You are on page 1of 24

ACCEPTED

03-17-00386-CV
19657014
THIRD COURT OF APPEALS
AUSTIN, TEXAS
03-17-00386-CV 9/25/2017 5:32 PM
JEFFREY D. KYLE
CLERK
NO. 03-17-00368-CV

FILED IN
3rd COURT OF APPEALS
IN THE COURT OF APPEALS AUSTIN, TEXAS
THIRD DISTRICT OF TEXAS 9/25/2017 5:32:16 PM
JEFFREY D. KYLE
Clerk

PEJMAN DARGAHI, KAMRAN DARGAHI, and YEKK CONSTRUCTION
SERVICES, LLC d/b/a LAKEWAY CUSTOM HOMES AND RENOVATION,
Appellants

v.

DHIRAJ HANDA and RITU HANDA, Appellees

Accelerated Appeal from the 261st Judicial District Court
Travis County, Texas
Hon. Lora Livingston, Presiding
Trial Court Cause No. D-1-GN-16-001279

APPELLANTS’ REPLY BRIEF

BUSH RUDNICKI SHELTON, P.C.

Carl J. Wilkerson
State Bar No. 21478400
cwilkerson@brstexas.com
200 N. Mesquite St., Suite 200
Arlington, Texas 76011
Telephone: (817) 274-5992
Facsimile: (817) 261-1671

ATTORNEY FOR APPELLANTS

ORAL ARGUMENT REQUESTED
TABLE OF CONTENTS

Table of Contents..........................................................................ii
Index of Authorities......................................................................iii
Argument…………………………………………………………………….1

1. Appellants preserved error under TEX. R. APP. P. 33.1 by: moving to
compel arbitration “pursuant to the terms of the Contract”;
presenting complete summary proof of the existence of an arbitration
agreement covering the claims at issue; and arguing applicable rules of
law with sufficient specificity to enable the trial court to determine, as
a matter of law, that the parties agreed to arbitrate their dispute
[in reply to Appellees’ Argument A.]………............................................1

a. The Texas Supreme Court’s explanation of estoppel in G.T.
Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502 (Tex.
2015) is consistent with U.S. Home and Courtland Bldg. and
supports Appellants’ argument to enforce the arbitration
agreement in the Residential Construction Contract……………..8

b. Appellees submitted evidence that Pejman Dargahi was a
signatory to the Residential Construction Contract and that
Kamran Dargahi and Pejman Dargahi are agents of Lakeway
Custom Homes and Renovation
[in reply to Appellee’s Argument A. regarding “no evidence that the
intent of the parties was to make the Dargahis parties to the arbitration
clause”]..…………………………………………………………..12

2. Appellants did not waive their right to compel arbitration by taking
part in Appellees’ litigation, because Appellants did not substantially
invoke the judicial process to Appellees’ detriment
[in reply to Appellees’ Argument B.]...…………………………………14

Prayer..............................................................…………………………………….19
Certificate of Compliance…………………………………………………………20
Certificate of Service………………………………………………………………20

ii
INDEX OF AUTHORITIES

Texas Supreme Court

EZ Pawn Corp. v. Mancias, 934 S.W.2d 87 (Tex. 1996)……………………………17

G.T. Leach Builders, LLC v. Sapphire V.P., LP,
458 S.W.3d 502 (Tex. 2015)……………………………………8,9,10,11,14,15,16,17

Perry Homes v. Cull, 258 S.W.3d 580 (Tex. 2008)…………………………..14,15,16

Richmont Holdings, Inc. v. Superior Recharge Sys, L.L.C.,
455 S.W.3d 573 (Tex. 2014) (per curiam)…………………………………………14

RSL Funding, LLC v. Pippins, 499 S.W.3d 423 (Tex. 2016) (per curiam)…..14,15,17

In re Rubiola, 334 S.W.3d 220 (Tex. 2011)………………………………………3,12

In re U.S. Home Corp., 236 S.W.3d 761 (Tex. 2007)………………………....3,6,7,11

In re Vesta Ins. Group, Inc., 192 S.W.3d 759 (Tex. 2006)…………………………..18

Texas Court of Appeals

In re Castro, 246 S.W.3d 756 (Tex. App. – Eastland 2008)………………………..17

Courtland Bldg. Co. v. Jalal Family Partnership, 403 S.W.3d 265
(Tex. App. – Houston [14th Dist.] 2012, no pet.)…………………………….4,6,7,11

