ACCEPTED
05-18-00140-CV
FIFTH COURT OF APPEALS
DALLAS, TEXAS
5/21/2018 12:48 PM
LISA MATZ
CLERK
Case No. 05-1 8-00140-CV
FILED IN
5th COURT OF APPEALS
IN TFIE COURT OF APPEALS FOR TFIE FIF'TH DISTRICT DALLAS,
OF TEXAS TEXAS
5/21/2018 12:48:06 PM
LISA MATZ
Clerk
ARCHER WESTERN CONSTRUCTION,LLC
Appellant
V
SOUTH TEXAS INNOVATIONS, LLC
Appellee
On appeal from the 193'd Judicial District Court of Dallas County, Texas
Ihe Honorable Carl Ginsberg presiding
APPELLANTOS REPLY BRIEF
Paulo Flores
State Bar No. 07164447
pflores@pecklaw.com
Timothy D. Matheny
State Bar No. 24000258
tmatheny@pecklaw.com
Tracey L. Williams
State Bar No. 24031954
twilliams@pecklaw. com
PECKAR & ABRAMSON P.C.
8080 N. Central Expwy.,
Suite 1600, LB 65
Dallas, Texas 75206
214-523 -51 00 (telephone)
21 4-521 -l 406 (facsimile)
IDENTITIES OF PARTIES AND COUNSEL
Parties
Archer Western Constructiono LLC
Appellant/Defendant/Cros s-Plaintiff/Cross-Defendant
South Texas Innovationso LLC
App e 1I e e/ D e fen d antlC ro s s - P IaintiffI Cro s s - D e fend ant
The Hanover Insurance Company
Interested Party
Counsel
Archer Western Construction, LLC
Trial and Appellate
Paulo Flores
State Bar No. 07164447
pflores@pecklaw.com
Timothy D. Matheny
State Bar No. 24000258
tmatheny @pecklaw.com
Tracey L. Williams
State Bar No. 24031954
twi I I i ams @p ecklaw. c om
PECKAR & ABRAMSON P.C.
8080 N. Central Expwy.,
Suite 1600, LB 65
Dallas, Texas 75206
(2t4) s23-sr00
1
South Texas Innovations, LLC and The Hanover Insurance Company
Trial and Appellate
Seth I. Rubinson
State Bar No. 24053908
srubinson@rubinsonlaw. com
RUBINSON LAW
1135 Heights Blvd.
Houston, Texas 77008
(832) 48s-48e9
fDamian W. Abreo - Mr. Abreo has withdrawn as counsel for STI and Hanover
State Bar No. 24006728
dabreo@jdkglaw.com
JOHNSON DELUCA KURISKY & GOULD
4 Houston Center
l22lLamar St., Suite 1000
Houston, Texas 770I0
(713) 6s2-2s2sl
Appellate only:
Nancy H. Elliott
State Bar No. 08701240
ne I I i ott@ zflaw ftrm. c om
ZABEL FREEMAN
1135 Heights Blvd.
Houston, Texas 77008
(7 t3) 802-ert7
1l
TABLE OF CONTENTS
IDENTITIES OF PARTIES AND COTINSEL ... i
INDEX OF AUTHORITIES .iv
REPLY 1
I Preliminary Matters ........., 1
A. Standard of Review 1
B. Appellee cannot use evidence in this appealthat was not
presented to the Trial Court, and all such evidence should
be disregarded by this Court. 2
il. Appellee cannot validly make arry argument that Archer
expressllz waived the arbitration clause 2
A. There is no evidence whatsoever of an express waiver 2
B. There is no waiver by Archer of its waiver argument 4
C. The "evidence" presented, allegedly in support of
Appellee's argument of express waiver clearly does not
rise to the level of express 6
II. Archer did not substantially invoke the judicial process so as to
impliedly waive the arbitration clause. 6
m. Appellee has not shown legal prejudice sufficient for a finding
of an implied waiver of the arbitration clause ...16
ry Appellant hereby withdraws its Issue No. 1 - The trial court
erred (or, alternatively, abused its discretion) in denying Archer
Western's Motion to Stay the Proceeding and to Compel
Arbitration as the arbitration clause itself prohibits waiver.......... . 18
PRAYER . 18
CERTIFICATE OF SERVICE ......... .20
CERTIFICATE OF COMPLIANCE .20
111
INDEX OF AUTHORITIES
Page(s)
