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signatories and nonsignatories to arbitration agreements | third-party beneficiary | motion to compel
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enforceability of arbitration agreement | Texas Arbitration Act (TAA) | Federal Arbitration Act (FAA) | waiver
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Recent arbitration cases from the Texas Supreme Court

Arbitration Award favorable to consumers thrown out

Perry Homes v. Cull, No. 05-0882 (Tex. May 2, 2008)(Opinion by Scott A. Brister)


Supreme Court finds that Court of Appeals did have jurisdiction to decide complaint about order
to compel arbitration in appeal from final judgment even though mandamus relief on the same
issue had previously been denied; holds that mandamus denial is not preclusive

Chambers v. John M. O'Quinn, No. 06-1073 (Tex. Dec. 14, 2007)(per curiam) (arbitration, court of appeals
erred in finding it lacked jurisdiction to review order compelling arbitration)

In Re U.S. Home Corp, Lennar Corp et al, No. 03-1080 (Tex. Oct. 12, 2007)(per curiam)(arbitration,
homeowner builder, residential construction defect)

In re Merrill Lynch Trust Co., No. 03-1059 (Tex. Aug 31, 2007)(per curiam)(arbitration mandamus, financial
services)    

Supreme Court grants mandamus to compel investors to arbitrate claims stemming from Enron
losses, including DTPA claim
In Re H&R Block No. 04-0061 (Tex. Aug. 24, 2007)(per curiam)(arbitration mandamus)

In re Merrill Lynch, No. 04-0865 (Tex. Aug. 24, 2007)(Brister)(arbitration)
Justice
Hecht delivered an opinion concurring in part and dissenting in part
Justice Johnson delivered an opinion concurring in part and dissenting in part

Supreme Court forces vocational students to arbitrate fraudulent inducement claims against
nonsignatories under the enrolment contract the student say they were induced to sign with
false representations
In re Kaplan Higher Educ. Corp., No. 06-0072 (Tex. Aug. 24, 2007)(per curiam)(arbitration mandamus)


In Re RLS Legal Solutions, LLC., No. 05-0290 (Tex. Apr. 20, 2007)(per curiam)(arbitration mandamus)

Supreme Court Grant Mandamus to Compel Arbitration (Conditionally, as is the custom);
Rejects Waiver Theory in Light of "Strong Presumption Against Waiver"
In re Bank One, No. 06-0093 (Tex. Feb 23, 2007)(per curiam)
(arbitration, presumption against waiver of right to arbitrate, mandamus appropriate to enforce arbitration
clause governed by Federal Arbitration Act (FAA))

Can Nonsignatory Enforce Arbitration?
Meyer v. WMCO-GP, No. 04-0252, No. 04-0252 (Tex. Dec. 22, 2006)(Justice Hecht)
A person who has agreed to arbitrate disputes with one party may in some cases be required to arbitrate
related disputes with others. This is such a case. A motor vehicle manufacturer exercised its right of first
refusal to acquire its dealer’s business and transferred the right to its assignee, preempting the dealer’s
agreement to sell the business to another. The jilted buyer sued the manufacturer and its assignee for
interfering with the proposed contract of sale. Although the defendants had no contract with the jilted buyer,
they demanded arbitration based on the buyer’s agreement to arbitrate disputes with the dealer. The trial
court refused to compel arbitration, and a divided court of appeals affirmed. We reverse. . . .
The trial court should have granted Meyer’s and Ford’s motions to compel arbitration. Accordingly, we
reverse the judgment of the court of appeals and remand the case to the trial court for further proceedings
consistent with this opinion.
Justice
O'Neill delivered a dissenting opinion In Meyer v. WMCO-GP   

Supreme Court Orders Arbitration; Agreement Not Ambiguous
In Re Wilson Construction Co., No. 05-0326 (Tex. June 30, 2006)(mandamus)(Willet)     
- consolidated with -
American Standard v. Brownsville ISD, No. 05-0327, (Tex. Jun 30, 2006)(consolidated with In Re Wilson
Construction Co. No. 05-0326 (Tex. Jun. 30, 2006)(Justice Willet)         
In this consolidated proceeding, we decide whether the court of appeals had jurisdiction over an
interlocutory appeal under the Texas Arbitration Act and whether the parties’ arbitration agreements are
ambiguous. We hold that the court of appeals had jurisdiction over the interlocutory appeal and that the
agreements are not ambiguous. . . .
The trial court abused its discretion by finding the contracts ambiguous and denying the motions to compel
arbitration. There is no ambiguity in either the existence or scope of these arbitration agreements. We
conditionally grant the writ of mandamus and direct the trial court to (1) vacate its order denying the
motions to compel arbitration, (2) grant Stotler’s motion to compel arbitration, (3) conduct further
proceedings to determine whether Wilson is entitled to arbitration,[7] and (4) conduct further proceedings to
determine whether the various nonsignatories are entitled to arbitration. The writ will issue only if the trial
court fails to comply. Insofar as we have granted full relief under our mandamus jurisdiction, we dismiss the
related interlocutory appeal as moot.