Murdock v. Trisun Healthcare, LLC, 2013 Tex. App. LEXIS 5638
(Tex. App. – Austin 2013, pet. denied)…………………………………………...2,3

Santander Consumer USA, Inc. v. Mata, 2017 Tex. App. LEXIS 2631
(Tex. App. – Austin 2017, no pet.)…...……………………………………………..3

SEB, Inc. v. Campbell, 2011 WL 749292, 2011 Tex. App. LEXIS 1588
(Tex. App. – Austin 2011, no pet.) (mem. op.)……………………..…………..13,18

iii
Texas Rules

Tex. R. App. P. 33.1………………………………………………………….2,18

Texas Statutes

TEX. BUS. ORG. CODE §§ 101.251………………………………………………….13

TEX. BUS. ORG. CODE §§ 101.254 (a)……………………………………………...13

TEX. PROP. CODE §§ 162.001-162.033……………………………………………..12

TEX. PROP. CODE §§ 162.002……………………………………………………...13

iv
ARGUMENT

1. Appellants preserved error under TEX. R. APP. P. 33.1 by: moving to compel
arbitration “pursuant to the terms of the Contract”; presenting complete
summary proof of the existence of an arbitration agreement covering the claims
at issue; and arguing applicable rules of law with sufficient specificity to enable
the trial court to determine, as a matter of law, that the parties agreed to
arbitrate their dispute [in reply to Appellees’ Argument A.].

The record shows Appellants, including individual Appellants Pejman

Dargahi and Kamran Dargahi, made their complaint to the trial court by their

timely Plea in Abatement and Motion to Compel Arbitration that clearly asserted,

“[p]ursuant to the terms of the Contract, Defendants are entitled to abate this

matter for binding arbitration.… [and] the parties have agreed to resolve the

dispute via binding arbitration with the American Arbitration Association … and

governed by AAA construction industry rules” CR 108-109. The record shows

Appellants presented complete summary proof of the existence of the parties’

contract containing an arbitration agreement covering the claims at issue,

consisting of the Residential Construction Contract and affidavits from Kamran

Dargahi and Pejman Dargahi identifying each of them as a member/manager of

Appellant Yekk Construction Services, LLC d/b/a Lakeway Custom Homes and

Renovation. CR 112-113, 114-124, 262-263. The record shows Appellants’

presentation of applicable rules of law with sufficient specificity to enable the trial

court to determine, as a matter of law, that the parties agreed to arbitrate their

APPELLANTS’ REPLY BRIEF 1
dispute, including Appellees’ claims against Pejman Dargahi and Kamran Dargahi.

RR 4-9, 21-25, 27-29. Appellants preserved error regarding the existence of an

arbitration agreement covering the claims at issue. See TEX. R. APP. P. 33.1 (a).

Appellees do not dispute the existence of an arbitration agreement between

them and Appellant Yekk Construction Services, LLC d/b/a Lakeway Custom

Homes and Renovation. Appellees dispute the existence of an arbitration

agreement between them and Appellants Pejman Dargahi and Kamran Dargahi,

specifically those Appellants’ “right to invoke the arbitration clause in the first

place because they are not parties to the underlying Contract.” 1

To compel arbitration, the trial court must first determine as a matter of law

that the parties have agreed to arbitrate. Murdock v. Trisun Healthcare, LLC, 2013

Tex. App. LEXIS 5638, *6 (Tex. App. – Austin 2013, pet. denied). The party

moving to compel arbitration must present complete summary proof of his case in

chief proving the existence of an arbitration agreement covering the claims at issue.

Id. This includes proving the party seeking to enforce the arbitration agreement

was a party to it or had the right to enforce the agreement notwithstanding. Id. at

*14.

