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FILED

16-0854
12/30/2016 7:36:58 AM
tex-14500944
SUPREME COURT OF TEXAS
BLAKE A. HAWTHORNE, CLERK

NO. 16-0854

IN THE SUPREME COURT OF TEXAS

HIAWATHA HENRY, ADDIE HARRIS, MONTRAY NORRIS,
and ROOSEVELT COLEMAN, JR., on behalf of
themselves and for all other similarly situated

Petitioner

v.

CASH BIZ, LP, CASH ZONE, LLC
D/B/A CASH BIZ and REDWOOD FINANCIALS, LLC

Respondent

FROM THE COURT OF APPEALS FOR THE FOURTH DISTRICT OF TEXAS
NO. 04-15-00469-CV

RESPONDENT’S RESPONSE TO PETITION FOR REVIEW

Edward S. Hubbard Patrick E. Gaas
State Bar No. 10131700 State Bar No. 07562790
ehubbard@coatsrose.com pgaas@coatsrose.com

COATS ROSE, P.C.
9 Greenway Plaza, Suite 1100
Houston, Texas 77046
(713) 651-0111
(713) 651-0220 Facsimile

COUNSEL FOR RESPONDENTS
_____________________________________________________________________

STATEMENT OF THE CASE
_____________________________________________________________________

Although the Petitioner’s Statement of the Case accurately presents certain

portions of the procedural history of the case, it is not complete. The following

Statement of the Case supplements the Petitioner’s Statement of the Case.

The Petition seeks review of a decision of the Fourth Court of Appeals,

which resolved an interlocutory appeal brought by Respondents Cash Biz, LP,

Cash Zone, LLC d/b/a Cash Biz, and Redwood Financials, LLC (“Respondents”)

pursuant to Sections 51.016 and 171.098(a)(1) of the Texas Civil Practice and

Remedies Code, and in accordance with Rule 28.1 of the Texas Rules of Appellate

Procedure.

This case arises from separate, individual credit services agreements and

credit services disclosures statements, between each of the Petitioners and the

Respondents, as well as Loan Disclosures, Promissory Note and Security

Agreements (hereinafter collectively referred to as “Loan Contracts”). Each of the

Loan Contracts with each Petitioner was in writing and contained a provision

requiring arbitration, and waiving class action lawsuits and arbitrations. After the

Petitioners defaulted on the repayment obligation under their respective Loan

Contracts, the Respondents conducted separate investigations that, in each

i
instance, uncovered information that led them to believe that each Petitioner had

engaged in separate, specific criminal acts during the formation and performance

of their respective Loan Contracts. Based on the concerns raised by the

information that the Respondents uncovered, they separately reported this

information to each state prosecutor with jurisdiction over each Petitioner.

Prosecutors subsequently pursued criminal actions against some of the Petitioners.

Meanwhile, the Respondents took no action against any of the Petitioners in any

civil proceeding.

The Petitioners joined together and filed this malicious prosecution, fraud

and statutory action against Cash Biz, seeking class action status, in the 224th

District Court of Bexar County, Texas. The core of the Petitioners’ claim is that

when the Respondents provided information or complaints to state prosecutors,

they engaged in improper loan collection activities. In response to this suit, the

Respondents filed a motion to compel arbitration, to enforce the contractual waiver

of class action lawsuits, and to stay the litigation pursuant to the Texas Arbitration

Act (“TAA”), Sections 171.001-171.098 of the Texas Civil Practice and Remedies

Code, and the Federal Arbitration Act (“FAA”), 9 U.S.C.A. §§ 1-16.

The motion was assigned for hearing to the 166th District Court of Bexar

County, Texas. After conducting an oral hearing on the motion, the trial court

denied the motion in its entirety and signed the order from which the Respondents

ii
appealed.

The interlocutory appeal was submitted for ruling after oral argument and

full briefing, including several supplemental briefs filed by both parties. A three-

judge panel of the Fourth Court of Appeals reversed the ruling of the trial court,

and rendered judgment in favor of arbitration and the waiver of the class actions,

with one justice dissenting. After the ruling was issued, Petitioners’ moved for

rehearing and en banc review. Both motions were considered by the appellate

court (together with the Respondents’ response) and were denied.

iii
TABLE OF CONTENTS

STATEMENT OF THE CASE .................................................................................. i
SUMMARY OF THE ARGUMENT ........................................................................9

STATEMENT OF FACTS ......................................................................................12

ARGUMENT ...........................................................................................................13

A. The Majority Opinion correctly applied the proper standards of review to
questions of law and findings of fact.................................................................13

B. The Majority Opinion correctly applied the law governing the burdens of proof
on the issues raised by the parties in the trial court ...........................................17
C. There is no split of authority justifying further review by this Court ...............21

I. The PLS Memorandum Opinion ..................................................................22

II. The Harrison Opinion ...................................................................................25
CONCLUSION ........................................................................................................26

PRAYER ..................................................................................................................27
CERTIFICATE OF COMPLIANCE .......................................................................28
CERTIFICATE OF SERVICE ................................................................................29

iv
TABLE OF AUTHORITIES

Page(s)