Cases
Apollo Theater Found., Inc. v. W. Int'l Syndication,
No. 02 CIV 10037,2004 U.S. Dist. LEXIS 11110 (S.D.N.Y. June
a
2r,2004) J
BBX Operating, LLC v. Am, Flourite, Inc.,
No. 09-17-00245-CV, 2018 WL 651276 (Tex. App.- Beaumont
February l, 201 8, no pet.)............. 3,14
In re Bruce Terminix Co.,
988 S.W.2d702 (Tex. 1998)...... 4
Cent. Educ. Agency v. Burke,
711 S.W.2d7 (Tex. 1986).... 5
Ellman v. J.C. Gen. Contractors,
419 S.W.3d 516 (Tex. App. - El Paso 2013, no pet.) .15, 16
In re Fleetwood Homes of Tex.,
257 S.W.3d 692 (Tex. 2008)...... ....4, l0
G.T. Leach Builders, LLC v. Sapphire V.P., L.P.,
458 S.W.3d 502 (Tex. 2015)...... 4,8,10, 11
Garcia v. Huerta,
340 S.W.3d864 (Tex.App.-San Antonio 2011, pet. denied)...... ......3
Greystar, LLC v. Adams,
426 S.W.3d 861 (Tex. App. - Dallas 2014, no pet) .2
Henry v. Cash Biz, LP,
No. 16-0854,2018 WL 1022838,2018 Tex. LEXIS 164, _S.W.3d
_ (Tex. F eb. 23, 20 1 8)...... 4
Hogg v. Lynch, Chappell & Alsup, P.C.,
480 S.W.3d767 (Tex. App. - El Paso 2015, no pet.)
1V
Okorafor v. (Jncle Sam & Assocs.,
295 S.W.3d27 (Tex. App. - Houston [1st Dist.], no pet.). .............3,15
Perry Homes v. Cull,
2s8 S.W.3d 580 (Tex. 2008).......... r,3, 4,7 , ll, 13, 16
Prof'l Advantage Sofnuare Solutions, Inc. v. West Gulf Mar. Ass'n Inc,,
No. 01-15-01006-CV, 2016 WL 2586690 (Tex. App.- Houston [1st
Dist.l May 5,2016, no pet.) I4
Triton Container Int'1, Ltd. v. Baltic Shipping Co,,
Civil Action No. 95-0427 CIW 95-2229,1995 WL 729329,1995
U.S. Dist. LEXIS 18213 (E.D.La. Dec.7,1995), affd,95 F.3d 54
(5th Cir.1996)...... .........3
Tuscan Builders, LP v. 1437 SH6 L.L.C.,
438 S.W.3d7I7 (Tex. App. - Houston [1st Dist.] 2014, no pet.).... 14
In re Vesta Ins. Group, Inc.,
192 S.W.3 d759 (Tex.2006) (p"t curiam) 10
Wisennant v. Arnett,
339 S.W.3d920 (Tex. App. - Dallas 2011, no pet.) 5
Other Authorities
Tex. R. App. 38.1 5
V
REPLY
I. Pnnr-rnananv MarrERS:
A. SraNoann or Rnvrnw
"A reviewing court should defer to a trial court's factual findings if they are
supported by the evidence, but ultimately the question whether a waiver has
occurred is a question of law, which an appellate court reviews de novo."l
Under a proper abuse-of-discretion review, waiver is a question of law
for the court, and we do not defer to the trial court on questions of
law. We do defer to a trial court's factual findings if they are
supported by evidence, but there was no factual dispute here . . . This
leaves only the conclusion whether such conduct constitutes
prejudice, a legal question we cannot simply abandon to the trial
court.2
In the case before this Court, there were no findings of fact by the trial court
whatsoever. In fact, the sum total of the trial court's Order, with respect to the
Motion to Compel Arbitration, was: "ON THIS DAY came to be heard Archer
Western's Motion to Compel Arbitration. Having taken the matter under
advisement, the Court herby DENIES the Motion to Compel Arbitration." As
such, there are no trial court findings of fact for this Court to consider, and it
reviews the trial court's action de novo, as a matter of law, for abuse of discretion.
t Hoggv. Lynch, Chappell & Alsup, P.C.,480 S.W.3d 767,780 (Tex. App. - El Paso
2015, no pet.)
t Perry Homes v. Cull,258 S.W.3d 580, 598 (Tex. 2008).
1
B. Appnr-r,nE cANNor usn EVIDENCE IN THIS AppBAL THAT wAs Nor
IRESENTED To tnn TRr,ql, Counr, AND ALL sucH EvTDENCE sHouLD
BE DTSREGARDED BY THrs Counr.
The evidence submitted by South Texas Innovations, LLC ("Appellee") for
its argument of waiver consisted of the 15 exhibits to Appellee's Response and
Opposition to Archer Western Construction's Motion to Stay and Compel
Arbitration ("Response"), and the testimony at hearing of Damien Abreo and Gary
Haymond, as found in the Reporter's Record. All other evidence presented to this
Court by Appellee, including the Supplemental Clerk's Record submitted by
Appellee to this Court on April 18, 2018, with the exception of those parts
duplicative of the Response exhibits, should be disregarded and not considered by
this Court. Any items not presented to the trial court will not be considered by a
court of appeals in its scope of review of the trial court's action.3
il. Appnr,r,nn cANNor vALIDLy MAKE ANy ARGUMENT THAT ARcrrnn
EXPRESSLY WAIVED THB ARBITRATION CLAUSE.