1
Appellees’ Brief, at 14.

APPELLANTS’ REPLY BRIEF 2
An obligation to arbitrate not only attaches to one who has personally signed

the written arbitration agreement but may also bind a non-signatory under

principles of contract law. In re Rubiola, 334 S.W.3d 220, 224 (Tex. 2011). Accord,

Santander Consumer USA, Inc. v. Mata, 2017 Tex. App. LEXIS 2631 (Tex. App. –

Austin 2017, no pet.) (“Nonsignatories to an agreement subject to the FAA may be

bound to an arbitration clause when rules of law or equity would bind them to the

contract generally”); Murdock, at *14 (“we apply ordinary principles of state

contract law to determine who may enforce an arbitration agreement under the

FAA”).

In re U.S. Home Corp., 236 S.W.3d 761 (Tex. 2007) (per curiam) provides

rules of contract law in response to homeowners’ claims that they do not have to

arbitrate with individual nonsignatory defendants when the homebuilder company

is the only signatory of a contract containing the arbitration agreement:

None of these [individual defendants] had a duty to supply shower
pans but for the plaintiffs’ contracts with U.S. Home. A litigant who
sues based on a contract subjects him or herself to the contract’s
terms. As the nonsignatories’ liability arises from and must be
determined by reference to the parties’ contract rather than general
obligations imposed by law, the [homeowners’] suit is subject to the
contract’s arbitration provisions.

Id. at 765 (citations and quotations omitted).

APPELLANTS’ REPLY BRIEF 3
Courtland Bldg. Co. v. Jalal Family Partnership, 403 S.W.3d 265 (Tex. App. –

Houston [14th Dist.] 2012, no pet.) provides a rule of law regarding how allegations

of non-signatories’ violations of statutes, specifically the Texas Construction Trust

Fund Act, are subject to arbitration:

[Contractor] additionally alleges that the Property Owners [including
non-signatories to the construction contract] breached a fiduciary duty
imposed by chapter 162 of the Texas Property Code to hold funds for
Courtland to pay for the construction. See Tex. Prop. Code Ann. §
162.001 (West 2011). Under this chapter, “[c]onstruction payments
are trust funds . . . if the payments are made to a contractor or
subcontractor . . . under a construction contract for the improvement of
specific real property in this state.” Id. § 162.001(a) (emphasis
added)…. These allegations of statutory violations are predicated on
the existence of the construction contract. They arise out of or relate
to the contract and are subject to arbitration.

Id. at 272-273.

Appellants presented and proved the entire Residential Construction

Contract as a basis for compelling arbitration, that Appellees sued Appellants for

breach of that Contract, and that Appellees’ other claims against Appellants

(including claims against Pejman Dargahi and Kamran Dargahi) were encompassed

by that Contract’s arbitration agreement. CR 108-124; 260-268. Appellants

referenced U.S. Home’s rules of law in their arguments to the trial court:

As with most home cases, this – this matter had a written contract
between the parties…. I would ask the Court to take judicial notice of
the pleadings on file by plaintiff in this case. But it involves complaints
regarding the construction of the residence, as well as the handling of

APPELLANTS’ REPLY BRIEF 4
the construction funds that were used to purchase materials, supplies,
and labor that were used by my client….

… he argues that only one defendant is covered by this arbitration
clause. Not only have courts of appeals, but the Supreme Court has
dealt with this issue, specifically when it deals with the construction of
homes and it’s specifically a U.S. home’s [sic] case. And it says …
that none of the individuals who have an independent duty to provide
anything of the purchaser, as a result of being non-signatories, they are
also covered by the content and the binding nature of an arbitration
clause when it comes to construction.

… [responding to Appellees’ argument that their construction trust
fund claims against the individual defendants “fall far outside of the
contract”] I would argue that, but for construction funds at the
entrance of a contract, the agreement between the parties and the
ability for a builder to provide the bricks and sticks to respond to those
funds, you would not have an agreement. That’s the very essence of a
construction agreement is, is a builder takes money and turns it into
bricks and sticks. So the handling of that money goes to the essence of
the contract. So we could not ask for a more appropriate topic to be
encompassed within an arbitration agreement regarding a construction
contract….