Cases
Amalgamated Local No. 55, United Automobile, Aerospace &
Agricultural Implement Workers of Am. v. Metal and Alloy Div. of
Silver Creek Precision Corp.,
396 F.Supp. 667 (W.D. N.Y. 1975) .................................................................... 16

AT&T Mobility v. Concepcion,
563 U.S. 333 (2011) .......................................................................................... 2, 9
AT&T Technologies, Inc. v. Communications Workers of Am.,
475 U.S. 643 (1986) ................................................................................1, 3, 7, 11
Capital Income Properties v. Blackmon,
843 S.W.2d 22 (Tex. 1992)................................................................................... 9

Consorcio Rive, S.A. De C.V. v. Briggs of Cancun, Inc.,
134 F.Supp.2d 789 (E.D. La. 2001) .................................................................... 16

Cooper Indus., LLC v. Pepsi-Cola Metro. Bottling Co., Inc.,
2015 Tex. App. LEXIS 8882 (Tex. App.—Houston [14th Dist.],
August 25, 2015)................................................................................................... 9

DirectTV, Inc. v. Imburgia,
___ U.S. ___, 136 S.Ct. 463 (2015).................................................................. 2, 9
G.T. Leach Builders, LLC v. Sapphire V.P., L.P.,
458 S.W.3d 502 (Tex. 2015) ......................................................................6, 7, 12

Garcia v. Huerta,
340 S.W.3d 864 (Tex. App.—San Antonio 2011, pet. denied) ............................ 7

Gatlin v. P.O.A. Criscione Star #16195,
2008 WL 2745956 .............................................................................................. 16

Griffin v. Burlington Volkswagon, Inc.,
411 N.J.Super. 515, 988 A.2d 101 (NJ. App. Div. 2010) .................................. 16

v
Horizon Health Corp. v. Tyler-Holmes Memorial Hosp.,
284 F. Supp. 2d 439 (N.D. Miss. 2003)........................................2, 3, 5, 8, 10, 11

In re Amos,
397 S.W.3d 309 (Tex. App.—Dallas 2013, orig. proceeding)
(following Bell v. State, 2006 WL 3628916, at *5 (Tex. App.—
Houston [1st Dist.] 2006, no pet.)....................................................................... 15

In re Christus Spohn Health System Corp.,
231 S.W.3d 475 (Tex. App.—Corpus Christi-Edinburg 2007, orig.
proceeding) ...................................................................................................14, 15

In re Fleetwood Homes,
257 S.W.3d 692 (Tex. 2008) ................................................................................ 7
In re Flores,
2016 WL 890969 (Tex. App.—Dallas 2016, orig. proceeding) ......................... 15
In re Jeffory Blackard,
Cause Nos. 5-16-00478, 5-16-00479, 5-16-00480 (Tex. App.—
Dallas, April 29, 2016, orig. proceeding) ........................................................... 15
In re Kellogg Brown & Root,
166 S.W.3d 732 (Tex. 2005) ................................................................................ 6

In re Labatt Food Serv., L.P.,
279 S.W.3d 640 (Tex. 2009) (orig. proceeding) .................................................. 7
In re Rubiola,
334 S.W.3d 220 (Tex. 2011) ................................................................................ 6

In re Weekley Homes, L.P.,
180 S.W.3d 127 (Tex. 2005) ................................................................................ 9

In re Wingfield, 171 S.W.3d 374, 381 (Tex. App.—Tyler 2005, orig.
proceeding) ......................................................................................................... 15

J.M. Davidson, Inc. v. Webster,
128 S.W.3d 223 (Tex. 2003) ......................................................................6, 7, 11
Kennedy Hodges, L.L.P. v. Gobellan,
433 S.W.3d 542 (Tex. 2014) ................................................................................ 7

vi
McReynolds v. Elston,
222 S.W.3d 731 (Tex. App.—Houston [14th Dist.] 2007, orig.
proceeding) ......................................................................................................... 11

Mendelsohn v. A&D Catering Corp.,
119 Misc.2d 581, 464 N.Y.S.2d 331 (N.Y. 1983) .............................................. 16
Municipal Energy Agency of Mississippi v. Big Rivers Elec. Corp.,
804 F.2d 338 (5th Cir. 1986) ............................................................2, 3, 7, 10, 11
Myers v. Rosenberg,
1986 WL 3329 (N.D. Ill. 1986) .......................................................................... 16

NCP Finance Ltd. Partnership v. Escatiola,
350 S.W.3d 152 (Tex. App.—San Antonio 2011, no pet.) ........................2, 9, 17
Perry Homes v. Cull,
258 S.W.3d 580 (Tex. 2008) .............................................................................. 12
Pilot Travel Ctrs., LLC v. McCray,
416 S.W.3d 168 (Tex. App.—Dallas 2103, no pet.) .......................................... 11

Prescott-Follett & Assocs., Inc. v. Delasa/Prescott Folett & Assocs.,
2002 WL 31528463 (E.D. La. 2002) .................................................................. 16

