Opinion issued May 7, 2010
In The
Court of Appeals
For The
First District of Texas
NO. 01-09-00475-CV
IN RE MULTIFUELS, L.P., Relator
Original Proceeding on Petition for Writ of Mandamus
MEMORANDUM OPINION
By petition for writ of mandamus, relator, Multifuels, L.P., challenges the trial court’s[1] May 15, 2009 order denying arbitration. Because the claims in the underlying suit are within the scope of the arbitration agreement and because the real party in interest did not carry its burden to show waiver, we conditionally grant the petition for writ of mandamus.
Background
Jesse Arriaga, the real party in interest, began working for relator, Multifuels, in 2002 without a written employment agreement. In 2003, Arriaga signed an arbitration agreement that identified covered claims and excluded claims and read, in relevant part
Claims Covered by the Agreement
The Company and I mutually consent to the resolution by arbitration of all claims or controversies (“claims”), past, present or future, whether or not arising out of my application for employment, employment, or the termination of my employment that the Company may have against me or that I may have against any of the following: (1) the Company, (2) its officers, directors, employees, or agents in their capacity as such or otherwise, (3) the Company’s parent, subsidiary, and affiliated entities, (4) the benefit plans or the plans’ sponsors, fiduciaries, administrators, affiliates, and agents, and/or (5) all successors and assigns of any of them.
The only claims that are arbitrable are those that, in the absence of this Agreement, would have been justiciable under applicable state or federal law. The claims covered by this Agreement include, but are not limited to: claims for wages or other compensation due; claims for breach of any contract or covenant (express or implied); tort claims; claims for discrimination (including, but not limited to race, sex, sexual harassment, religion, national origin, age, marital status, medical condition, handicap or disability) work-related illnesses or injuries; claims for benefits (except claims under an employee benefit or pension plan that either (1) specifies that its claims procedure shall culminate in an arbitration procedure different from this one, or (2) is underwritten by a commercial insurer which decides claims); and claims for violation of any federal , state or other governmental law, statute, regulation, or ordinance, except claims excluded in the section of this Agreement entitled “Claims Not Covered by the Agreement.”
Except as otherwise provided in this Agreement, both the Company and I agree that neither of us shall initiate or prosecute any lawsuit or administrative action (other than an administrative charge of discrimination to the Equal Employment Opportunity commission, or a similar fair employment practices agency, or an administrative charge within the jurisdiction of the National Labor Relations Board) in any way related to any claim covered by this Agreement.
Claims Not Covered by the Agreement
Claims I may have for unemployment compensation benefits or workers’ compensation benefits are not covered by this Agreement. Also not covered are claims for injunctive and/or other equitable relief for unfair competition and/or the use and/or unauthorized disclosure of trade secrets or confidential information, as to which either party may seek and obtain relief from a court of competent jurisdiction.
That same year, Arriaga began working on a gas-storage-site project, called the Freebird Gas Storage Project. Multifuels later fired Arriaga, and Arriaga then made demands to Multifuels for payment of more than one million dollars in bonuses that he asserted were owed to him for work on the Free Bird Gas Storage Project. According to Multifuels, after his discharge, Arriaga made disparaging and false statements to third parties about Multifuels’ economic interests and disclosed confidential information and/or trade secrets to Multifuels’ competitors.
On December 16, 2008, Multifuels sued Arriaga for business disparagement, breach of fiduciary duty, a declaratory judgment that there is no enforceable contract between Multifuels and Arriaga and by which it owed Arriaga money, and a declaration that Multifuels had no obligation to pay Arriaga any additional monies for his work for Multifuels. Multifuels alleged that it had suffered pecuniary loss from the business disparagement and, in its prayer, sought actual and punitive damages from Arriaga. It also sought temporary and permanent injunctive relief to stop Arriaga from disclosing trade secrets or confidential information.
On February 2, 2009, Arriaga answered and countersued for breach of contract, quantum meruit, promissory estoppel, and fraudulent inducement relating to the unpaid bonuses that Arriaga contends Multifuels owes him.