RR 6:12-17; 20:25-21:6; 21:24-22:9; 22:17-23:3.

Appellants also referenced Courtland Bldg. Co.’s rule of law in arguments to

the trial court:

… There is a case on point from 2012 that specifically addresses the
inclusion of all of these other claims that the Court had inquired,
including claims under 162…. And if I could direct the Court’s
attention to Page 7 of the opinion that I’ve handed to you, that’s
Courtland Building Company v. Jalal Family Partnership. It’s Court of
Appeals, 14th District Court out of Houston, November 20th, 2012,
403 S.W.3d 265. Specifically, when referring to claims under Section
28 [sic] of the Property Code, which is the Residential Construction

APPELLANTS’ REPLY BRIEF 5
Liability Act, which would be the – baseline cause of action that
plaintiffs would have for defective work, coupled with Texas Property
Code 162, which is their other claim. The court simply, very concisely
summarizes that these allegations of statutory … violations are
predicated on the existence of the contract itself. They arise out of or
relate to the contract and are subject to arbitration.

RR 27:13 – 28:15.

When Appellants argued applicability of those rules of law, they did not

specifically state: “A litigant who sues based on a contract subjects him or herself

to the contract’s terms”; or “direct benefits estoppel.” See U.S. Home, at 765;

Courtland Bldg. Co., at 271. But, the trial court’s inquiry to Appellees – “Have you

just sued on the contract, or have you brought other claims?” – indicates the trial

court’s recognition of those rules of law to determine, as a matter of law, whether

all Appellants had the right to enforce arbitration. RR 13:12-13. When Appellees

answered the trial court’s inquiry, they proved Appellants’ right to enforce

arbitration:

MR. KING: There is a claim on the contract, but there are
numerous additional claims…. [T]here is a – a contract
claim for breach of contract against all of the
defendants…. This is not just a contract claim.

RR 13:17 – 14:9 (emphasis added). Appellees further proved Appellants’ right to

enforce arbitration by Appellees’ filings claiming breaches of the Residential

APPELLANTS’ REPLY BRIEF 6
Construction Contract. CR 18, 156-157, 269-270.2 Appellees subjected themselves

to that Contract’s terms, including the obligation to arbitrate Appellees’ dispute.

See U.S. Home, at 765; Courtland Bldg. Co., at 271.

Appellees’ further arguments specifically raised the grounds of estoppel as a

basis to apply an arbitration agreement to non-signatories:

MR. KING: [T]his was not raised by defendants, but I … want
your Honor to know about it because I suspect it
would be something you’ve seen before. Nonparties
can be brought under an arbitration clause through
equitable estoppel. This is not a case where you have
that because equitable estoppel is specifically for
breach of contract claims.

Estoppel does not apply even if the claim refers to or
relates to the contract…. We’ve got … the Property
Code claim, we’ve got unjust enrichment, we have
negligence, we have fraud. Those are all the claims
that, even if they refer to or relate to the contract,
estoppel does not apply to them.

[T]he individuals, they’re under a different standard.
The equitable estoppel standard is explained right
here by the Texas Supreme Court in G.T. Leach.

2
CR 18, from Appellees’ Motion for Partial Summary Judgment, recites “Defendants are
general contractors hired to build Plaintiffs’ home under a fixed-price contract.” CR 156-157,
from Appellees’ Fourth Amended Petition, their live pleading at the time of the trial court’s
5/24/17 hearing, recites Appellees’ specific breach of contract claims “Against Pejman Dargahi
and Yekk” and Appellees’ general “Defendants have breached their contracts and warranties”
claims “Against All Defendants.” CR 269-270, from Appellees’ Response to Motion to Compel
Arbitration recites “Defendants were hired to build Plaintiffs’ home under a fixed-price
contract” and “Defendants breached the construction contract.”

APPELLANTS’ REPLY BRIEF 7
RR 20:18-24; 26:24 - 27:9; 29:7-10.

a. The Texas Supreme Court’s explanation of estoppel in G.T. Leach
Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502 (Tex. 2015) is
consistent with U.S. Home and Courtland Bldg. and supports
Appellants’ argument to enforce the arbitration agreement in the
Residential Construction Contract.