A. There is no evidence whatsoever of an express waiver
There was never any evidence of express waiver presented by Appellee to
the Trial Court. (In fact, as addressed next, Appellee did not even raise the issue of
express waiver at the trial court level.) There could be no evidence of express
3
Greystar, LLC v. Adams,426 S.W.3d 861, 865 (Tex. App. - Dallas 2014, no pet.)("It is
well-established an appellate court may not consider matters outside the record, which includes
documents attached to a brief as an exhibit or an appendix that were not before the trial court.");
See also Hogg,480 S.W.3d at787, n. 10.
2
waiver, as none exists, as supported by one of Appellee's own cited cases. As
stated by Appellee in its Brief: "Express waiver arises when a party affirmatively
indicates that it wishes to resolve the case in the judicial forum, rather than through
arbitration."a A case relied on by Appellee in its Brief amplifies on this, and
makes clear that the word "express" means what it says - express:
Aparty makes an express waiver when it 'affirmatively indicates that
it wishes to resolve the case in the judicial forum, rather than through
arbitration.' Ohorafor v. (Jncle Sam & Assocs., lnc.,295 S.W.3d 27,
39 (Tex.App.-Houston [1st Dist.] 2009, pet. denied); see Triton
Container Int'L, Ltd. v. Baltic Shipping Co., CIY.A. 95-0427, 1995
WL 729329, at *3 (E.D.La. Dec. 8, 1995), aff d, 95 F.3d 54 (5th
Cir.I996) (party's communication to opposing counsel expressly
stating that it intended to settle the case and did not intend to seek
arbitration, was an express waiver of the right to arbitrate); Garcia v.
Huerta, 340 S.W.3d 864, 867 (Tex.App.-San Antonio 2011, pet.
denied) (court found express waiver where party affirmatively stated
in settlement agreement that it was waiving its right to enforce an
5
arbitration agreement).
As the cases cited in Hogg make clear - for express waiver to occur, there has to be
an express statement affirmatively stating something to the effect of "I waive
arbitration." Just for reference, in Perry Homes v. Cull, the only Texas Supreme
a
Appellee's Brief atpg.18, citing, Okorafor v. (Jncle Sam & Assocs.,295 S.W.3d 27,39
(Tex. App. - Houston ;1't Dist.1, no pet.); see also BBX Operating, LLC v. Am. Flourite, Inc.,
No.09-17-00245-CV,2018 WL 651276, at *15 (Tex. App. - Beaumont February 1,2018, no
pet.); and Apollo Theater Found., Inc. v. W. Int'l Syndication, No. 02 CIV 10037, 2004 U.S.
Dist. LEXIS 11110, at *8 (S.D.N.Y. June2I,2004).
t Hogg,480 S.W.3d at78l.
a
J
Court case finding a waiver of an arbitration clause,6 even a 79 page objection to
arbitration was not found to be an express waiver of the arbitration clause; the
Texas Supreme Court still underwent the implied waiver analysis: "But under the
totality-of-the-circumstances test, discovery is not the only measure of waiver
Here, when the warranty defendants initially moved to compel arbitration, the
Culls filed a 79-page response opposing it . In our case, there was no
evidence of express waiver argued or submitted by Appellee to the trial court, nor
could there be - no such evidence exists.
B. There is no waiver by Archer of its waiver argument
Appellee argues, at page 20 of its Brief, "Archer Western has waived any
complaint about its express waiver of arbitration by failing to raise it in the trial
court and its brief." Not only does this argument have no merit whatsoever,
Appellee never argued express waiver to the trial court, either in its Response or in
its oral argument to the trial court. Nowhere in Appellee's Response, nor in its
argument to the Court, does Appellee ever refer to, or invoke, express waiver. A11
u
In Hurry v. Cash Biz, LP,2018 WL 1022838,2018 Tex. LEXIS 164, (Tex.
-S.W.3d -, have
Feb.23,2018), a case cited in Appellee's Response, the Texas Supreme Court noted, "We
declined to conclude that the right to arbitrate was waived in all but the most unequivocal of
circumstances." The Texas Supreme Court then cites to its Perry Homes opinion where it did
find a waiver; and then to G.T. Leach Builders, LLC,458 S.W.3d at 5l2,In re Fleetwood Homes
of Tex., 257 S.W.3d 692,694 (Tex. 2008), and In re Bruce Terminix Co.,988 S.W.2d 702,703-
04 (Tex. 1998), as cases in which it did not find waiver. The Texas Supreme Court could have
equally said that only one case exists in which it concluded that the right to arbitrate was waived.