Preston v. Ferrer,
552 U.S 346 (2008) ............................................................................................... 9
Primerica Life Ins. Co. v. Brown,
304 F.3d 469 (5th Cir. 2002) ........................................................2, 3, 5, 7, 10, 11

Principal Investments v. Harrison,
2016 WL 166011, 132 Nev. Adv. Op. 2, ___ P.3d ___ (2016).......................... 17

Smith Barney Shearson, Inc. v. Boone,
838 F. Supp. 1156 (N.D. Tex. 1993) ................................................2, 3, 8, 10, 11

Snap-On Tools Corp. v. Mason,
18 F.3d 1261 (5th Cir. 1994) ..................................................................2, 3, 7, 11

Southland Corp. v. Keating,
465 U.S. 1 (1984) .................................................................................................. 9

vii
Southwind Group, Inc. v. Landwehr,
188 S.W.3d 730 (Tex. App.—Eastland 2006, orig. proceeding) ....................... 11

Suburban Leisure Center, Inc. v. AMF Bowling Products, Inc.,
468 F.3d 523 (8th Cir. 2006) .............................................................................. 10

Subway Equip. Leasing Corp. v. Forte,
169 F.3d 324 (5th Cir. 1999) .............................................................................. 16

Taft v. Burttram,
254 Ga. 687, 333 S.E.2d 585 (1985) .................................................................. 17

Tuscan Builders, L.P. v. 1437 SH6 L.L.C.,
438 S.W.3d 717 (Tex. App.—Houston [1st Dist.] 2014, pet.
denied)............................................................................................................. 7, 11
Venture Cotton Co-op v. Freeman,
435 S.W.3d 222 (Tex. 2014) ................................................................................ 6

Statutes
Federal Arbitration Act (FAA) ................................. 3, 5, 7, 9, 10, 11, 13, 14, 17, 18

Texas Arbitration Act (TAA)..................................................................... iii, 5, 9, 11

TEX. CIV. PRAC. & REM. CODE § 51.016 .....................................................................i

TEX. CIV. PRAC. & REM. CODE § 171.021(b) ...................................................6, 7, 11
TEX. CIV. PRAC. & REM. CODE §§ 171.001-171.098 ................................................ ii

9 U.S.C.A. §§ 1-16.................................................................................................... ii

Other Authorities
Federal Rules of Civil Procedure Rule 12(b).........................................10, 11, 12, 14

Texas Rules of Appellate Procedure Rule 28.1 ........................................................ ii

viii
TO THE HONORABLE SUPREME COURT:

Respondents, Cash Biz, LP, Cash Zone, LLC d/b/a Cash Biz, and Redwood

Financials, LLC (“Respondents”), present this Response in opposition to the

Petition for Review filed by Petitioners, Hiawatha Henry, Addie Harris, Montray

Norris, and Roosevelt Coleman, Jr., on behalf of themselves and for all other

similarly situated (“Petitioners”).

_____________________________________________________________________

SUMMARY OF THE ARGUMENT
_____________________________________________________________________

The Respondents recognize that they are members of an industry whose

business model and practices have been the subject of recent public criticism. This

criticism, regardless of its accuracy or fairness, has fostered a negative public

perception of the industry. The Petitioners’ (as well as the Amicus’) substantive

allegations about the merit of the underlying action (including their reliance on

materials such as a Texas Appleseed Report and various newspaper articles)

present arguments, inferences, conclusions and unverified quotes from out-of-court

interviews that build-on and re-enforce this public perception. The Petitioners

promote this public perception as a reason for granting their Petition for Review.

However, the merit of the Petitioners’ underlying allegations was not for the

lower courts, or for this Court, to decide at this stage of the proceeding. AT&T
Technologies, Inc. v. Communications Workers of Am., 475 U.S. 643, 649 (1986);

Primerica Life Ins. Co. v. Brown, 304 F.3d 469, 471 (5th Cir. 2002); Snap-On Tools

Corp. v. Mason, 18 F.3d 1261, 1267 (5th Cir. 1994); Municipal Energy Agency of

Mississippi v. Big Rivers Elec. Corp., 804 F.2d 338, 342 (5th Cir. 1986); Horizon

Health Corp. v. Tyler-Holmes Memorial Hosp., 284 F. Supp. 2d 439, 441 (N.D.

Miss. 2003); Smith Barney Shearson, Inc. v. Boone, 838 F. Supp. 1156, 1158 (N.D.

Tex. 1993). The Fourth Court of Appeals’ Majority Opinion (“Majority

Opinion”), and its decisions to deny a rehearing or en banc review, are consistent

with this principle, as well as federal and Texas law enforcing arbitration and

waiver-of-class-action provisions. See DirectTV, Inc. v. Imburgia, ___ U.S. ___,

136 S.Ct. 463 (2015); AT&T Mobility v. Concepcion, 563 U.S. 333 (2011); NCP

Finance Ltd. Partnership v. Escatiola, 350 S.W.3d 152, 155 (Tex. App.—San

Antonio 2011, no pet.).

