law-arbitration waiver by conduct | waived by invoking litigation process | waiver theory generally |
waiver as affirmative defense | waiver of governmental or sovereign immunity by conduct | FAA Federal
Arbitration Act | FAA-applicability  9 U.S.C.S. §§ 1-307 | TAA Tex. Civ. Prac. & Rem. Code Ann. § 171.001-.098 |
confirmation of arbitration award under FAA | grounds for vacature under the FAA | TAA vs. FAA | preemption of
TAA by FAA | preemption of state TAA by Federal Arbitration Act |
Appeals from suits to confirm arbitration awards in the Houston Courts of Appeals | Houston Arbitration Cases |

ARBITRATION WAIVER: WAS RIGHT TO ARBITRATE WAIVED BY LITIGATION
CONDUCT?

Whether a party has waived its right to arbitrate presents a question of law that we review de novo. In re
Oakwood Mobile Homes, Inc., 987 S.W.2d 571, 574 (Tex.1999), abrogated in part on other grounds by In re
Halliburton Co., 80 S.W.3d 566 (Tex.2002); Jones v. Citibank (S.D.), NA, 235 S.W.3d 333, 340 (Tex.App.-Fort
Worth 2007, no pet.). Because public policy favors arbitration, there is a strong presumption against waiver
under the FAA. See D. Wilson Const., 196 S.W.3d at 783; In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 763
(Tex. 2006) (per curiam). A "heavy burden of proof" is required to establish waiver of arbitration rights, and the
court must resolve all doubt in favor of arbitration. In re Bruce Terminix Co., 988 S.W.2d 702, 705 (Tex.1998)
(per curiam). Waiver occurs if the party requesting arbitration "has substantially invoked the judicial process to
its opponent's detriment." Id. at 704. Thus, absent a showing of prejudice by the opposing party, waiver does
not result by invoking the judicial process alone. Id.

Waiver of the right to arbitration must be intentional. EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 89 (Tex.1996);
In re Certain Underwriters at Lloyd's, 18 S.W.3d 867, 872 (Tex.App.-Beaumont 2000, orig. proceeding). After
suit has been filed, a party must make a specific and deliberate act inconsistent with its right to arbitrate to
substantially invoke the judicial process. Sedillo v. Campbell, 5 S.W.3d 824, 827 (Tex.App.-Houston [14th Dist.]
1999, orig. proceeding); Nationwide of Bryan, Inc. v. Dyer, 969 S.W.2d 518, 522 (Tex.App.-Austin 1998, no
pet.). For example, substantially invoking the judicial process "may occur when the party seeking arbitration
actively tried, but failed, to achieve a satisfactory result in litigation before turning to arbitration." Southwind
Group, Inc. v. Landwehr, 188 S.W.3d 730, 736 (Tex.App.-Eastland 2006, no pet.) (citing Williams Indus., Inc. v.
Earth Dev. Sys. Corp., 110 S.W.3d 131, 135 (Tex.App.-Houston 368 [1st Dist.] 2003, no pet.)); see also Vesta
Ins. Group, 192 S.W.3d at 764.

Mere delay alone does not suffice to show prejudice. In re Serv. Corp. lnt'l, 85 S.W.3d 171, 174 (Tex.2002)
(quoting Marshall 909 S.W.2d at 898-99) ("[A] party does not waive a right to arbitration merely by delay;
instead, the party urging waiver must establish that any delay resulted in prejudice."); In re Rolland, 96 S.W.3d
339, 343 (Tex.App.-Austin 2001, orig. proceeding) ("Mere delay in requesting arbitration does not automatically
constitute waiver."). Thus, to establish waiver based on the time period Bath Junkie waited to request
arbitration, Hygiene had to show how the delay prejudiced it. The trial court record does not establish that the
delay resulted in prejudice to Hygiene.

While the filing of a counterclaim may not result in waiver, counterclaims based on arbitrable claims, in
combination with other factors, may result in waiver of a contractual right to arbitrate. Sedillo v. Campbell, 5
S.W.3d 824, 828 (Tex.App.-Houston [14th Dist.] 1999, orig. proceeding).

Waiver of Right to Enforce Contractual Arbitration Clause by substantial
Invocation of litigation with prejudice to opposing party

In their fifth issue, the Fogals assert that Stature waived its right to demand arbitration when it filed and later
abandoned the original arbitration proceedings.