After hurricane damage to a South Padre condominium project under

development by Sapphire V.P., L.P. (“Sapphire”), Sapphire sued its insurance

brokers for failing to renew a builder’s risk insurance policy covering the project.

Id. at 509. The insurance brokers designated numerous engineering/construction

parties as responsible third parties and Sapphire then asserted its own claims

against those parties. Id. G.T. Leach was the general contractor for the

condominium project. Id. at 510. The general contract between G.T. Leach and

Sapphire contained an arbitration agreement and G.T. Leach moved to compel

arbitration of Sapphire’s claims against it. Id. All other defendants, i.e. the

insurance brokers, G.T. Leach’s subcontractors, and engineers likewise moved to

compel arbitration based upon the arbitration agreement between G.T. Leach and

Sapphire. Id. The trial court denied all the motions without explanation and the

court of appeals affirmed. Id.

The Texas Supreme Court held that Sapphire must arbitrate its claims

against G.T. Leach. See id. at 523. The Court concluded that Sapphire did not agree

APPELLANTS’ REPLY BRIEF 8
in the general contract to arbitrate its claims against the insurance brokers,

subcontractors, and engineers, because: those parties were not signatories or

parties to the general contract; they did not show a valid legal right to enforce the

general contract’s arbitration agreement; and Sapphire was not equitably estopped

from refusing to arbitrate its claims against them. See id. at 523-524.

Equitable estoppel did not require Sapphire to arbitrate its claims against the

insurance brokers, subcontractors, and engineers because Sapphire did not sue

those parties for breach of obligations under the general contract containing the

arbitration agreement. See id. at 527-528. Sapphire alleged those parties’ breaches

of “contractually agreed” duties, but those duties arose from separate contracts:

We read Sapphire’s allegations to refer to separate agreements in
which the Engineers agreed with Sapphire to provide engineering
services, the Insurance Brokers agreed with Sapphire to provide
insurance services, and the Subcontractors agreed with G.T. Leach to
provide construction-related services….

Sapphire’s contract claims against the [insurance brokers,
subcontractors, and engineers] do not, on their face, seek a “direct
benefit” under the general contract; rather, the record at this stage
indicates that they seek direct benefits under the other alleged
contracts. Under these circumstances, we cannot conclude that the
“direct benefits” theory of equitable estoppel authorizes the
[insurance brokers, subcontractors, and engineers] to rely on the
arbitration provision in Sapphire’s general contract with G.T. Leach.

Id. at 528-529.

APPELLANTS’ REPLY BRIEF 9
These illustrations show how the circumstances that led the Texas Supreme

Court to deny nonsignatories’ motion to compel arbitration in G.T. Leach differ

from this case:

APPELLANTS’ REPLY BRIEF 10
Here, Appellees seek the direct benefits of their general contract, i.e.

Residential Construction Contract, from nonsignatories Pejman Dargahi and

Kamran Dargahi. Appellees seek to hold Pejman Dargahi and Kamran Dargahi

liable pursuant to duties imposed by that Contract, which contains an arbitration

provision. See G.T. Leach, at 527. Unlike Sapphire’s claims against the insurance

brokers, subcontractors, and engineers arising from separate agreements,

Appellees’ claims against Pejman Dargahi and Kamran Dargahi: arise from and

must be determined by reference to the Residential Construction Contract; and are

predicated on the existence of the Residential Construction Contract. See U.S.

Home, at 765; Courtland Bldg. Co., at 271. By those rules of law, consistent with

G.T. Leach, Appellees are equitably estopped from denying Appellants’ right to

enforce Appellees’ agreement to arbitrate their dispute:

This is because the claimant “cannot have it both ways”; it cannot,
“on the one hand, seek to hold the non-signatory liable pursuant to
duties imposed by the agreement, which contains an arbitration
provision, but, on the other hand, deny arbitration’s applicability
because the defendant is a non-signatory.