7
Pnrry Homes,258 S.W.3d at596.
4
of Appellee's argument, both in its Response,t as well as in its argument to the trial
court,e addressed the concept of implied waiver, specifically: (1) substantial
invocation of the judicial process; and (2) prejudice to Appellee. As Appellee
states in its own Response, "It is well established that 'fi]ssues not expressly
presented to the trial court may not be considered on appeal as grounds for
reversalf.1r,10 11 is Appellee who has never argued express waiver.
It is clear from the Reporter's Record that all the trial court judge considered
was implied waiver. The judge himself stated: "I think we're just talking about
1 1
invocational process."
In any event, Appellant is appealing the trial court's one sentence denial of
its Motion to Compel Arbitration. There is no reason to, nor is Appellant obligated
to, separate out and address different subsets of waiver.
8
In fact, a word search reveals the word "express" does not appear in STI's Response.
e
All references by Mr. Rubinson in the Reporter's Record are to "substantial invocation"
and "prejudice;" he never even uses the word "express," much less does he argue an express
waiver, or present any evidence whatsoever of an express waiver. Mr. Rubinson mentions
substantial invocation of the judicial process at RR pg. 7,line 16; pg. 8, line s 3-4; p9.9, lines 5-
6and16;pg.27,line25;andpg.29,line5. Heonlymentions"prejudice"once,atRRpg.29,
Iine 7, but at least he mentions it and clearly intended to put on evidence of prejudice (although it
was clear insufficient). And, as stated above, "express waiver" is never even mentioned.
r0
Respotrre atpg.35, (citing Cent. Educ. Agencyv. Burke,711 S.W.2d 7,8 (Tex. 1986);
see also Whisennant v. Arnett,339 S.W.3d 920,926 (Tex. App. - Dallas 2011, no pet.); and Tex.
R. App. 38.1.
r1
RR atpg.15, lines l2-I4. (It is clear from RR at pg. 7, lines 10-16 that the trial judge
used "invocational" as shorthand for "substantial invocation of the judicial process.")
5
C. The ooevidence" presented, allegedly in support of Appelleeos
argument of express waiver clearly does not rise to the level of
express waiver:
If somehow this Court still believes that there is any issue in this case
regarding express waiver; this is the sum total of Appellee's "evidence," as argued
in its Brief to this Court, of express waiver:
Certainly. I had initiated two separate lawsuits on behalf of South
Texas Innovations. One lawsuit was against Lennar MultiFamily
Communities, which is the entity developing the projects that forms
the basis of this suit. The other was against Archer Western
Construction, the general contractor.
In both cases, opposing counsel filed motions to compel arbitration,
motions to stay. We had a discussion, and in the course of that
discussion, it was agreed -- and please allow me to use that word in
the loose sense, not a Rule 11 or a formal contract -- but it was agreed
between us that I would nonsuit the arbitration. And there's a number
of reasons for that. I would then move to consolidate the case against
Archer into the pending litigation brought by Beaird. And the
statement was, we won't move this to arbitration as long as we can get
everything resolved in the context of one lawsuit. Does that answer
your question?12
It is self-evident - this is not an express waiver of an arbitration clause
il. AncTTnn DID NoT SUBSTANTIALLY INVOKE THE JUDICIAL PRoCESS So AS TO
IMPLIEDLY WAIVE THE ARBITRATION CLAUSE.
Appellant agrees with Appellee that the applicable standard for this Court to
consider is the "Totality of the Circumstances Test" announced by the Texas
t'RR Il-12 - testimony by Appellee's former counsel, Damian Abreo, to the trial courl.
6
Supreme Court in Peruy Homes v. Cull.t3 This has been thoroughly briefed by the
Parties, but a few points in reply to Appellee's Brief:
Appellee's statement at page 28 of its Response, that "Archer purposely
delayed in seeking arbitration until after the trial court denied its motion for
continuance and shortly before the trial setting" is absolutely inaccurate. The
trigger here, which is conveniently ignored by Appellee, was the mediation date.
On January 9,2018, mediation was held on Beaird's claims, pursuant to order of
the trial court, and all of Beaird's claims were settled, leaving only the claims
between Archer Western and STI for adjudication. Therefore, on January 22,
2018, Archer Western filed its Motion to Stay the Proceeding and to Compel
Arbitratiotrto 1th. "Motion to Compel Arbitration") that is the subject of this
appeal. Subsequently, on February 27, 2018, the trial court signed the Agreed
15
Order to Dismiss Certain Claims and Parties with Prejudice. This was the point
in the life of this lawsuit when all that existed were claims subject to the arbitration
clause. This is consistent, for example, with why pleadings, etc. filed after the
consolidation did not have a statement saying they were subject to the Motion to
Arbitrate.
t3
Pnrry Homes,258 S.W.3d at59I-592.
to
CR at pages 244 - 256.
t5
CSR at pages 40 - 43.