Court Enforces Lopsided Arbitration Agreement
In Re Palm Harbor Homes, No. 04-0490 (Tex. Jun. 9, 2006)(mandamus)(Justice Johnson)
[arbitration law, motion to compel arbitration, arbitration clause, binding, nonbinding, unconscionable]
This original proceeding presents the issue of whether the purchasers of a manufactured home must
arbitrate their claims against both the retailer and manufacturer of the home pursuant to a written
arbitration agreement between the purchasers and the retailer. The agreement specified that it inured to
the benefit of the manufacturer and gave the manufacturer a twenty-day period during which it could opt
out of arbitration. We conclude that the manufacturer’s opt-out right did not render the arbitration
agreement unenforceable and that the purchasers must arbitrate their claims against both parties.
Conclusion. . . .
We conclude that the trial court abused its discretion in failing to order the Ripples to arbitrate their claims
against the retailer and manufacturer. We conditionally grant the writ of mandamus and direct the trial court
to compel arbitration of the Ripples’ claims. The writ will issue only if the trial court fails to comply with our
directive.
In Re Palm Harbor Homes, No. 04-0490 (Tex. Jun. 9, 2006)(mandamus)(Dissent by O'Neill)

In re Vesta Ins. Group, Inc., 192 S.W.3d 759 (Tex. 2006)

In Re Olga Palacios, No. 05-0038 (Tex. Jun. 30, 2006)(per curiam opinion) (arbitration mandamus)  

In Re Dallas Peterbilt, No. 05-0706 (Tex. Jun. 16, 2006)(per curiam opinion)(arbitration)     

In Re Dillard Department Stores, No. 05-0250 (Tex. Jan. 27, 2006)(mandamus)(per curiam opinion)
(arbitration mandamus, employment, FAA)

PRE-2006 TEXAS  SUPREME COURT CASES

In re Weekley Homes, L.P., 180 S.W.3d 127 (Tex. 2005)
In re Advance PCS Health L.P., 172 S.W.3d 603 (Tex. 2005)
In re Bruce Terminix Co., 988 S.W.2d 702 (Tex. 1998)
EZ Pawn Corp. v. Mancias, 934 S.W.2d 87 (Tex. 1996)
Dist.] Jan. 25, 2007)(Hedges)
[arbitration law, confirmation of arbitration award]
AFFIRMED: Opinion by Chief Justice Hedges
(Before Chief Justice Hedges, Justices Seymore and Mirabal)
14-05-00877-CV        Michael D. Sydow v. Verner, Liipfert, Bernhard, McPherson and Hand, Chartered
Appeal from 55th District Court of Harris County (Judge Jeff Brown)
Case Law on Arbitration from the Texas Supreme Court
Also see --> Texas ADR Law Blog - Table of Arbitration Cases
Arbitration

In its second issue, Interconex argues that the trial court abused its discretion in denying its motion to compel
arbitration because there is no evidence that it intentionally waived its right to arbitration or that Ugarov was prejudiced
by any delay in Interconex's request for arbitration. Ugarov asserts that the parties never agreed to arbitrate, that
Interconex is not a party to the arbitration agreement, that the "Arbitration Court in Moscow" referred to in the arbitration
agreement does not conduct arbitration, and that Interconex waived its right to arbitration.

"A party seeking to compel arbitration has the initial burden to establish the arbitration agreement's existence and to
show that the claims asserted against it fall within the arbitration agreement's scope." Williams Indus., Inc. v. Earth
Dev. Sys. Corp., 110 S.W.3d 131, 134 (Tex. App.--Houston [1st Dist.] 2003, no pet.) (citing Mohamed v. Auto Nation USA
Corp., 89 S.W.3d 830, 835 (Tex. App.--Houston [1st Dist.] 2002, no pet.)). If the party seeking to compel arbitration
carries its initial burden, the party resisting arbitration must then present evidence on any defenses to the arbitration
agreement. Id.