The day after filing suit, on December 17, 2008, Multifuels filed a motion for expedited discovery to prepare for the temporary injunction hearing. Multifuels sought a deposition of Arriaga and others with knowledge of relevant facts and numerous documents relating to Arriaga’s actions and communication from the time of his termination forward. The record on mandamus does not reflect the trial court’s ruling on this motion, but Multifuels, in its reply, says that it was denied. According to Arriaga, in an effort to avoid unnecessary litigation, he agreed to the temporary injunction, agreed to present himself for deposition in an expedited fashion, and agreed to provide counsel with requested documents prior to the deposition, while Multifuels agreed to provide dates for the deposition of Multifuels’s principal, Randall Gibbs.
On February 6, 2009, the trial court issued an “Agreed Temporary Injunction” restricting Arriaga from disclosing trade secrets or confidential information belonging to Multifuels and which set the case for trial on July 20, 2009. Arriaga’s deposition was taken February 24, 2009, and the record indicates that Multifuels tendered responses to requests for production that included requests for documents relating to claims that Multifuels would later contend were subject to arbitration. The record also suggests that Arriaga responded to Multifuels’s interrogatories, additional requests for production, and a request for disclosure. The mandamus record does not contain any of Multifuel’s discovery requests or Arriaga’s responses,[2] other than some documents which Arriaga apparently sent as responses to some requests for production.
On March 16, 2008, after Arriaga had been deposed, and after he had responded to Multifuels’s interrogatories and requests for disclosure and production, Arriaga sent his own interrogatories and requests for production to Multifuels.
On April 13, 2009, Multifuels sent Arriaga a letter demanding arbitration on “its claims against . . . Arriaga,” and referenced its claims for declaratory relief and Arriaga’s claims for breach of contract. The letter did not mention Multifuels’s claims of pecuniary loss from the alleged business disparagement or its request for judgment in its favor for actual and punitive damages against Arriaga.
On April 16, 2009, Multifuels filed a motion to compel arbitration and to abate the case. On April 20, 2009, Multifuels responded to Arriaga’s discovery requests, objecting to each interrogatory and request for production on the ground that the claims were subject to arbitration. Multifuels asserted that it had only found the arbitration agreement on March 27, 2009, while searching its records to respond to Arriaga’s request for production of documents.
In its motion to compel arbitration, Multifuels stated:
1. This is a suit seeking declaratory relief that (1) there is no enforceable contract by and between the Company and Jesse Arriaga . . . by which Arriaga is owed any money and (2) the Company has no obligation to pay Arriaga any additional monies in connection with his employment at the Company. Arriaga has filed a counter-claim alleging breach of contract and generally that he is owed money in connection with his employment at the Company.
. . . .
2. . . . The Arbitration Agreement provides that claims for wages or other compensation due and claims for breach of any contract or covenant shall be determined by binding arbitration. . . .
. . . .
2. [sic] The claims which are the subject matter of this lawsuit fall within the scope of the Arbitration Agreement. Arriaga has admitted as much in his Original Answer and Original Counterclaim. Accordingly, Multifuels requests this Court to order this matter to arbitration pursuant to the Arbitration Agreement.
Multifuels’s request omitted any mention of its noncontractual claims, both (1) the request for injunctive relief related to disclosure of confidential information and trade secrets[3] and (2) its claim for business disparagement for which it asserted a pecuniary loss and asked for actual and punitive damages. It sought to abate the suit during the pendency of the arbitration proceedings.
Arriaga opposed the motion to compel. He noted that Multifuels had sought more than just the declaratory judgment asserted in the motion to compel, pointing out that Multifuels has also pleaded business disparagement and breach-of- fiduciary duties causes of action, in addition to requesting injunctive relief. He also noted that Multifuels had filed a motion for expedited discovery and related what had occurred up until that point in the suit. Arriaga argued that Multifuels had waived its right to arbitration. He asserted that Multifuels substantially invoked the judicial process by: (a) filing suit, (b) seeking a temporary injunction; and (3) “forcing Arriaga to: give his deposition; respond to interrogatories; and respond to requests for discovery.” He asserted that he had suffered prejudice “because Multifuels used the lawsuit to gain access to discovery” and “because he was forced to answer interrogatories” which were “a kind of discovery that [was] not available under the arbitration agreement.” He also asked for sanctions against Multifuels.
Multifuels replied to Arriaga’s response to the motion to compel arbitration, arguing, that as a matter of law, the actions Multifuels took in the underlying case did not constitute waiver and that Arriaga had not demonstrated prejudice. Multifuels asserted that a limited amount of discovery had taken place and noted that it had moved for arbitration after only about 10 weeks of litigation. Multifuels contended that it had only issued one set of interrogatories containing only 8 questions and had only taken one deposition.[4]
After a hearing, the trial court denied Multifuels motion to compel arbitration, without any explanation or comment in its order.