7
With respect to the counterclaim referenced by Appellee in its Brief, at page
25: (l) As cases cited in Appellee's own Brief state: "the filing of defensive
pleadings, including mandatory or compulsive counterclaims, made in response to
a party's pleadings, do not necessarily waive arbitration."16 (2) As pointed out in
Appellant's Brief, the trial court granted the relief requested by Appellant - it put a
stop to the serial lien filing engaged in by Appellee that was interfering with
funding for the construction project.lT This is clearly not a case in which Appellant
sought judicial relief that was denied and then sought to switch to a different forum
- arbitration. (3) Appellee, surely, cannot engage in wrongful conduct that is
subsequently restrained by the trial court,l8 and use Appellant's protective and
defensive response as a basis for claiming waiver.
With respect to Appellee's argument that Appellant sought extensive merits-
based discovery from STI, this is simply not borne out by the record. The
discovery listed at page 27 of Appellee's Response was largely defensive and
related to Beaird Drilling's claims, as detailed at pages 28 and 29 of Appellant's
'u Hogg,480 S.W.3d at784 (Tex. App. - El Paso 2015, no pet.) (citing G.T. Leach
Builders,458 S.W.3d at 512-13).
tt To the extent the Court considers the supplemental record filed by Appellee, the
Temporary Restraining Order entered by the trial court on December 4,2077 and the Agreed
Temporary Injunction Order entered by the trial court on December 14,2017 are part of such
record - 2nd Supp. CR217-19 and228-89 (none of which were presented to the trial court, in the
Response or at hearing).
r8
To the extent the Court considers the supplemental record, see 2nd Supp. CF*2I7-I9
and228-89.
8
Brief. The legal standards are addressed in Appellant's Brief, as well as further
addressed below using Appellee's own cases.
Although not hugely material, Appellee's timing calculation - a delay of 5-
l12 months - is actually inaccurate. Appellee calculates its timing from the date it
filed suit, JuIy 7,2017 . The proper calculation should be when Appellant appeared
in this case - August 28,2017.te Appellant filed its Motion to Compel Arbitration
on January 22,201820 - less than five months after answering and appearing in this
suit.2r Acknowledging that length of delay standing alone is not dispositive, only
one of the cases cited by both Parties to this Court even contemplates such a short
time peri od - Hogg v. Lynch, Chappett & Alsup.2' Ar detailed below, Hogg had
extreme facts - Ms. Hogg perjured herself to the trial court and moved to abate for
arbitration on the eve of suffering death penalty type sanctions from the trial court.
As noted, even in Hogg:
LCA contends that it was prejudiced by Ms. Hogg's delay in seeking
arbitration, pointing out that Ms. Hogg had been aware of the
existence of the arbitration clause from the outset of litigation, yet
waited to file her motion to compel arbitration three months after the
parties began discovery, and less than four months before the trial
te
csR atpg.12.
20
CR at pages 244 - 256.
" RR atpg. 13, lines 19-25; and pg. 14, lines 1-16. Of course, even that is
Snn, e.g.,
irrelevant - the Motion to Compel Arbitration was filed within two weeks of the triggering event
- the mediation, and was actually filed even before the dismissal of the Beaird Drilling claims.
" Hogg,480 S.W.3d 767.
9
setting. We do not, however, find that this approximate three-month
delay, standing alone, prejudiced LCA's case. In fact, various courts
have found that much longer delays are not sufficient to cause
prejudice to the opposing party's case. See, e.g., In re Fleetwood
Homes of Tex., L.P.,257 S.W.3d 692, 694 (Tex.2008) (per curiam)
(eight-month delay);In re Vesta Ins. Group, Inc., 192 S.W.3d 759,
763 (Tex.2006) (per curiam) (two-year delay).z3
As covered thoroughly in Appellant's Brief, typically the delays addressed by the
Courts are far in excess of five months, almost always over a year, and often in
excess ofa year and a half.
Finally, as to this issue, a survey of the Courts of Appeal cases cited by
Appellee in its Brief where a finding of waiver was found or sustained, actually
push toward a finding by this Court that under the Totality of the Circumstances
Test there has clearly not been a substantial invocation of the judicial process by
Appellant, nor a sufficient showing of prejudice to Appellee, such as to overcome
the heavy burden to show an implied waiver of the arbitration clause. We start
with the incredibly thorough Hogg opinion, which has already been cited heavily
in this Reply.
Key points from Hogg follow:
a As noted above, "the filing of defensive pleadings, including
mandatory or compulsive counterclaims, made in response to a party's
pleadings, do not necessarily waive arbitration."2a
23
Id. at7gl.