Waiver is the intentional relinquishment of a known right or intentional conduct inconsistent with claiming that right.
Jernigan v. Langley, 111 S.W.3d 153, 156 (Tex. 2003); In re Citigroup Global Mkts, Inc., 202 S.W.3d 477, 481 (Tex.
App.--Dallas 2006, combined appeal and original proceeding [mand. pending]). As with any contractual right, a party
may waive its right to arbitration. Williams Indus., 110 S.W.3d at 135. However, because public policy favors arbitration,
there is a strong presumption against finding a waiver of the right to arbitration, and any doubts regarding waiver are
resolved in favor of arbitration. In re Bruce Terminix Co., 988 S.W.2d 702, 704, 705 (Tex. 1998). Whether waiver occurs
"depends on the individual facts and circumstances of each case." Williams Indus., 110 S.W.3d at 135. Waiver may be
express or implied. Id.; In re Citigroup Global Mkts, Inc., 202 S.W.3d at 481. A party may waive its right to arbitration "by
expressly indicating that it wishes to resolve the case in a judicial forum." In re Citigroup Global Mkts, Inc., 202 S.W.3d
at 481. Alternatively, a party may waive its right to arbitrate "by taking an action inconsistent with that right to the
opposing party's prejudice." Id. at 481-82. Thus, waiver will be found only when (1) the party seeking arbitration has
substantially invoked the judicial process and (2) the party opposing arbitration suffers actual prejudice as a result.
Williams Indus., 110 S.W.3d at 135.

An attempt to resolve the merits and still retain the right to arbitration is clearly impermissible. In re Citigroup Global
Mkts, Inc., 202 S.W.3d at 482. Substantially invoking the judicial process has also been described as "taking specific
and deliberate actions, after the suit's filing, that are inconsistent with the right to arbitrate." Williams Indus., 110 S.W.3d
at 135 (citing Sedillo v. Campbell, 5 S.W.3d 824, 827 (Tex. App.--Houston [14th Dist.] 1999, no pet.)). Examples include
moving for summary judgment or seeking a final resolution of the dispute. Williams Indus., 110 S.W.3d at 135. A party
may establish prejudice by showing that the movant acquired access to information in the court proceedings that is not
discoverable in arbitration. In re Bruce Terminix Co., 988 S.W.2d at 704; Williams Indus., 110 S.W.3d at 135. A party
may also establish prejudice by showing that it incurred costs and fees due to the movant's actions or delay. Williams
Indus., 110 S.W.3d at 135; Pennzoil Co. v. Arnold Oil Co., 30 S.W.3d 494, 499-500 (Tex. App.--San Antonio 2000, no
pet.). Typically, a party must present evidence of prejudice, and may not rely on general allegations of harm. See In re
Oakwood Mobile Homes, Inc., 987 S.W.2d 571, 573 (Tex. 1999); Pennzoil Co., 30 S.W.3d at 499.

Here, the trial court did not directly address whether a valid arbitration agreement existed, and instead limited its
findings to whether, if such an agreement existed, Interconex waived its right to compel arbitration. We review the trial
court's finding of waiver de novo. Tex. Residential Mortgage, L.P. v. Portman, 152 S.W.3d 861, 863 (Tex. App.--Dallas
2005, no pet.); The Courage Co. v. The Chemshare Corp., 93 S.W.3d 323, 337 (Tex. App.--Houston [14th Dist.] 2002,
no pet.). (3)

In regard to whether Interconex impliedly waived its right to arbitration, i.e., whether it acted inconsistent with its right to
arbitration, we note that Interconex was served through its registered agent on January 7, 2004 and that the trial court
entered a partial default judgment "as to liability" against Interconex on March 3, 2004. Although Interconex filed a
motion to set aside default judgment on June 2, 2004, it did not set a hearing or file its amended motion to set aside
default judgment, which included more extensive allegations, until October 15, 2004. At the conclusion of the October
15, 2004 hearing, the trial court denied Interconex's motion and initially stated that it would set the damages trial for the
existing trial date, October 25, 2004. Interconex then asserted that it had paid a jury fee and was entitled to a jury trial on
damages. The court, pursuant to Interconex's request, then reset the damages trial for December 13, 2004.