G.T. Leach, at 527.

Applicable rules of law, provided by the Texas Supreme Court and courts of

appeals, authorized Appellants Pejman Dargahi and Kamran Dargahi to enforce

arbitration of Appellees’ claims against them as a matter of law. The record shows

APPELLANTS’ REPLY BRIEF 11
that Appellants and Appellees presented those rules of law to the trial court with

sufficient specificity to preserve appellate review of the trial court’s legally

incorrect denial of Appellants’ Motion to Compel Arbitration of Appellees’ claims.

b. Appellees submitted evidence that Pejman Dargahi was a signatory to
the Residential Construction Contract and that Kamran Dargahi and
Pejman Dargahi are agents of Lakeway Custom Homes and
Renovation [in reply to Appellee’s Argument A. regarding “no evidence
that the intent of the parties was to make the Dargahis parties to the
arbitration clause”3]

Appellees submitted evidence that Pejman Dargahi is a signatory of the

Residential Construction Contract. CR 460 (“Defendant Pejman Dargahi is

individually liable for any breaches of Yekk’s obligations since he is a signatory of the

Contract.”) (emphasis added). As a named signatory, Pejman Dargahi may enforce

Appellees’ obligation to arbitrate. See Rubiola, at 224. Appellees also submitted

evidence that Pejman Dargahi “signed as an agent for an identified principal, and

his principal’s identity was actually known to and acknowledged by the Handas.”

CR 309.

Appellees also submitted evidence that Pejman Dargahi and Kamran Dargahi

are agents of Lakeway Custom Homes and Renovation by suing and moving for

summary judgment against them for breaches of fiduciary duties under the

Construction Trust Funds Act. See TEX. PROP. CODE §§ 162.001-162.033.

3
Appellees’ Brief, at 17-21.

APPELLANTS’ REPLY BRIEF 12
Appellees specifically named Pejman Dargahi and Kamran Dargahi as “trustees”

of “progress payments … made under a construction contract for the improvement

of specific real property in Texas.” CR 153, 457. By naming Appellants as

“trustees” under those statutes, Appellees rely upon the statutory definition of

“trustee” applicable to their claims:

A contractor, subcontractor, or owner or an officer, director, or agent
of a contractor, subcontractor, or owner, who receives trust funds or
who has control or direction of trust funds, is a trustee of the trust
funds.

TEX. PROP. CODE §§ 162.002. By that definition, Appellees admitted that Pejman

Dargahi and Kamran Dargahi are each an “agent of a contractor … who has control

or direction of trust funds….” Id. According to Appellees, “Defendants Pejman

and Kamran Dargahi had control and direction over Plaintiffs’ progress payments

for the Project” CR 153, 456. As members and managers of Lakeway Custom

Homes and Renovation, Kamran Dargahi and Pejman Dargahi are agents of

Lakeway Custom Homes. See TEX. BUS. ORG. CODE §§ 101.251, 101.254 (a). By

this Court’s rule of law, Kamran Dargahi and Pejman Dargahi are also covered by

the arbitration agreement in the Contract and may enforce it against Appellees. See

SEB, Inc. v. Campbell, 2011 Tex. App. LEXIS 1588, *13-*14 (Tex. App. – Austin

2011, no pet.) (mem. op.).

APPELLANTS’ REPLY BRIEF 13
2. Appellants did not waive their right to compel arbitration by taking part in
Appellees’ litigation, because Appellants did not substantially invoke the
judicial process to Appellees’ detriment [in reply to Appellees’ Argument B.].

Since Perry Homes v. Cull, the Texas Supreme Court’s more recent opinions

against claims of waiver of arbitration show that Appellees’ evidence did not

overcome the strong presumption against waiver. Compare Perry Homes v. Cull, 258

S.W.3d 580 (Tex. 2008) (plaintiffs vigorously opposed arbitration for 14 months,

then moved to compel arbitration on the eve of trial) with Richmont Holdings, Inc. v.