Multifuels filed a petition for writ of mandamus,[5] arguing that the trial court abused its discretion in denying the motion to compel arbitration based on waiver. Multifuels asserts that the three actions that Arriaga presented to the trial court to prove that Multifuels allegedly invoked the judicial process (filing suit, securing a temporary injunction, and conducting “limited” discovery[6]) were insufficient as a matter of law to prove waiver and that Arriaga did not prove prejudice because he provided no affidavits, no witness testimony, and no evidence of the allegedly prejudicial discovery requests or his deposition transcript. Multifuels also argued that Arriaga suffered no prejudice because the discovery conducted by Multifuels was also available in the arbitration proceeding because the Arbitration Agreement allowed for the parties to take the deposition of one individual and any expert witness, the right to propound requests for document production and “additional discovery may be had only where the arbitrator selected so orders.” Multifuels noted that the arbitrator had the authority to order interrogatories and so contended that Arriaga was not prejudiced by Multifuels having received his responses to their discovery in the litigation.
Multifuels filed a record on mandamus that included:
(1) Multifuels’s original and amended petition;
(2) Arriaga’s answer and counterpetition;
(3) the Agreed Temporary Injunction;
(4) Multifuels’s motion to compel arbitration and for abatement;
(5) Arriaga’s response in opposition to the motion to compel; and
(6) Multifuel’s reply to Arriaga’s response.
The record on mandamus does not include a reporter’s record from the hearing on Multifuels’ motion to compel arbitration nor did it include any of the discovery requests by Multifuels or responses by Arriaga. It also does not include a full transcript of the deposition of Arriaga, though it does provide a few pages of the deposition.
We ordered Arriaga to respond. He did so and also filed a supplemental record.[7] In his response, Arriaga contended that the discovery conducted by Multifuels before seeking arbitration was “substantially complete” given the nature of the case and its level of complexity. He argued that Multifuels’s actions as a whole (filing suit, securing a temporary injunction, and “conducting substantially complete discovery”) were sufficient to substantially invoke the judicial process. He also pointed out that, unlike cases relied upon by Multifuels, Multifuels was the plaintiff in this litigation, sought its relief from the court system, conducted and received the benefit of discovery, and only then moved for arbitration, before Arriaga could receive the benefit of discovery. Arriaga further argued that he was prejudiced by Multifuels’s substantial completion of discovery and asserted that Multifuels could not have received a similar benefit in arbitration because the agreement did not provide for interrogatories as a matter of right (but only as a matter of discretion by the arbitrator). Arriaga noted that Multifuels, in its motion for a stay of discovery in this Court, had stated that “different rules may be employed” in the trial system than in arbitration.
The supplemental record filed by Arriaga included:
(1) Multifuels’s motion for expedited discovery;
(2) letters between the parties regarding production requests, including one apparent response to requests for production that included emails and a power of attorney and contingent fee contract; and
(3) Multifuels’s emergency motion to stay discovery filed in this Court.
It did not include the discovery that Arriaga answered before Multifuels sought arbitration, other than the portions of responses to requests for production mentioned above, nor did it include a copy of the deposition given by Arriaga.
In its reply to Arriaga’s response, Multifuels asserted that it was Arriaga’s responsibility to provide evidence to the trial court that he was prejudiced and that Arriaga did not do so below and did not do so on mandamus. It also asserted that if each of the three bases which Arriaga contended were individually insufficient to constitute waiver, then they could not, considered all together be sufficient for waiver because “the whole cannot be greater than the sum of its parts.”
Mandamus Standard of Review
A. Mandamus as a Remedy
The arbitration agreement that Arriaga signed stated, “I understand and agree that the company is engaged in transactions involving interstate commerce and that my assignment/employment with the Company involves such commerce.” Therefore, the Federal Arbitration Act (“the FAA”) applies to this case. See 9 U.S.C. § 2 (2006). For orders entered prior to September 1, 2009,[8] “[a] party denied the right to arbitrate under the Federal Arbitration Act by a state court has no adequate remedy by appeal and is entitled to mandamus relief to correct a clear abuse of discretion.” In re L & L Kempwood Assocs., L.P., 9 S.W.3d 125, 128 (Tex. 1999) (per curiam).