"[A] party waives an arbitration clause by substantially invoking the judicial process to the other
party's detriment." Perry Homes v. Cull, 258 S.W.3d 580, 590-91 (Tex. 2008). Waiver is a legal
question for the court based on the totality of the circumstances, and asks whether a party has substantially
invoked the judicial process to an opponent's detriment, the latter term meaning inherent unfairness
caused by "a party's attempt to have it both ways by switching between litigation and arbitration to its own
advantage." Id. at 597.

The Fogals cite In re Bruce Terminix Company in support of their argument, but Terminix likewise asks whether
the appellee waives his right to demand arbitration by substantially invoking the judicial process to the
appellant's detriment. See 988 S.W.2d 702, 704 (Tex. 1998).

Stature never invoked litigation through the judicial process. Stature demanded arbitration, then failed to pay
the arbitration fee, resulting in the dismissal of the arbitration. After that, the Fogals filed suit. Stature
responded by filing a motion to compel arbitration. Thus, Stature has never sought to invoke the litigation
process. Instead, it has only sought arbitration for resolution of the disputes between it and the Fogals. Stature
has not attempted to "have it both ways by switching between litigation and arbitration." See Perry Homes, 258
S.W.3d at 597. We hold Stature did not waive its right to demand arbitration by previously demanding arbitration.

We overrule the Fogals' fifth issue.Trial Court's Denial of Motion to Vacate Award
Fogal v. Stature Construction (Tex.App.- Houston [1st Dist.] Jan. 29, 2009)(Alcala)
(confirmation of arbitration award, no waiver, challenges to arb award overruled, award confirmed, open courts,
motion to modify arbitration award under FAA)
AFFIRM TRIAL COURT JUDGMENT: Opinion by Justice Alcala
Before Justices Taft, Keyes and Alcala
01-07-00456-CV Mary Fogal and Robert Fogal v. Stature Construction, Inc., Jorge Casimiro, Tom Thibodeau
and Bernie Kane
Appeal from 80th District Court of Harris County
Trial Court Judge: Hon. Lynn Bradshaw-Hull  

OTHER CASES FROM THE HOUSTON COURTS OF APPEALS INVOLVING
CLAIMS OF ARBITRATION WAIVER

Chambers v. O'Quinn (Tex.App.- Houston [14th Dist.] Oct. 1, 2009)(Opinion on remand by Taft)
(right to arbitration of attorney-client / legal malpractice dispute not waived, conflict in arb agreement as to
whether TAA or FAA applies resolved in favor of Texas Arbitration Act, arbitration of legal malpractice claims)
AFFIRM TRIAL COURT JUDGMENT: Opinion by Justice Tim Taft   
Before Justices Taft, Keyes and Hanks   
01-04-01029-CV  Bob Chambers, et al. v. John M. O'Quinn, individually d/b/a O'Quinn & Laminack, and John M.
O'Quinn, P.C.   
Appeal from 61st District Court of Harris County
Trial Court Judge: Hon. John Donovan

In Re Bison Building Materials (Tex.App.- Houston [1st Dist.] June 26, 2008)(Radack) (opinion in pdf)
(arbitration mandamus, employment, workplace injury, no waiver of right to arbitrate found)
GRANT PETITION FOR WRIT OF MANDAMUS: Opinion by Chief Justice Radack  
Before Chief Justice Radack, Justices Alcala and Bland
01-07-00003-CV  In re Bison Building Materials, Ltd.
Appeal from 212th District Court of Galveston County
Trial Court Judge: Hon. Susan Elizabeth Criss

Denial of Motion to Compel Arbitration Affirmed - Motion Not Timely, Counterclaim Asserted
Nova Info Systems v. Nidhi (Tex.App.- Houston [14th Dist.] Mar. 29, 2007)(Anderson)
(denial of motion to compel arbitration affirmed)
A party to an arbitration agreement can waive its contractual right to compel arbitration of a dispute in two ways.  A party can waive
arbitration if that party delays seeking to compel arbitration and the delay results in prejudice; or if that party substantially invokes
the judicial process and the opposing party suffers prejudice as a result.  Prudential Securities, Inc. v. Marshall, 909 S.W.2d 896,
898-99 (Tex. 1995); Associated Glass, Ltd. v. Eye Ten Oaks Investments, Ltd., 147 S.W.3d 507, 514 (Tex. App.-San Antonio 2004,
no pet.).
Here, Nova filed its special appearance in April 2002.  Nova then waited approximately thirty months before it filed its motion to
compel arbitration in October 2004, soon after requesting and receiving a continuance of the original trial setting.  In the interim,
Nova filed its original answer with affirmative defenses as well as a counterclaim against appellee.  In addition, Mr. Sowada, as
well as the other defendants, were not parties to the arbitration agreement and did not join the motion to compel arbitration which,
if it had been granted, would have required appellee to pursue its claims simultaneously in two different forums.  These facts
support the trial court's findings that (1) Nova unreasonably delayed in filing its motion to compel arbitration; (2) Nova substantially
invoked the judicial process; and (3) appellee was prejudiced as a result of Nova's actions.  Accordingly, the trial court did not
abuse its discretion when it denied appellants' motion for new trial.  See In re E. I. DuPont de Nemours & Co., 136 S.W.3d at 223.
We overrule appellants; first issue.