Superior Recharge Sys, L.L.C., 455 S.W.3d 573, 575-576 (Tex. 2014) (per curiam)

(party did not waive arbitration by: delaying nineteen months after being sued;

filing second suit; moving to transfer venue; and engaging in very limited

discovery); G.T. Leach, at 511-515 (Tex. 2015) (party did not waive arbitration by:

delaying approximately twelve months after being sued; filing motions to transfer

venue, designate responsible third parties, continuance, and to quash depositions;

responding to and resisting discovery requests; designating experts; and requesting

disclosures); and RSL Funding, LLC v. Pippins, 499 S.W.3d 423, 430-434 (Tex.

2016) (per curiam) (party did not waive arbitration by: adding sellers of annuities to

suit against issuers of annuities; delaying less than eight months to seek arbitration

against sellers; and engaging in extensive discovery and motion for summary

judgment related to non-arbitrable disputes with issuers).

APPELLANTS’ REPLY BRIEF 14
Appellees argue that this Court “should look to the totality of the

circumstances.” See Perry Homes, at 591. But, of the multiple circumstances to be

considered by the trial court, Appellees argue only these:

• Appellants waited nine months, from the date Appellees filed suit, to
seek arbitration;
• Appellants’ awareness of the arbitration clause in the Contract;
• Appellants sought arbitration on the eve of trial;
• Appellants engaged in pretrial matters related to the merits; and
• Appellees’ amount of time and expense committed to the litigation.

CR 273-276.

Appellees’ evidence of a nine-month delay did not present evidence of a

delay of 11 months, 13 months or 14 months that, according to Appellees,

“establish[ ] waiver in other cases.” Appellees’ Brief, at 23. According to the

Texas Supreme Court, “while delay by the party seeking arbitration may be a

factor, we have found no waiver in cases where there were delays as much as eight

months.” RSL Funding, at 431.

Appellees argued that Appellants “do not and cannot assert that they were

unaware of the arbitration clause in the Contract.” CR 275. Appellees argued that

the Residential Construction Contract was Appellees’ “own form contract”, but

presented no evidence of that. CR 275. Appellees presented no evidence “whether

and when [Appellants] knew of the arbitration agreement during the period of

delay.” See G.T. Leach, at 512.

APPELLANTS’ REPLY BRIEF 15
Appellees argued that Appellants waited until “the eve of trial” to seek

arbitration. The specific circumstance to be considered is “when the case was to be

tried.” Id. Appellees presented no evidence of the trial court’s trial setting.

Although Appellees argued that their filing of a Motion for Partial Summary

Judgment was an “eve of trial” circumstance, Perry Homes does not support that

argument. In that case, the Texas Supreme Court based its waiver holding on a

motion to compel arbitration filed 14 months after filing suit resulting in an order

compelling arbitration signed four days before the court’s trial setting, i.e. on the

“eve of trial.” See Perry Homes, at 585, 596. That Court did not equate a hearing on

a motion for partial summary judgment as a circumstance commensurate with a

trial setting. Appellees likewise declined such equation when they admitted, in this

Court, that since Appellees’ “Motion for Partial Summary Judgment does not seek

to dispose of all issues and parties in this lawsuit”, this Court’s June 22, 2017

Order staying trial court proceedings until the disposition of this appeal was not

required.4

Appellees argued and presented evidence that Appellants “engaged in

pretrial matters without once mentioning the arbitration clause.” CR 275. But the

Texas Supreme Court considers “the extent of the movant’s engagement in pretrial

4
Appellees’ Motion for Reconsideration of Order Granting Appellants’ Emergency Motion for
Temporary Relief etc. filed 6/23/2017.

APPELLANTS’ REPLY BRIEF 16
matters related to the merits.” G.T. Leach, at 512 (emphasis added). Appellants’

filing of their answer, and responding /supplementing their discovery responses are

defensive actions that do not amount to substantial invocation of the judicial

process and do not amount to waiver. See G.T. Leach, at 513-514. Appellants’ sole

discovery request for production of construction funding records from Appellees’

lender does not amount to substantial invocation of the judicial process and does

not amount to waiver. See RSL Funding, at 430. And, without waiving Appellants’

argument that Appellees presented no evidence that Appellants “agreed to set the

case for trial”, the Texas Supreme Court’s most recently recited examples of its

“no waiver” cases includes a case in which the party seeking arbitration conducted

discovery and agreed to a trial setting. See RSL Funding, at 430 (citing EZ Pawn

Corp. v. Mancias, 934 S.W.2d 87, 90 (Tex. 1996)).