In fact, the fallacy at the heart of the Petitioners’ (and Amicus’) argument

has been, and continues to be, their total reliance upon the alleged merit of the

underlying case to establish defenses to substantive arbitrability. That is, the

Petitioners argue that the alleged operative facts giving rise to their causes of

action (i.e., that the Respondents’ presentation of information and criminal

complaints to various district attorneys allegedly constituted an improper attempt

to collect a civil debt in violation of tort and statutory law) prove their defenses to

10
substantive arbitrability. Actually, the Petitioners presented no defense to

substantive arbitrability other than their reliance on the operative facts of their

underlying claim. So, when it denied the motion to compel arbitration based on

the Petitioners’ arguments, the trial court necessarily analyzed and pre-judged the

merit of the Petitioners’ underlying allegations. Unfortunately, the dissenting

opinion in the Fourth Court of Appeals makes this same fundamental error.

When deciding the issue of arbitrability under the Federal Arbitration Act

(“FAA”), a trial court is legally prohibited from considering the merits of an

underlying claim or defense. AT&T Technologies, Inc., 475 U.S. at 649; Primerica

Life Ins. Co., 304 F.3d at 471; Snap-On Tools Corp., 18 F.3d at 1267; Municipal

Energy Agency of Mississippi, 804 F.2d at 342; Horizon Health Corp., 284 F.

Supp. 2d at 441; Smith Barney Shearson, Inc., 838 F. Supp. at 1158. Applying this

rule to the present case, the Petitioners never presented a cognizable defense to

substantive arbitrability to either the trial court, or the Court of Appeals. Instead,

they simply have argued the merit of their allegations in underlying case as the

reason for denying arbitration.1

1
Petitioners now refer to a recent, pre-election newspaper article from the San Antonio Express-
News, which prominently contained an interview with Petitioners’ counsel. This self-serving
article discusses the Fourth Court’s decision, and campaign contributions to the authoring justice
of the Majority Opinion by the law firm representing the Respondents, largely from the
perspective of Petitioners’ counsel. Petitioners argue that the mere existence of this article is
evidence as to why this Court should grant review. This tactic of impugning the integrity of
those who refuse to adopt the Petitioners’ arguments adds nothing to the merit of the Petition.
The reference to the article is not evidence, and should be disregarded by this Court.

11
Consequently, the Majority Opinion correctly avoided wading into the merit

of the Petitioners’ underlying allegations, and correctly applied the well-

established Texas and Federal law governing substantive arbitrability to reverse the

trial court’s order.

Because the Majority Opinion correctly applied the law to this case, this

Petition for Review should be denied.

_____________________________________________________________________

STATEMENT OF FACTS
_____________________________________________________________________

It is the Respondents’ position that the Petitioners’ Statement of Facts is

essentially a lengthy argument of the allegations they believe support their

underlying lawsuit. As such, that section of the Petition is mostly irrelevant to the

resolution of the issue of substantive arbitrability before this Court, regardless of

its accuracy—which the Respondents vehemently contest.

Instead, the Respondents present the following uncontested facts, which are

relevant to the issue before this Court:

 the Petitioners entered into transactions with the Respondents memorialized
by the Loan Contracts, which contained a broad-form arbitration and waiver-
of-class-action provision;

 the Respondents submitted information and complaints to various state
prosecutors concerning behavior of the Petitioners, which the Respondents

12
believed constituted criminal conduct, but otherwise did not pursue any civil
proceedings against the Petitioners;

 the Petitioners brought the present action alleging that they were damaged as
result of the Respondents’ conduct, which the Petitioners allege constituted
an improper attempt to collect a civil debt in violation of tort and statutory
law;

 the Respondents sought to enforce the Loan Contracts by moving to compel
arbitration and enforce the waiver-of-class action provision;

 the trial court denied the motion, finding that the Respondents conduct
giving rise to the Petitioners’ substantive allegations also waived
enforcement of the arbitration provision; and

 the Fourth Court of Appeals, in a 2-1 opinion, reversed the trial court order,
and rendered judgment enforcing the arbitration and waiver-of-class action
provision of the Loan Contracts.

_____________________________________________________________________

ARGUMENT
_____________________________________________________________________

A. The Majority Opinion correctly applied the proper standards of
review to questions of law and findings of fact
Under both the TAA and the FAA, the movant seeking to compel has the

initial burden to prove, and the court must initially decide, only two issues:2

1. Is there a valid arbitration agreement; and

2. If so, does the agreement encompass the claim.
2
Federal Courts also recognize another step, which requires the trial court to determine whether
arbitration of the dispute would be prohibited by another law. Primerica Life Ins. Co., 304 F.3d
at 471; Horizon Health Corp., 284 F. Supp. 2d at 441. The Appellees did not raise this issue in
the trial court, or to this Court, and they have not presented any such law to this Court in their
Motion.