TEXAS SUPREME COURT'S RESOLUTION OF ARB WAIVER CLAIMS

In Re CitiGroup Global Markets, Inc., No. 06-0886 (Tex. May 16, 2008)(per curiam)
(arbitration compelled, no waiver of right to arbitrate found)

Perry Homes v. Cull, No. 05-0882, 258 S.W.3d 580 (Tex. May 2, 2008)(Opinion by Scott A. Brister)
(arbitration award to consumers set aside by Texas Supreme Court on waiver theory)
Justice O'Neill delivered a concurring opinion in Perry Homes vs. Cull.
Justice Johnson wrote an opinion concurring and dissenting in part, which was joined by Chief Justice Jefferson
and Justice Green
Justice Willett delivered a separate opinion in Perry Homes v. Culls

Once a court has determined a valid arbitration agreement exists, the burden shifts to the party opposing
arbitration to raise an affirmative defense to enforcing arbitration. J.M. Davidson, Inc. v. Webster, 128 S.W.3d
223, 227 (Tex.2003); Bath Junkie Franchise, 246 S.W.3d at 364. A party waives an arbitration clause by
"`substantially invoking the judicial process to the other party's detriment or prejudice.'" In re Fleetwood Homes
of Tex., L.P., 257 S.W.3d 692, 694 (Tex.2008) (quoting Perry Homes v. Cull, 258 S.W.3d 580, 589-90
(Tex.2008)). There is a strong presumption against waiver under the FAA. In re Vesta Ins. Group, Inc., 192
S.W.3d 759, 763 (Tex.2006). Whether the facts found by the trial court amount to a waiver is a question of law
for the court. Id.

602 "[T]he test for determining waiver is two-pronged: (1) did the party seeking arbitration substantially invoke
the judicial process; and (2) did the opposing party prove that it suffered prejudice as a result?" Tex.
Residential Mortgage, L.P. v. Portman, 152 S.W.3d 861, 863 (Tex. App.-Dallas 2005, no pet.); see In re Serv.
Corp. Int'l, 85 S.W.3d 171, 174 (Tex.2002) (party alleging waiver must establish delay resulted in prejudice).
"Whether a party's conduct waives its arbitration rights under the Federal Arbitration Act is a question of law." In
re Bruce Terminix Co., 988 S.W.2d 702, 703-04 (Tex.1998). Waiver can be implied from a party's conduct but,
in close cases, the "strong presumption against waiver" should govern. Perry Homes, 258 S.W.3d at 593.

The Texas Supreme Court has recently noted it has never found a waiver merely by filing suit. Id. at 590.[5] The
Texas Supreme Court has further mandated that a court should not infer waiver based only on a minimal
amount of discovery. Bruce Terminix Co., 988 S.W.2d at 704. In this case, discovery has not yet begun. The
mere act of filing suit is insufficient to substantially invoke the judicial process.

In addition, there is insufficient evidence of prejudice. Green Tree did not file the motion to compel and plea in
abatement until approximately ninety days after filing suit. However, "[m]ere delay alone does not suffice to show
prejudice." Bath Junkie Franchise, 246 S.W.3d at 368; see Serv. Corp. Int'l, 85 S.W.3d at 174; see also Bruce
Terminix Co., 988 S.W.2d at 703-04. The Texas Supreme Court has refused to find prejudice even when the
parties had been litigating for two years, had incurred more than $200,000.00 in expenses, and had conducted
extensive discovery. See Vesta Ins. Group, Inc., 192 S.W.3d at 763. But see Miller Brewing Co. v. Fort Worth
Distrib. Co., 781 F.2d 494, 498 (5th Cir.1986) ("A party `may not invoke arbitration and yet seek pre-trial
discovery going to the merits. . . .'"). In contrast, Coyner incurred $1,500.00 in expenses and discovery has yet
to begin. Coyner has failed to show sufficient prejudice. The trial court erred in finding Green Tree waived its
right to arbitration.[6]

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