B. Clear Abuse of Discretion
We review the denial of a motion to compel arbitration for abuse of discretion. In re D. Wilson Constr. Co., 196 S.W.3d 774, 780 (Tex. 2006) (original proceeding); Walker v. Packer, 827 S.W.2d 833, 839 (Tex. 1992) (orig. proceeding). A trial court abuses its discretion when it acts arbitrarily or unreasonably and without reference to any guiding rules or principles. See Walker, 827 S.W.2d at 839, 840. Because a trial court has no discretion in determining what the law is, which law governs, or how to apply the law, we review this category of discretionary rulings de novo. See id. at 840.
Applicability of the Arbitration Agreement
When a party asserts a right to arbitrate under the FAA, the question of whether the dispute is subject to arbitration is determined under federal law. Prudential Secs. Inc. v. Marshall, 909 S.W.2d 896, 899 (Tex. 1995). As a matter of federal law, any doubts concerning the scope of arbitrable issues are resolved in favor of arbitration, whether pertaining to the construction of the contract or a defense to arbitration. See In re Serv. Corp. Int’l, 85 S.W.3d 171, 174 (Tex. 2002). “In determining whether to compel arbitration, a court must decide two issues: (1) whether a valid, enforceable arbitration agreement exists and, (2) if so, whether the claims asserted fall within the scope of the agreement.” In re Tenet Healthcare, Ltd., 84 S.W.3d 760, 765 (Tex. App.—Houston [1st Dist.] 2002, orig. proceeding) (citing In re Oakwood Mobile Homes, Inc., 987 S.W.2d 571, 573 (Tex. 1999)). A court has no discretion and must compel arbitration if the answer to both questions is affirmative. In re Tenet Healthcare, Ltd., 84 S.W.3d at 765. “An order to arbitrate should not be denied unless it can be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.” Hou-Scape, Inc. v. Lloyd, 945 S.W.2d 202, 205 (Tex. App.—Houston [1st Dist.] 1997, no writ) (citing United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582–83, 80 S. Ct. 1347, 1353 (1960)). We review de novo whether an enforceable agreement to arbitrate exists. In re Kellogg Brown & Root, 80 S.W.3d 611, 615 (Tex. App.—Houston [1st Dist.] 2002, orig. proceeding). To determine if a claim falls within the scope of an arbitration agreement, we focus on the facts alleged, not the causes of action asserted. Hou-Scape, 945 S.W.2d at 205.
Reviewing the record, we note that, while Multifuels’s claim for injunctive relief based on disclosure of trade secrets was not arbitrable, under the plain language of the agreement, the remaining factual allegations pertaining to compensation that Arriaga contended Multifuels owed him as a result of his employment were clearly within the scope of the arbitration agreement’s plain language, as were Arriaga’s claims against Multifuels, and Multifuels’s business tort claims for which it sought actual and punitive damages. Multifuels’ motion to compel arbitration also speaks only of arbitrable claims. We conclude that the claims on which Multifuels sought arbitration were subject to the arbitration agreement.
We further note that Arriaga did not contest the validity and applicability of the arbitration agreement below. His only argument was that Multifuels had waived its right to compel arbitration. On mandamus, likewise, Arriaga limits his argument to waiver of arbitration. We turn then to analyzing that issue.
The Affirmative Defense of Waiver
In a mandamus review, generally the relator carries the burden to show that the trial court clearly abused its discretion. See Tex. R. App. P. 52. The real party in interest need not even file a response. Tex. R. App. P. 52.4 (“Any party may file a response to the petition, but it is not mandatory.”). However, a party opposing arbitration based on the affirmative defense of waiver has the burden to prove waiver. See, e.g., In re Fleetwood Homes, L.P., 257 S.W.3d 692, 695 (Tex. 2008) (original proceeding) (“Because [real party in interest] has failed to show that Fleetwood waived its contractual right to arbitration, we conditionally grant Fleetwood’s petition for writ of mandamus and direct the trial court to compel arbitration.”).