Appellees argued the amount of their time and expense expended in the

litigation and presented unsupported and conclusory affidavit testimony of

$35,000.00 in attorney’s fees, without testimony that such fees were reasonable or

necessary. CR 276, 448. But, Appellees presented no evidence that they suffered

actual prejudice by showing they incurred costs and fees “due to the movant’s

actions or delay.” See In re Castro, 246 S.W.3d 756, 762 (Tex. App. – Eastland

2008) (party seeking arbitration waived arbitration clause in open court, then filed

APPELLANTS’ REPLY BRIEF 17
motion to compel arbitration two years later on day of trial; party opposing

arbitration established prejudice from its attorney’s testimony of reasonable

attorney’s fees incurred during delay in seeking arbitration and in preparing for

trial). Accord, In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 763 (Tex. 2006)

($200,000 in “self-inflicted” pre-trial expenses and fees insufficient evidence of

prejudice without evidence relating amounts to movant’s requested discovery);

SEB, Inc., at *21-*23 (citing Vesta and additional court of appeals cases requiring

explanations and evidentiary support to establish prejudice).

Appellants preserved its complaint of Appellees’ legally insufficient

evidence in Appellants’ Amended Brief. Appellants’ Amended Brief, at 15, 19-21.

In a nonjury case, a complaint regarding the legal or factual insufficiency of the

evidence … may be made for the first time on appeal in the complaining party’s

brief. TEX. R. APP. P. 33.1 (d).

APPELLANTS’ REPLY BRIEF 18
PRAYER

WHEREFORE, PREMISES CONSIDERED, Appellants Pejman Dargahi,

Kamran Dargahi, and Yekk Construction Services, LLC d/b/a Lakeway Custom

Homes and Renovation pray that this Court: reverse the trial court’s May 30, 2017

ORDER ON DEFENDANTS’ MOTION TO COMPEL ARBITRATION as an

abuse of discretion; remand the case to the trial court with instructions that the

trial court compel arbitration of Appellees’ claims against Appellants in accord

with the parties’ arbitration agreement in their Contract, and abate further

proceedings in the trial court pending conclusion of the parties’ arbitration; award

Appellants their costs on appeal; and award Appellants such other relief to which

Appellants may be justly entitled.

Respectfully submitted,

BUSH RUDNICKI SHELTON, P.C.

/s/ Carl J. Wilkerson
Carl J. Wilkerson
State Bar No. 21478400
cwilkerson@brstexas.com
200 N. Mesquite St., Suite 200
Arlington, Texas 76011
Telephone: (817) 274-5992
Fax: (817) 261-1671

ATTORNEYS FOR APPELLANTS

APPELLANTS’ REPLY BRIEF 19
CERTIFICATE OF COMPLIANCE

I certify that this document was produced on a computer using Microsoft
Word 2007 and contains 4,111 words, as determined by the computer software’s
word-count function, excluding the sections of the document listed in Texas Rule
of Appellate Procedure 9.4(i)(1).

/s/ Carl J. Wilkerson
Carl J. Wilkerson

CERTIFICATE OF SERVICE

The undersigned hereby certifies that a true and correct copy of
APPELLANTS’ REPLY BRIEF has been e-filed with the Clerk of this Court and
e-served to Appellees’ counsel of record on September 25, 2017.

David King
State Bar No. 24083310
dking@gdhm.com
Brian T. Cumings
State Bar No. 24082882
bcumings@gdhm.com
GRAVES, DOUGHERTY, HEARON & MOODY
401 Congress Ave., Suite 2200
Austin, Texas 78701
Telephone: (512) 480-5603
Facsimile: (512) 536-9942

/s/ Carl J. Wilkerson

APPELLANTS’ REPLY BRIEF 20