13
In re Rubiola, 334 S.W.3d 220, 223 (Tex. 2011); In re Kellogg Brown & Root, 166

S.W.3d 732, 737 (Tex. 2005); J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223,

227 (Tex. 2003). Once the movant meets its burden on these two elements, the

burden of proof shifts to the non-movants to prove defenses to arbitrability,

including waiver and prejudice. Venture Cotton Co-op v. Freeman, 435 S.W.3d

222, 227 (Tex. 2014); J.M. Davidson, Inc., 128 S.W.3d at 227.

As the Majority Opinion correctly noted, the first element of the

Respondents’ burden of proof—whether a valid arbitration agreement existed

between the parties—was not contested by the Petitioners. Therefore, the only

element of the Respondents’ initial burden of proof contested by the Petitioners in

the trial court was whether the dispute fell within the scope of the arbitration

provision. Once that burden was met by the Respondents, the burden of proof

shifted to the Petitioners to provide relevant evidence of waiver and prejudice,

which this Court has found to be a “high hurdle” to overcome. G.T. Leach

Builders, LLC v. Sapphire V.P., L.P., 458 S.W.3d 502, 512 (Tex. 2015).

The questions as to whether the disputes come within the scope of the

arbitration provision, and whether the relevant evidence presented by the non-

movant proves waiver and prejudice, are questions of law to be resolved by the

trial court. TEX. CIV. PRAC. & REM. CODE § 171.021(b); J.M. Davidson, Inc., 128

S.W.3d at 227; G.T. Leach Builders, LLC, L.P., 458 S.W.3d at 519-20. Then,

14
appellate courts apply the de novo standard of review to the trial court’s

determinations of these legal questions. G.T. Leach, Builders L.L.C., 458 S.W.3d

at 511; Kennedy Hodges, L.L.P. v. Gobellan, 433 S.W.3d 542, 545 (Tex. 2014); In

re Fleetwood Homes, 257 S.W.3d 692, 694 (Tex. 2008) (citing Perry Homes v.

Cull, 258 S.W.3d 580, 590, 598 (Tex. 2008)); J.M. Davidson, Inc., 128 S.W.3d at

227.

If the trial court has to make findings of fact in order to resolve the questions

of law, the trial court makes those findings by comparing the arbitration provision

with the pleadings and any supporting affidavits or discovery. TEX. CIV. PRAC. &

REM. CODE § 171.021(b); J.M. Davidson, Inc., 128 S.W.3d at 227. Although the

appellate courts defer to the trial court’s findings of fact under the “abuse of

discretion” standard, that deference is limited to those fact findings supported by

the record. In re Labatt Food Serv., L.P., 279 S.W.3d 640, 643 (Tex. 2009) (orig.

proceeding); Garcia v. Huerta, 340 S.W.3d 864, 868 (Tex. App.—San Antonio

2011, pet. denied). Federal law governing the FAA further limits the trial court’s

scope of review by prohibiting courts from considering the merits of the

underlying action when making findings of fact and resolving questions of law.

AT&T Technologies, Inc., 475 U.S. at 649; Primerica Life Ins. Co., 304 F.3d at

471; Snap-On Tools Corp., 18 F.3d at 1267; Municipal Energy Agency of

15
Mississippi, 804 F.2d at 342; Horizon Health Corp., 284 F. Supp. 2d at 441; Smith

Barney Shearson, Inc., 838 F. Supp. at 1158.

The Majority Opinion correctly applied these standards of review, and the

legal presumptions that strongly favor arbitration, by considering the factual

findings of the trial court relevant to the legal questions that were addressed and

decided by the trial court. Applying the de novo standard to the second element of

the Respondents’ burden, the Majority found that the dispute as pled by the

Petitioners fell within the scope of the broad-form arbitration provision. Then, the

Majority looked at the relevant factual evidence produced by the Petitioners to

support their claim of waiver and prejudice—proof that the Respondents were the

complainants in several criminal actions involving the Petitioners—and correctly

determined that those facts do not clear the “high hurdle” of proof required to show

waiver or prejudice.

What the Petitioners continue to seek is not a proper application of the

“abuse of discretion” standard to the trial court’s factual findings, but rather a

ruling on the merit of their underlying action by relying on third-party reports and

newspaper articles to argue that their claims have merit, and that the merit of those

claims should defeat enforcement of the arbitration provision. Instead, the

Majority Opinion correctly refused to follow the trial court’s fact findings to the

extent that they were based on an analysis of the merits of the underlying action.

16
Because the Majority Opinion correctly applied both the proper standards of

review to the trial court’s order, this Petition for Review should be denied.

B. The Majority Opinion correctly applied the law governing the
burdens of proof on the issues raised by the parties in the trial
court
The Respondents seek to enforce the arbitration agreement containing the

waiver-of-class-action provision under both the TAA and the FAA. When

applying FAA, state courts must recognize and apply the federal substantive law of

arbitrability. Preston v. Ferrer, 552 U.S 346, 349 (2008); see Southland Corp. v.

Keating, 465 U.S. 1 (1984). For example, Texas courts applying the FAA are

generally required to enforce broad-form arbitration provisions that contain

waiver-of-class clauses. See generally, DirectTV, Inc., supra.; AT&T Mobility,

supra.; see also, NCP Finance Ltd. Partnership, 350 S.W.3d at 155.