A. Waiver of right to arbitration
1. Waiver is a Question of Law
Whether a party has waived its right to arbitration is a question of law, which we review de novo. In re Fleetwood Homes, 257 S.W.3d at 694; Perry Homes v. Cull, 258 S.W.3d 580, 591–93 (Tex. 2008); Williams Indus., Inc. v. Earth Dev. Sys. Corp., 110 S.W.3d 131, 135 & n. 4 (Tex. App.—Houston [1st Dist.] 2003, no pet.) (explaining waiver under Texas General Arbitration Act, but explaining that “standard for determining waiver of the right to arbitration is the same under both the Texas General Arbitration Act and the Federal Arbitration Act.”). There exists a strong presumption against waiver in the law and “[a]ny doubts regarding waiver are resolved in favor of arbitration.” In re D. Wilson Constr., 196 S.W.3d at 783; see also Perry Homes, 258 S.W.3d at 589–90; Williams Indus., 110 S.W.3d at 135 (citing In re Bruce Terminix, 988 S.W.2d 702, 705 (Tex. 1998)).
2. Proof of waiver
Waiver of arbitration rights may be expressed or implied. In re Citigroup Global Mkts., 258 S.W.3d 623, 626 (Tex. 2008). Express waiver occurs when a party affirmatively indicates that it wishes to litigate the dispute. See id. Implied waiver occurs when the party “substantially invoke[es] the judicial process to the other party’s detriment.” Id. at 625 (quoting Perry Homes, 258 S.W.3d at 589–90). The party who asserts waiver of an arbitration clause bears a heavy burden. EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 90 (Tex. 1996).
A determination of whether waiver has occurred depends on an evaluation of the totality of the circumstances of the particular case. Perry Homes, 258 S.W.3d at 591–92. The Perry Homes court identified several nonexclusive factors that it and the federal courts have used when considering a question of waiver, some pertaining to substantial invocation of the litigation process and others to actual prejudice: (1) whether the movant was plaintiff (who chose to file in court) or defendant (who merely responded); (2) how long the movant delayed before seeking arbitration; (3) whether the movant knew of the arbitration clause all along; (4) how much pretrial activity related to the merits rather than arbitrability or jurisdiction; (5) how much time and expense has been incurred in litigation; (6) whether the movant sought or opposed arbitration earlier in the case; (7) what discovery would be unavailable in arbitration; (8) whether activity in court would be duplicated in arbitration; (9) when the case was to be tried; (10) when the movant knew of the arbitration clause; (11) how much discovery had been conducted; (12) who initiated the discovery that had been conducted; (13) whether the discovery that had been conducted related to the merits rather than arbitrability or standing; (14) how much of the discovery would be useful in arbitration; and (15) whether the movant sought judgment on the merits. Perry Homes, 258 S.W.3d at 591–92.
How much litigation conduct will be “substantial” depends on the context of the case. Id. Parties that “conduct full discovery, file motions going to the merits, and seek arbitration only on the eve of trial” may waive contractual rights to arbitration. In re Vestra Ins. Group, 192 S.W.3d 758, 764 (Tex. 2006). But the Perry Homes court recognized that sometimes only two of those three circumstances have been met and that how much discovery is “full discovery” depends on the context of the case. See Perry Homes, 258 S.W.3d at 590, 593. This Court has held that “[s]ubstantially invoking the judicial process can occur when the proponent of arbitration actively tried, but failed, to achieve a satisfactory result in litigation before turning to arbitration,” and that a party substantially invokes the judicial process when, after the lawsuit is filed, he takes specific and deliberate actions that are inconsistent with the right to arbitrate, such as moving for summary judgment or seeking a final resolution of the dispute. Williams Indus., 110 S.W.3d at 135.
A party opposing arbitration must also show detriment, i.e., that he has suffered actual harm as a result of the moving party’s substantial invocation of the judicial process. See id. Detriment means “inherent unfairness caused by ‘a party’s attempt to have it both ways by switching between litigation and arbitration to its own advantage,’” In re Fleetwood Homes, 257 S.W.3d at 694 (quoting Perry Homes, 258 S.W.3d at 597), that is, “the inherent unfairness in terms of delay, expense, or damage to a party’s legal position” when it is first forced by the other party to litigate an issue, and later required to arbitrate the same issue. Perry Homes, 258 S.W.3d at 597. “The prejudice on which courts focus includes such things as (1) the movant’s access to information that is not discoverable in arbitration and (2) the opponent’s incurring costs and fees due to the movant’s actions or delay.” Williams Indus., 110 S.W.3d at 135. Showing prejudice is generally an evidentiary burden which is placed on the party opposing the arbitration. Id.