2a
Id. at 784 (citing G.T. Leach Builders,458 S.W.3d at 512-13)
10
a "Ms. Hogg correctly points out that there are multiple cases in which
the parties engaged in far more extensive discovery for far longer
periods of time, yet the courts in those cases found that arbitration had
not been waived. In fact, the Supreme Court recently chronicled
several of its holdings in which it declined to find a waiver despite
rather extensive and prolonged discovery periods ranging from six to
nineteen months."25
o "Although how long a party has engaged in pretrial activities is one
factor to be considered in determining whether arbitration has been
waived, a court should not look simply to the number of days between
the initiation of litigation and the request for arbitration; instead, the
court should consider how extensive the discovery was in the context
of the facts of a particular case."26
o "Ms. Hogg's own attorney admitted in his sworn affidavit that at least
half of the discovery conducted went to the question of the
enforceability of the contingent fee agreement, which clearly went to
the merits of this ease."21
o "While we cannot conclude that the parties in this case conducted 'full
discovery,' we are able to conclude that the parties had conducted a
substantial amount of discovery with regard to this single-issue case,
and were likely nearing the end of the discovery proceedings when
Ms. Hogg filed her motion to compel arbitration. Once again,
however, this does not end our analysis, as the next factor is perhaps
the most important factor in our determination whether Ms. Hogg
substantially invoked the judicial process [--] Ms. Hogg Willingly
Engaged in Litigation Until She Faced an Adverse Ruling."28
2s
Id. at788 (citing G.T. Leach Builders,458 S.W.3d at 514-15).
'6 Id.lcitingCitizens Nat'l Bank 271 S.W.3d at 355 (citing Percy Homes,258 S.W.3d at
590, 593)).
" Id. at7B9.
'8 Id.
11
a In readingHogg, it is crystal clearthis was the crux of the case - the
reason why both the trial court and the El Paso Court of Appeals
found a waiver of the arbitration clause. In the interest of brevity, the
facts will be summarized here, but they can be found at page 777 of
the Hogg opinion. In summary, Ms. Hogg responded to a Request for
Production that no recordings between her and the Defendant (the
party opposing arbitration) existed; she so testified under oath to the
trial judge in a motion to compel hearing; however, she had (probably
accidentally) sent an email to Defendant stating: "Hey do not mention
that i recorded every meeting with those attys in midland. Idk if its
legal. And u def dont want them knowing i recorded mediation! My
new attys will deal with it please dont even tell ur dad! No one needs
to know! Love u dont worry! Focus on u sweet baby girl. Say ur
prayers. It wil all come out in the end. I only appear to be stupid son! I
love yall! George is watching over us! Hugs! Thank you, DGHogg.u2e
Probably not surprisingly, when on the eve of being sanctioned Ms.
Hogg filed a Motion to Abate for Arbitration, such Motion was
denied, and the denial was affirmed by the El Paso Court of Appeals.
o It is clear from the Hogg opinion that the overarching basis for the
Court's holding was the inescapable conclusion that Ms. Hogg was
trying to avoid soon to be placed sanctions. "In the present case, Ms.
Hogg was willing to participate in the discovery process and to litigate
the discovery battle with LCA in a judicial forum only up until the
point that she received an adverse ruling from the district court and
was faced with the possibility of having the court impose case-
30
crippling sanctions." "[T]here can be no doubt that her strategy in
attempting to switch forums at this critical juncture was her only hope
2e
Id. at777. (Ms. Hogg's son's name was Scott Lee Whitley; the attorney, who was with
the Defendant law firm, was named Scott Ryburn; it appears Ms. Hogg meant to send her son
Scott, not to the Scott that worked for her opponent.)
30
Id. at7go.
T2
of getting a 'second bite at the apple' on the issue of the parties'
3I
discovery dispute."
o The Hogg Court then came back to this theme, as quoted below, to
find prejudice. But first, pertinent to our case, the El Paso Court of
Appeals found there was insufficient evidence presented of prejudice
with respect to costs incurred. Just as in this case, the evidence of
costs in Hogg was very general and generic. "However, as set forth
above, in the present case, not only did LCA fail to provide any
evidence of the costs it incurred in responding to Ms. Hogg's
discovery requests, it failed to provide any evidence from which we
could conclude that the discovery requested by Ms. Hogg was
"substantial" or that LCA provided her with 'extensive' documents in
response to her requests."32 "Therefore, based on the record before
us, we are unable to conclude that LCA would suffer any significant
financial detriment if the parties' dispute was submitted to
arbitration."33
a However: "In determining whether prejudice has resulted in 'cases of
waiver by litigation conduct, the precise question is not so much when
waiver occurs as when a party can no longer take it back.' Perry
Homes,258 S.W.3d at 595. In the present case, we conclude that the
point at which Ms. Hogg could not 'take it back' occurred when, after
willingly participating in litigation over the discovery dispute, she
suffered an adverse ruling from the trial court, and was faced with the
nearcertainty of having a sanctions order entered against her. Ms.