Consistent with this requirement, this Court has found that the federal

substantive law of arbitration embodied in the FAA is part of the substantive law

of Texas. Capital Income Properties v. Blackmon, 843 S.W.2d 22, 23 (Tex. 1992).

Therefore, when applying the FAA, Texas trial courts are required to apply the

procedural rules and substantive law of Texas, which includes the federal

substantive law of embodied in the FAA, to determine whether the parties must

arbitrate. In re Weekley Homes, L.P., 180 S.W.3d 127, 130 (Tex. 2005); Cooper

17
Indus., LLC v. Pepsi-Cola Metro. Bottling Co., Inc., 2015 Tex. App. LEXIS 8882,

*6-8 (Tex. App.—Houston [14th Dist.], August 25, 2015).

The Petitioners note that Federal courts procedurally treat a motion to

compel arbitration as a form of motion to dismiss under Rule 12(b) of the Federal

Rules of Civil Procedure. In accordance with that rule, Federal courts treat the

non-movants factual pleadings as true when reviewing the motion to compel. See

Suburban Leisure Center, Inc. v. AMF Bowling Products, Inc., 468 F.3d 523, 525

(8th Cir. 2006). But, this Federal rule of procedure is neither a substantive rule of

law under the FAA, nor is it used by the Federal courts to expand the evidence that

is relevant to the issues of arbitrability, waiver, or prejudice. See, e.g., Id., at 525-

27. Simply put, Rule 12(b) of the Federal Rules of Civil Procedure is not part of

the federal substantive law of arbitrability embodied in the FAA.

In fact, even Federal courts limit the application of the rule that the factual

pleadings are to be taken as true in the arbitration context to the legal

determination as to whether the nature of the dispute falls within the scope of the

arbitration provision. Primerica Life Ins. Co., 304 F.3d at 471; Municipal Energy

Agency of Mississippi, 804 F.2d at 342; Horizon Health Corp., 284 F. Supp. 2d at

441; Smith Barney Shearson, Inc., 838 F. Supp. at 1158; see, e.g., Suburban

Leisure Center, Inc., 468 F.3d at 525-27. In making that determination, the

Federal courts focus only on the nature of the dispute as pled and are prohibited

18
from analyzing the merits of the underlying action. AT&T Technologies, Inc., 475

U.S. at 649; Primerica Life Ins. Co., 304 F.3d at 471; Snap-On Tools Corp., 18

F.3d at 1267; Municipal Energy Agency of Mississippi, 804 F.2d at 342; Horizon

Health Corp., 284 F. Supp. 2d at 441; Smith Barney Shearson, Inc., 838 F. Supp. at

1158.

This application of the pleading rule under Federal Rule 12(b) is consistent

with the burdens each party has during the summary proceeding on substantive

arbitrability as applied by Texas courts. The two initial elements for which the

movant has the burden are satisfied by a review of the pleadings and the arbitration

provision. TEX. CIV. PRAC. & REM. CODE § 171.021(b); J.M. Davidson, Inc., 128

S.W.3d at 227. Once the movant’s burden is met, however, the non-movant has

the burden to present additional evidence of waiver and prejudice to defeat

enforcement of the arbitration provision, and the standard for determining waiver

is the same under both the FAA and the TAA (the non-movant must show that the

movant substantially invoked the judicial process). Tuscan Builders, L.P. v. 1437

SH6 L.L.C., 438 S.W.3d 717, 720 (Tex. App.—Houston [1st Dist.] 2014, pet.

denied); Pilot Travel Ctrs., LLC v. McCray, 416 S.W.3d 168, 182 (Tex. App.—

Dallas 2103, no pet.); McReynolds v. Elston, 222 S.W.3d 731, 741 (Tex. App.—

Houston [14th Dist.] 2007, orig. proceeding); Southwind Group, Inc. v. Landwehr,

188 S.W.3d 730, 735 (Tex. App.—Eastland 2006, orig. proceeding). Courts are to

19
determine whether the non-movant met its burden using the “totality of the

circumstances” standard. G. Leach Builders, LLC, 458 S.W.3d at 512; Perry

Homes, 258 S.W.3d 589-90. Because this portion of the proceeding requires the

presentation of “additional evidence,” the Federal pleading rule is simply

inapplicable to determining whether the burden has been met by the non-movant.

So, even assuming that a rule of pleading similar to the rule under Federal

Rule 12(b) applies to a proceeding in a Texas state court, it does not apply as

broadly as the Petitioners argue so as to relieve them from producing admissible

relevant evidence on the issues of waiver and prejudice. Again, the only relevant

evidence presented in the trial court by the Petitioners to meet their high burden on

the issues of waiver and prejudice was a compilation of online records showing

that the Respondents were complainants in several criminal cases—a point that

Respondents concede. The other materials presented to the trial court by the

Petitioners—the Petitioners’ conclusory pleadings, the Texas Appleseed Report

and newspaper articles—contain arguments, inferences, conclusions and unverified

quotes from out-of-court interviews that, at most, support the alleged merit of the

Petitioners’ underlying claims; they present no admissible evidence relevant to the

“totality of the circumstances” standard applicable to the issue of waiver or

prejudice. G. Leach Builders, LLC, 458 S.W.3d at 512; Perry Homes, 258 S.W.3d

589-90.