3. Multifuels’s Actions
Before moving to compel arbitration, Multifuels: (1) filed suit for declaratory judgment on a contract claim, injunctive relief on a trade-secrets-disclosure claim, and for actual and punitive damages on business-tort claims; (2) moved for expedited discovery and deposition of Arriaga on the nonarbitrable claims; (3) served Arriaga with interrogatories and requests for production and disclosure, for which it received responses; (4) wrote to Arriaga’s attorney about document production on Arriaga’s claims; (4) filed an amended original petition; (5) deposed Arriaga; and (7) demanded arbitration by letter sent to Arriaga’s counsel. Contemporaneous with its motion to compel arbitration, Multifuels responded to Arriaga’s first set of interrogatories and first request for production, but Multifuels objected to each question or request, stating that the claims were subject to arbitration.
B. Proof of waiver and the adequacy of the record
Review of the mandamus record reveals that neither the record filed by Multifuels nor the supplemental record filed by Arriaga include a transcript of the hearing on the motion to compel arbitration, a complete transcript of Arriaga’s deposition, the complete discovery requested by Multifuels, or Arriaga’s complete responses to Multifuels’ discovery requests. The mandamus record shows that Multifuels filed suit, deposed Arriaga, and sought and received some written discovery, but does not show how much discovery remained to be completed, how much the discovery already conducted pertained to the merits or to issues of arbitrability or the non-arbitrable claims, or even how much discovery had been conducted. However, as Multifuels asserts that it did not discover the arbitration agreement until after discovery had been undertaken, it is reasonable to assume that the discovery requests pertained to the merits of the case. The record does not establish how many questions were posed in the interrogatories, how many requests for production were made, or how many documents were sought.[10] It also does not show what answers were given, or what documents produced (apart from the ones noted previously), or how what was answered or given would have prejudiced Arriaga. The record and arguments of both parties suggest that Multifuels did not seek additional discovery—and actually sought to stay discovery in the trial court—after it demanded and then moved to compel arbitration, albeit after Arriaga had already complied with Multifuels’s discovery and deposition requests.
Given the relative simplicity of the case, the fact that Multifuels instigated the litigation and immediately sought and received discovery (including Arriaga’s deposition)—some of which, at least, was clearly related to the merits of Arriaga’s claims—in a short period of time, lends support to the trial court’s conclusion that the “totality of the circumstances” demonstrated that Multifuels had substantially invoked the judicial process. The trial court was not required to believe Multifuels’s assertion that it did not know about the arbitration agreement—an agreement which was apparently created by Multifuels and would have presumably been in Arriaga’s employment file. See In re Yamaha Corp., No. 09-09-00313-CV, 2009 WL 2051661, at *1 (Tex. App.—Beaumont, July 16, 2009) (orig. proceeding [mandamus denied]) (memo. op.) (holding that, given nature of document, trial court could have reasonably disbelieved relator who asserted that it was not aware of arbitration clause until year after litigation began). Moreover, like a recent case decided by this Court in which we affirmed a trial court’s decision to refuse to compel arbitration, Multifuels sought arbitration only after it had benefitted from receiving discovery from Arriaga and when its own discovery to Arriaga was due. See Okorafor v. Uncle Sam & Assocs., Inc., 295 S.W.3d 27, 40 (Tex. App.—Houston [1st Dist.] 2009, pet. denied).
However, even if the “totality of the circumstances” demonstrates that Multifuels substantially invoked the judicial process in this case, thus meeting the first requirement of waiver under Perry Homes, this alone would not be sufficient for the trial court to have found waiver. There must also have been evidence that Arriaga suffered actual harm as a result of Multifuels’ use of the judicial process. See In re Bruce Terminix, 988 S.W.2d at 704 (“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 [of the invocation of the judicial process]”). In other words, Arriaga must have been harmed in terms of delay, expenses, or damage to his legal position as a result of being “forced” to be in the judicial system litigating the dispute for four months instead of being in arbitration from the start. See id.; Perry Homes, 258 S.W.3d at 597; Williams Indus., 110 S.W.3d at 135.
