. 05-16-00480-CV
INRE JE¡'FORY BLACKARD, Retnror
On Appeal from the 4l6th Judicial District Court
rriar cou rr cau se N"* 4 r;.Ti ;l."-äTg'ä::äi, or-ro r r, 416 -Bzt4s -z0rs
MËN'IORANDUM OPINIOH
Before chief Justice wright, Justice Lang, and Justice Brown
Opinion by Chief Justice Wright
In this petition for writ of mandamus and prohibition, relator requests that
the Court order
the trial court to vacate its January 6,2016 Order on Payment of Attorney's
Fees to Attorneys
Pro Tem to the extent it approves the hourly rate set for each ofthe attorneys representing the
State of Texas in this case as attorneys pro tem. He further requests that the Court prohibit the
trial coud from ordering the payment of any additional invoices subrnitted
by the attomey pro
tem that vary from the frxed fees or hourly rates set forth in the fee
schedule contained in the
Collin County District Coun Plan. Relator is not a party in any of the cases
in which the order
was signed.
Taxpayers may, under certain limited circumstances, possess standing

to challenge the
lawfulness of government acts. see Bland Indep. sch. Dist, v,
ßlue, 34 s.w.3d 547, 555 (Tex.
2000); verney v. Abbott, No. 03-05-00064-cv, 2006 rill, z}Bz)gs, ar 17 (Tex, App.-Austin
July 28, 2006, no pet.),¡ That limited grant of standing to bring a civil suit to challenge
a
government act does not, however, authorize a taxpayer to challenge

an order in a criminal case
in which he is not a party. see In re Amos,397 s.w.3d 30g,314 (Tex. App.-Dallas

2013, orig.
proceeding) (parties to a criminal case are the State and the acoused);
see also In re llringfìeld,
171 S.W.3d 374, 381 (Tex' App.-Tyler 2005, orig. prooeeding) ("Unlike the Rules of Civil
Procedure, the Code of Criminal Procedure makes no provision for a third party
to intervene in a
'criminal action. "').
Standing is an element of an appellate court's subject-matter jurísdiction over an original
proceeding. see Inre Baknr,404 s,w.3d 57s,s77 (Tex. App.-Houston [lstDist.] 2010, orig.
proceeding)' Because relator lacks standing to challenge the trial court's order,
we dismiss the
petition.
/Carolvn Wriehl
CAROLYN WRIGHT
CHIEF JUSTICE
160478F.P0s
I
The question whqther relûtor possesscs stônding to ohallcngc thc psymcnts to tho ettonìeys pro tenì in
. ..
in this original proceeding.
a civit silit is tìot befbre rhis court
-2-

Henry V Cash Biz - Response To Petition For Review

Uploaded by

Copyright:

Available Formats

Henry V Cash Biz - Response To Petition For Review

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Henry V Cash Biz - Response To Petition For Review

Uploaded by

Copyright:

Available Formats

FILED

IN THE SUPREME COURT OF TEXAS

HIAWATHA HENRY, ADDIE HARRIS, MONTRAY NORRIS,

CASH BIZ, LP, CASH ZONE, LLC

FROM THE COURT OF APPEALS FOR THE FOURTH DISTRICT OF TEXAS

RESPONDENT’S RESPONSE TO PETITION FOR REVIEW

Edward S. Hubbard Patrick E. Gaas

COATS ROSE, P.C.

COUNSEL FOR RESPONDENTS

STATEMENT OF THE CASE

Although the Petitioner’s Statement of the Case accurately presents certain

Statement of the Case supplements the Petitioner’s Statement of the Case.

The Petition seeks review of a decision of the Fourth Court of Appeals,

which resolved an interlocutory appeal brought by Respondents Cash Biz, LP,

Respondents, as well as Loan Disclosures, Promissory Note and Security

Agreements (hereinafter collectively referred to as “Loan Contracts”). Each of the

Petitioners defaulted on the repayment obligation under their respective Loan

Contracts, the Respondents conducted separate investigations that, in each

of their respective Loan Contracts. Based on the concerns raised by the

information that the Respondents uncovered, they separately reported this

information to each state prosecutor with jurisdiction over each Petitioner.

Prosecutors subsequently pursued criminal actions against some of the Petitioners.

when the Respondents provided information or complaints to state prosecutors,

Respondents filed a motion to compel arbitration, to enforce the contractual waiver

Code, and the Federal Arbitration Act (“FAA”), 9 U.S.C.A. §§ 1-16.

court (together with the Respondents’ response) and were denied.

STATEMENT OF THE CASE .................................................................................. i

STATEMENT OF FACTS ......................................................................................12

A. The Majority Opinion correctly applied the proper standards of review to

I. The PLS Memorandum Opinion ..................................................................22

II. The Harrison Opinion ...................................................................................25

AT&T Mobility v. Concepcion,

Consorcio Rive, S.A. De C.V. v. Briggs of Cancun, Inc.,

Cooper Indus., LLC v. Pepsi-Cola Metro. Bottling Co., Inc.,

DirectTV, Inc. v. Imburgia,

Gatlin v. P.O.A. Criscione Star #16195,

Griffin v. Burlington Volkswagon, Inc.,

In re Christus Spohn Health System Corp.,

In re Labatt Food Serv., L.P.,

In re Weekley Homes, L.P.,

In re Wingfield, 171 S.W.3d 374, 381 (Tex. App.—Tyler 2005, orig.

J.M. Davidson, Inc. v. Webster,

Mendelsohn v. A&D Catering Corp.,

NCP Finance Ltd. Partnership v. Escatiola,

Prescott-Follett & Assocs., Inc. v. Delasa/Prescott Folett & Assocs.,

Principal Investments v. Harrison,

Smith Barney Shearson, Inc. v. Boone,

Snap-On Tools Corp. v. Mason,

Southland Corp. v. Keating,

Suburban Leisure Center, Inc. v. AMF Bowling Products, Inc.,

Subway Equip. Leasing Corp. v. Forte,

Tuscan Builders, L.P. v. 1437 SH6 L.L.C.,

Texas Arbitration Act (TAA)..................................................................... iii, 5, 9, 11

TEX. CIV. PRAC. & REM. CODE § 51.016 .....................................................................i

TEX. CIV. PRAC. & REM. CODE § 171.021(b) ...................................................6, 7, 11

Texas Rules of Appellate Procedure Rule 28.1 ........................................................ ii

Financials, LLC (“Respondents”), present this Response in opposition to the

similarly situated (“Petitioners”).

waiver-of-class-action provisions. See DirectTV, Inc. v. Imburgia, _ U.S. _,