Interconex waited until December 1, 2004, ten days prior to the damages trial, to file its motion to compel arbitration,
asserting for the first time that the case should be sent to arbitration. In its motion to compel arbitration, Interconex
asserted that to handle the moving of his personal belongings, Ugarov had entered into a written contract, which
contained an arbitration agreement. Interconex attached the contract containing the arbitration agreement, and
asserted that Ugarov's allegations were within the subject matter of the agreement.

On December 2, 2004, Ugarov filed a response, asserting, among other things, that the arbitration agreement was no
longer valid and that Interconex had delayed in asserting its right to arbitration. On December 3, 2004, the trial court
signed an order denying Interconex's motion stating "that, by failing to file an answer before default judgment was
granted, [Interconex] waived its right, if any, to insist on arbitration." The court also stated in its order that it made no
finding "as to whether or not [Interconex] would have had such right if [Interconex] had chosen to answer the lawsuit in a
timely manner."

Here, the merits of the case regarding Interconex's liability had been established when the trial court denied
Interconex's motion to set aside the default judgment. At that point, Interconex asserted that it had paid a jury fee and
was entitled to a jury trial on damages, and the trial court reset the case for a trial on damages. Interconex acted
inconsistently with its right to arbitrate by failing to timely answer the lawsuit after it had been served through its
registered agent and by failing to move for arbitration before its liability had been established. Moreover, it acted
inconsistently with its right to arbitrate when it requested that the case be reset from its existing October trial date to a
December 13, 2004 jury trial on the issue of damages. It did not file its motion to compel arbitration until shortly before
the jury trial, which Interconex had specifically requested and caused to be set in December 2004. Accordingly, we
conclude that Interconex had substantially invoked the judicial process before it moved to compel arbitration.

In regard to whether Ugarov suffered actual prejudice as a result of Interconex's invocation of the judicial process, we
note that Ugarov, in his response to Interconex's motion to compel arbitration, attached an affidavit from his counsel,
who testified that the parties were only four days away from a jury trial, that Ugarov had gone to the expense of flying
from Kiev, Ukraine to Houston for the sole purpose of attending the jury trial on damages that had been requested and
set by Interconex, that he and Ugarov had been spending time getting ready for the jury trial, and that Ugarov had been
prejudiced by Interconex's utilization of the discovery process before requesting arbitration because he did not believe
that the arbitration in Russia would require the advanced production of documents. In its order denying Interconex's
motion to reconsider, the trial court found that Interconex's delay in seeking arbitration caused prejudice to Ugarov.
Thus, Ugarov established that he had incurred costs and expended time in preparation for the jury trial on damages.
Accordingly, we conclude that Ugarov demonstrated that Interconex's invocation of the judicial process caused him to
suffer actual prejudice.

In support of its argument that the judgment should be set aside, Interconex cites Home Club, Inc. v. Barlow, 818
S.W.2d 192, 193 (Tex. App.--San Antonio 1991, orig. proceeding). In Barlow, the court held that a party who had
contested jurisdiction and sought to set aside default judgments had taken only a defensive posture and thus had not
substantially invoked the judicial process. Id. Importantly, in Barlow, the court set aside the default judgments that had
originally been entered. Id. The situation presented in the instant case is distinguishable. Here, not only did Interconex
fail to timely file an answer, the trial court found that Interconex had received service and denied Interconex's motion to
set aside the default judgment filed pursuant to Craddock. Thus, at the time that Interconex sought to compel
arbitration, the trial court had already entered, and affirmed, its default judgment that Interconex was liable for the
events sued upon in Ugarov's petition. See Gen. Star Nat'l Ins. Co. v. Administratia Asigurarilor de Stat, 289 F.3d 434,
438 (6th Cir. 2002) (holding that defendant who did not assert right to arbitrate until seventeen months after receiving
actual notice of lawsuit and after entry of default judgment "remained idle while [the plaintiff] incurred the costs
associated with this action" waived any right to arbitrate); State ex rel. Barden and Robeson Corp. v. Hill, 539 S.E.2d
106, 112 (W.Va. 2000) (stating that unless defendant is able to show good cause for default, it has waived its right to
assert arbitration as affirmative defense and that "[u]nexcused conduct that results in the entry of a default judgment is
no less of an implicit waiver of a right to arbitration than any other procedural forfeiture"). Here, it simply cannot be said,
as in Barlow, that at the time Interconex filed its motion "the litigation was still in its infancy." Id. Accordingly, we hold that
Interconex waived any right to arbitration that it may have had.

We overrule Interconex's second issue.
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