Arriaga argues that he was prejudiced because he responded to discovery requests which are not necessarily available in arbitration.[11] However, the record of does not include a complete copy of the discovery requests or Arriaga’s responses to them, or a copy of his deposition. Multifuels asserts that Arriaga presented no evidence of prejudice to the trial court apart from the attachments to his response in opposition to the motion to compel—which do not include a copy of the discovery requests or Arriaga’s responses or a copy of the deposition. Arriaga does not contradict this assertion. Instead, he states that he presented the trial court with “ample evidence,” but he does not identify any particular evidence that he presented to the trial court, nor does he cite to any evidence in the record before us as being given to the trial court. Arriaga argues only that the trial court was entitled to take judicial notice of its own records and should be presumed to have done so. He does not assert that the trial court took judicial notice of any particular document in the record. We do not have a copy of the trial court’s record before us and so we do not know what documents the trial court could have taken judicial notice of, if it so did. However, because Texas Rule of Civil Procedure 191.4 prohibits the filing of discovery requests, responses, or documents and tangible things produced in discovery, the record should not have contained any of those items apart from any attached to other motions, such as Arriaga’s motion in opposition to the motion to compel. See Tex. R. Civ. Pro. 191.4(a)(1), (2), (3), (b)(2), (c)(2). Therefore, in light of Arriaga’s response, we take as true Multifuel’s assertion that the only evidence that Arriaga offered to the trial court was the documents attached to Arriaga’s response in opposition to the motion to compel, which included a cover letter and a copy of the arbitration agreement, a fax cover sheet and Multifuels’ answers to Arriaga’s interrogatories and requests for production.[12] Thus neither the discovery requests to Arriaga from Multifuels, nor the responses by Arriaga to Multifuels, were before the trial court when it made its ruling.
“Knowing the amount and content of discovery is important in determining prejudice because ‘when only a minimal amount of discovery has been conducted, which may also be useful for the purpose of arbitration, the court should not ordinarily infer waiver based upon prejudice.’” Williams Indus., 110 S.W.3d at 139–40 (quoting In re Bruce Terminix, 988 S.W.2d at 704). Without a copy of the discovery requests to Arriaga and Arriaga’s responses, the trial court could not ascertain whether by Arriaga’s responses provided Multifuels “information that is not discoverable in arbitration.”[13] See Williams Indus., 110 S.W.3d at 135. The trial court could determine that Arriaga had not gained anything from discovery in the litigation because Multifuels had not responded to Arriaga’s discovery requests, but the trial court did not have any evidence before it that proved that Arriaga was harmed in terms of delay, expenses, or damage to his legal position by responding to Multifuels’s interrogatories. See Perry Homes, 258 S.W.3d at 597; In re Bruce Terminix, 988 S.W.2d at 704; Williams Indus., 110 S.W.3d at 135. The scant evidence actually presented to the trial court did not include any information demonstrating harm to Arriaga arising from delay, expenses, or damage to Arriaga’s legal position. On this record, Arriaga did not meet his burden to prove that he suffered actual harm as a result of Multifuels’ use of the judicial process. See Perry Homes, 258 S.W.3d at 597; In re Bruce Terminix, 988 S.W.2d at 704; Williams Indus., 110 S.W.3d at 135.
Based on the totality of the circumstances, we hold that Arriaga did not meet his burden below to show that Multifuels waived the arbitration agreement. See Perry Homes, 258 S.W.3d at 593; In re Bruce Terminix, 988 S.W.2d at 705. Accordingly, Multifuels has met its burden on mandamus to prove that the trial court abused its discretion denying Multifuel’s motion to compel arbitration.
Conclusion
We conditionally grant relator’s petition for writ of mandamus and we direct the trial court to vacate its May 15, 2009 order and grant relator’s motion to compel arbitration. We are confident the trial court will promptly comply, and our writ will issue only if it does not.
Laura Carter Higley
Justice
Panel consists of Justices Jennings, Higley, and Sharp.
Justice Sharp, dissenting with opinion to follow.
1 The underlying case is Multifuels, L.P. v. Jesse Arriaga, No. 2008-73857, in the 11th District Court of Harris County, Texas, the Honorable Mike Miller, presiding.
[2] Multifuels contends that these documents were also not filed with the trial court nor shown to the trial court.
[3] The request for injunctive relief was not arbitrable under the arbitration agreement and was functionally resolved by the issuance of the temporary injunction.
[4] The record on mandamus does not contain these interrogatories or deposition. It is clear from the record that there were also at least 18 requests for production, including requests for documents related to Arriaga’s counterclaims.
[5] We dismissed Multifuels’ first motion to stay discovery, and we later denied (J. Sharp, individually) its second “emergency” motion to stay discovery.