Hogg's last-ditch effort to save her case from the impending sanctions
order, by seeking a new forum in which she could potentially
34
relitigate that issue, simply came too late."
3t
Id. x79r.
32
Id. at 793.
33
Id.
34
Id. at796.
I3
o "Therefore, because we find that Ms. Hogg purposefully and
unjustifiably manipulated the exercise of her arbitral rights to her own
advantage and to LCA's prejudice, we conclude that, based on these
35
unique facfs, Ms. Hogg waived her right to arbitration."
These "unique facts" are obviously extreme; the facts before this Court in no
way approach the unique facts in Hogg
Below, is a brief statement of why the remaining Courts of Appeal cases
cited by Appellee actually support Appellant's position in this appeal (in reverse
date order):
o BBX Operating, LLC v. Americqn Flourite, Inc., No. 09-17-00245-
CY,2018 WL 651276 (Tex. App. - Beaumont February 1,2018, no
pet.) - The basis for denial of the motion to compel arbitration was
invocation of relief by movant and that relief was denied by the trial
court, and then movant moved to compel arbitration. "BBX then
received an adverse ruling when the trial court denied BBX's motion
to enforce the Rule 11 Agreement. Only after receiving this adverse
ruling did BBX file its demand for arbitration." BBX Operating at *8.
o Prof'l Advantage Sofnuare Solutions, Inc. v. West Grlf Mar. Ass'n
1nc., No. 01-15-01006-CV, 2016 WL 2586690 (Tex. App. - Houston
[lst Dist.] May 5, 2016, no pet.) - Particularly egregious facts -
Almost three year delay in filing motion, and three attempted
summary judgment motions engaged in by movant, all denied by the
trial court, after which movant moved to compel arbitration.
a Tuscan Builders, LP v. 1437 SH6 L.L.C.,438 S.W.3d 717 (Tex. App.
- Houston [1't Dist.] 2014, no pet.) - One year delay in filing motion,
during which not only did movant engage in substantial discovery,
movant also joined third parties, and then benefitted from their
substantial discovery.
3t
Id. le phasis added)
t4
a Ellman v. JC Gen. Contractors,4l9 S. W. 3d 516 (Tex. App. - El
Paso 2013, no pet.) - Three year delay in filing motion and movant
admitted, in court pleadings, to have conducted "extensive discovery."
Ellman at 519.
a Okorafor v. Uncle Sam & Associates, lnc.,295 S.W.3d 27 (Tex. App.
- Houston [1" Dist.] 2009, pet. denied) - 21 month delay in filing
motion and motion was filed after movant had received respondent's
discovery, but before movant had provided discovery responses and
documents to respondent. The trial court even abated the hearing on
the motion to compel arbitration to allow movant to respond to the
discovery, and movant failed to properly do so, at which point the trial
court denied the motion. "Armed with discovery provided by Uncle
Sam and facing a looming deadline to produce discovery requested by
Uncle Sam, the Okorafors tried to have it both ways and moved to
compel arbitration." Okorafor at 40. As to prejudice: "Because the
Okorafors had not complied coffespondingly with Uncle Sam's
requested discovery, Uncle Sam would be essentially handicapped by
having to arbitrate without benefit of any discovery responses from
the Okorafors, including potentially deemed admissions." Id. at 4I.
The trial court even deferred on ruling on the Okorafors' motion to
arbitrate and gave them a week's extension to answer discovery, and,
at a subsequent hearing the trial court determined, "the responses
provided within that week were incomplete, missing, inadequate, and
thus 'deficient."' Id. The Houston Court of Appeals agreed with the
trial court that, "To compel Uncle Sam to arbitrate, thus hampered by
a lack of knowledge of the Okorafors' case, would result in an 'unfair
advantage' to the Okorafors." Id.
These Courts of Appeal cases provided by Appellee further push toward the
inescapable conclusion that Appellant did not impliedly waive the arbitration
clause by substantially invoking the litigation process to the extremely high degree
required.
15
ilI. AppnT,T.nB HAS NoT SHowN LBGAL PREJUDICE SUFFICIENT F.oR A FINDING
OF AN IMPLIED WAIVER OF THE ARBITRATION CLAUSE.
The sum total of Appellee's evidence of prejudice is that Appellee has
incurred attorney's fees between $101,000 and $104, 000 "on the Archer Western
litigation," plus Mr. Rubinson's January 2018 invoice.36 Incidentally, as can be
seen at RR. 20, lines 16 - 22, Appellee argues that this does not include the costs of
it taking depositions of Appellant's personnel a few weeks prior to the hearing,
which it claims should be added. Courts are clear - costs incurred by a non-movant
to obtain discovery cannot and should not be considered in the prejudice analysis.