20
Based on this record from the trial court, the Majority Opinion correctly

applied the law pertaining to waiver and prejudice to find that being the

complainant in criminal proceedings pre-dating the Petitioners’ current suit does

not constitute waiver or prejudice of the contractual right to arbitrate the

Petitioners’ underlying civil action. To have considered the arguments, inferences,

conclusions and unverified quotes from out-of-court interviews submitted by the

Petitioners as evidence of waiver and prejudice, the appellate court would have had

to analyze and pre-judge the merit of the Petitioners’ underlying action, which it is

legally prohibited from doing under federal law when resolving the issue of

substantive arbitrability.

Therefore, the Majority Opinion correctly applied the pleading rules to

review the trial court’s order, and this Petition for Review should be denied.

C. There is no split of authority justifying further review by this
Court
Although Texas courts look to the decisions of Federal courts and other

sister-state courts when construing and applying the FAA, they are not bound by

distinguishable decisions by those courts. Again, the Petitioners want this Court to

find that the Majority Opinion conflicts with the decisions of one Federal district

court and one sister-state court, when those opinions are clearly distinguishable

21
and when both courts impermissibly analyzed and pre-judged the merits of the

non-movants’ underlying actions.

I. The PLS Memorandum Opinion
The federal district court’s memorandum opinion in Lucinda Vine, Kristy

Pond, on behalf of themselves and for all others similarly situated v. PLS Financial

Services, Inc. and PLS Loan Store of Texas, Inc., Civil Action No. 3:16-cv-00031-

PRM (W.D. Tex. [El Paso Division] June 6, 2016) (“PLS Opinion”), is

distinguishable for several reasons.

First, the district court broadly applied the Federal rule of pleading under

Rule 12(b) beyond a review of the movant’s initial burden on the two elements of

arbitrability, to find that the non-movants met their burden of proof on the issues of

waiver and prejudice simply based on the allegations contained in their pleading.

By reaching its decision in this way, the district court relied on a federal procedural

rule, rather than the federal substantive law embodied in the FAA. Moreover, by

using the procedural rule in this way, the district court arguably misapplied the

pleading rule to relieve the non-movants of their burden to produce evidence of

waiver and prejudice and impermissibly analyzed and pre-judged the merit of the

underlying action. In fact, the district court even delved into an analysis of the

elements of the underlying action as it made its determination, which federal law

prohibits.

22
Second, the PLS Opinion relies too extensively on In re Christus Spohn

Health System Corp., 231 S.W.3d 475 (Tex. App.—Corpus Christi-Edinburg 2007,

orig. proceeding), which was briefed and argued extensively to the appellate court.

The circumstances that gave rise to the ruling in Christus Spohn are extraordinarily

unique, because a private party was inexplicably allowed to intervene in a criminal

case to pursue a contempt motion when Texas law prohibits such an intervention

by a private party. See In re Amos, 397 S.W.3d 309, 314 (Tex. App.—Dallas

2013, orig. proceeding) (following Bell v. State, 2006 WL 3628916, at *5 (Tex.

App.—Houston [1st Dist.] 2006, no pet.), and In re Wingfield, 171 S.W.3d 374, 381

(Tex. App.—Tyler 2005, orig. proceeding)); In re Flores, 2016 WL 890969, at *1

(Tex. App.—Dallas 2016, orig. proceeding); In re Jeffory Blackard, Cause Nos. 5-

16-00478, 5-16-00479, 5-16-00480 (Tex. App.—Dallas, April 29, 2016, orig.

proceeding). This factor alone makes the Christus Spohn opinion an outlier with

little or no precedential value beyond its unique facts.

However, the PLS Opinion also ignores the fact that the court in Christus

Spohn narrowed the application of its ruling by stating that the civil litigant’s

intervention in the criminal case would not alone establish waiver of the right to

arbitration. Id., at 481-82. Instead, the PLS Opinion read Christus Spohn as

broadly concluding “that a party can invoke the judicial process by strategically

23
filing a contempt motion in a related criminal matter.” That conclusion is a

misreading of Christus Spohn.