[6] The term “limited” is Multifuels’s characterization, not Arriaga’s.
[7] Under the Rules of Appellate Procedure, Arriaga had the opportunity to supplement the record to bring forward any evidence that was presented to the trial court but not included in relator’s record. Tex. R. App. P. 52.7(b) (“After the record is filed, relator or any other party to the proceeding may file additional materials for inclusion in the record.”).
[8] See Tex. Civ. Prac. & Rem. Code Ann. § 51.016 (Vernon Supp. 2009) (providing for interlocutory appeal of order denying motion to compel arbitration under Federal Arbitration Act); In Re Helix Energy Solutions Group, Inc., 303 S.W.3d 386, 395 n.7 (Tex. App.—Houston [14th Dist.] 2010) (original proceeding).
[10] Multifuels contends in its petition for writ of mandamus that it served requests for disclosure, requests for production (33) and interrogatories (8) on Arriaga and Arriaga responded to “some of the same” and “produced some responsive documents.” There is nothing in the record that actually establishes that that was the total discovery by Multifuels or what the answers were that it received and how that would affect the position of the parties or the lawsuit.
[11] Multifuels erroneously argues that, because the arbitrator could order interrogatories and other discovery, Arriaga was not prejudiced by not being able to receive responses to its discovery requests in the litigation, as Multifuels had. This same argument was rejected by the Texas Supreme Court in Perry Homes, the court noting that arbitrators have almost unbridled discretion, so no one could predict what they could do in advance. Perry Homes v. Cull, 258 S.W.3d 580, 599 (Tex. 2008). Multifuels’s comments in its motion to stay discovery pending the mandamus (remarking that the rules as to discovery might be different in the courts than in arbitration) also undermine its arguments that Arriaga could not show prejudice because he could receive discovery in arbitration. See also Citizens Nat’l Bank v. Bryce, 271 S.W.3d 347, 359 (Tex. App.—Tyler 2008, no pet.) (interlocutory appeal and orig. proceeding [mandamus denied]).
[12] Arriaga has provided a supplemental mandamus record which includes some correspondence between the attorneys and some apparent responses by Arriaga to request for production by Multifuels. Multifuels asserts that Arriaga did not file or present those documents to the trial court and so they were not part of the record in the case. Arriaga has not disputed this assertion and has not asserted that he presented those documents to the trial court. Therefore we may not consider those documents in determining whether the trial court abused its discretion in finding waiver. See Sabine OffShore Serv., Inc. v. City of Port Arthur, 595 S.W.2d 840, 841 (Tex. 1979) (original proceeding) (on mandamus, appellate court could not consider evidence that was not part of trial-court record, except to decide its own jurisdiction); Methodist Hosps. v. Tall, 972 S.W.2d 894, 898 (Tex. App.—Corpus Christi 1998, no pet.) (“It is axiomatic that an appellate court reviews actions of a trial court based on the materials before the trial court at the time it acted.”) However we note that, even if we could consider such documents, they do not include the interrogatories or responses that Arriaga claims were prejudicial, and what is in the supplemental record is insufficient to establish actual harm.
[13] For this reason, this case is distinguishable from our decision in Okorafor. The record before us in that case established that, by answering the defendants’ discovery requests, the plaintiff had provided the defendants with the benefit of discovery relevant to the case on the merits, as well as the defendants’ counterclaims and affirmative defenses, to the extent that the defendants were “familiar” with the plaintiff’s case on the merits and on the defendants’ counterclaims and affirmative defenses. See Okorafor v. Uncle Sam & Assocs., Inc., 295 S.W.3d 27, 41 (Tex. App.—Houston [1st Dist.] 2009, pet. denied). By contrast, in the case before us, the mandamus record does not establish how “familiar” Multifuels became with Arriaga’s case from Arriaga’s responses to discovery—in fact, we do not actually know from this record whether, and to what extent, Arriaga even fully responded to the requests, whatever they were. Without knowing the substance of the requests, or Arriaga’s responses, we cannot say, on this record, that, because of Arriaga’s responses to Multifuels’s discovery requests, Multifuels became so “familiar” with Arriaga’s case on the merits, as was the plaintiff in Okorafor, so as to make such knowledge prejudicial to Arriaga, or that such knowledge could not have been obtained in arbitration. See Williams Indus., 110 S.W.3d at 135.