"[A] party who requests lots of discovery is not prejudiced by getting it
Mr. Haymond did not attempt any segregation of fees whatsoever.
During cross-examination, Mr. Haymond admitted he could not provide any
more detail, including he could not even break down as to how much of the
amount was due to Beaird Drilling, the former Plaintiff in this suit, and how much
was due to Archer Western. Nor did he break down how much was due to
Appellee's affirmative actions against the other parties to the case.
here today, how does that 101 to 104,000 break
Q. And as far as this lawsuit
down as between defending against Beaird's claims versus prosecuting and
defending the Archer Western claims?
'6 RR atpg.20, lines 7-22; andpg.2I,lines2I-25.
" Pnrry Homes,258 S.W.3d at 600 (emphasis in original). See also Ellman,4l9 S.W.3d
at 522 ("The discovery initiated by JC does not provide a basis for finding prejudice.").
16
A. So just like I said, it's the lawyers' bill per case, and I just added all the
ones that said Archer Western.
a. So you can't tell me how much of those fees are related to Beaird
specifically?
A. I didn't. I wasn't asked to provide that information
a. Okay. And would you agree with me Beaird Drilling has been very
aggressive in its prosecution of this case?
A. Not toward us.
Q. How about towards Archer Western?
A. Yeah, a lot of - - I saw a lot of paper flying to Archer.
a.And every deposition that Beaird has noticed in the case against Archer
Western, against the Lennar entities, against Mr. Allums, your attorneys
have attended those depositions, correct?
A. Damian attended the first few solely.
Q. You've always had an attorney present?
A. Yes, sir.38
As detailed atpages 31 - 37 of Appellant's Brief, this is simply insufficient
evidence to uphold a finding of prejudice sufficient to overcome the extremely
high burden of showing an implied waiver of an arbitration clause
38
RR aI" pg. 25,lines 1 I-25; and pg. 26,lines 1- 13
t1
IV Appnr,r,nNT HEREBy wrrHDRAws rrs Issun No. 1 - THn rRrAL couRT
ERRED (ono , ALTERNATTvELv, ABUSED ITS orscnnrron) rN DENvING
ARcnnn WnsrnnN's MotloN To Sra.v rnn PnocEEDING AND To Conmpr,
AnnTTn,tTIoN As THE ARBITRATIoN CLAUSE ITSELF PROHIBITS wAIvER.
The clause at issue states: "Subcontractor waives to the fullest extent
permitted by law any objection that they may now or may hereafter have to having
arbitration proceedings conducted in the state or United States territory in which
the Project is located, including any claim that it is an inconvenient forum for such
arbitration or court proceedings." Appellant's reading of this clause was that
"conducted in the state or United States territory in which the Project is located"
simply was part of the term "arbitration proceedings;" i.e., "arbitration proceedings
conducted in the state or United States territory in which the Project is located."
Appellant concedes Appellee's reading, that this is a waiver about objecting to
forum location, is a more logical reading of the clause, and hereby withdraws Issue
No. 1.
PRAYER
WHEREFORE, PREMISES CONSIDERED, Archer Westem Construction,
LLC hereby requests that this Court reverse the order of the Trial Court and render
an order staying the underlying proceedings and compelling arbitration between
the remaining parties to this case - Archer Westem, STI, and Hanover. Archer
Western Construction, LLC further prays for such other and further relief, at law
and in equity, to which it may show itselfjustly entitled
l8
Re spectfully submitted,
PECKAR & ABRAMSON, P.C.
By: /s/ Paulo Flores
Paulo Flores
State Bar No. 07164447
pflores@pecklaw.com
Timothy D. Matheny
State Bar No. 24000258
tmatheny@pecklaw.com
Tracey L. Williams
State Bar No. 24031954
twi I I i ams @p e cklaw. com
8080 N. Central Expressway
suite 1600, LB 65
Dallas, Texas 7 5206-1819
(214) 523 -5 1 00 Telephone
(21 4) 521 -4601 Facsimile
ATTORNEYS FOR APPELLANT
t9
CERTIFICATE OF SERVICE
I hereby certifl' that on this the 2l't day of May, 2018, a true and correct
copy of the above foregoing instrument was served upon all counsel of record in
accordance with the Texas Rules of Appellate Procedure.
/s/ Paulo Flores
Paulo Flores
CERTIFICATE OF COMPLIANCE
In compliance with Rule 9.4(iX3) of the Texas Rules of Appellate
Procedure, I hereby certifr that there are 5,138 words total in the foregoing
document, according to the Word count, excluding those words permitted to be
excluded by Rule 9.4(iX1) of the Texas Rules of Appellate Procedure.
/s/ Paulo Flores
Paulo Flores
20
Archer Western Construction, LLC v. Beaird Drilling Services, Inc., and South Texas Innovations
Combined Opinion