Third, the PLS Opinion misapplies the definition of “invoking” provided by

the Fifth Circuit in Subway Equip. Leasing Corp. v. Forte, 169 F.3d 324, 328 (5th

Cir. 1999). Although the opinion contains a correct quotation of the Subway

definition, it ignores Texas law by assuming that a private party can implement or

enforce the criminal judicial process when it presents a complaint to a district

attorney, and by failing to address the many analogous Texas cases (cited in the

Majority Opinion) that have found that the mere filing of pleadings in a civil case

does not constitute a “substantial invocation of the judicial process.” Instead, the

majority of courts that have ever addressed the question of the whether the filing of

a criminal complaint can constitute “substantial invocation of the judicial process,”

have followed the reasoning of Subway to determine that it does not. See, e.g.,

Griffin v. Burlington Volkswagon, Inc., 411 N.J.Super. 515, 988 A.2d 101, 104

(NJ. App. Div. 2010); Gatlin v. P.O.A. Criscione Star #16195, 2008 WL 2745956,

at *3; Prescott-Follett & Assocs., Inc. v. Delasa/Prescott Folett & Assocs., 2002

WL 31528463, *4-5 (E.D. La. 2002); Myers v. Rosenberg, 1986 WL 3329, *2

(N.D. Ill. 1986); Amalgamated Local No. 55, United Automobile, Aerospace &

Agricultural Implement Workers of Am. v. Metal and Alloy Div. of Silver Creek

Precision Corp., 396 F.Supp. 667, (W.D. N.Y. 1975); c.f., Mendelsohn v. A&D

24
Catering Corp., 119 Misc.2d 581, 464 N.Y.S.2d 331 (N.Y. 1983); c.f., Consorcio

Rive, S.A. De C.V. v. Briggs of Cancun, Inc., 134 F.Supp.2d 789, 795-97 (E.D. La.

2001); but see, Taft v. Burttram, 254 Ga. 687, 333 S.E.2d 585, 586 (1985)

(analyzing the facts in the context of the rules of the National Association of

Securities Dealers, rather than the FAA).

For these reasons, the PLS Opinion is distinguishable from the present case,

and it should not be given weight by this Court in determining whether to grant the

Petition.

II. The Harrison Opinion
In Principal Investments v. Harrison, 2016 WL 166011, 132 Nev. Adv. Op.

2, ___ P.3d ___ (2016), the Nevada Supreme Court was not dealing with a criminal

case, and the movant had been the plaintiff in the prior civil actions at issue.

Moreover, the arbitration provision had allowed the plaintiff to choose whether to

proceed in a justice court or arbitration, and the proceeding being reviewed was

analogous to a Bill of Review proceeding under Texas law. So, unlike the present

case, the Court in Harrison found that the lender had invoked the judicial process

in a civil proceeding within the scope of the arbitration agreement. Therefore,

25
Harrison is distinguishable, but not inconsistent with, the Majority Opinion in this

case.3

CONCLUSION
Although the allegations involving prior criminal proceedings make the

underlying factual dispute in this case somewhat unique, the law to be applied to

the question of arbitrability is well-settled, and was correctly analyzed and applied

by the appellate court. Therefore, this case does not involve an issue of importance

to the jurisprudence of this State, which would require this Court’s review and

resolution.

Instead, the Majority Opinion of the Fourth Court of Appeals carefully and

correctly avoided pre-judging the merits of the Petitioners’ underlying action, and

was subject to further review and sustained by the full appellate court when it

denied rehearing and en banc review. The lower court correctly applied Texas and

Federal law construing and applying the FAA to the relevant evidence in the trial

court record.

In reality, what the Appellees seek is a de facto exception to the law

governing substantive arbitrability based on the nature of the allegations giving rise

to their underlying action. However, Federal and Texas law are clear that the
3
Finally, the Fourth Court’s prior decision in NCP Finance Ltd. Partnership is itself evidence
that there is no real split of authority in Texas on how to apply the broad-form provision at issue
in this case.

26
consideration of the merits is for the ultimate trier of fact—the arbitrator—not for

the court to decide in a summary proceeding to determine substantive arbitrability.

Therefore, this Petition for Review should be denied.

PRAYER
WHEREFORE, PREMISES CONSIDERED, Respondents request that the

Petition for Review be denied, and that they receive such other and further relief to

which they are justly entitled.

Respectfully submitted,

COATS ROSE, P.C.

By: /s/ Edward S. Hubbard
Edward S. Hubbard
State Bar No. 10131700
ehubbard@coatsrose.com
Patrick E. Gaas
State Bar No. 07562790
pgaas@coatsrose.com
Sam Arora
State Bar No. 24034287
sarora@coatsrose.com
9 Greenway Plaza, Suite 1100
Houston, Texas 77046-0307
(713) 651-0111
(713) 651-0220 facsimile

27
ATTORNEYS FOR THE APPELLANTS

CERTIFICATE OF COMPLIANCE
Pursuant to Rule 9.4(i)(3) of the Texas Rules of Appellate Procedure, the

undersigned certifies that this Response complies with the 4,500 word limit for this

Response in accordance with Rule 9.4(i)(2)(D). The word count from page 1

through the Prayer on page 19 is 4,266 words, excluding the parts of the brief

exempted by Rule 9.4(i)(1). This word court is based on the count provided by the

“word count” function of Microsoft Word 2010, which is the computer program

used to prepare this Response.

/s/ Edward S. Hubbard
Edward S. Hubbard

28
CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the foregoing document has
been sent to the following counsel via e-filing in accordance with the Texas Rules
of Appellate Procedure, on this 30th day of December, 2016:

Daniel R. Dutko
Hanszen LaPorte, L.L.P.
11767 Katy Freeway, Suite 850
Houston, Texas 77079
Counsel for Petitioners

Ricardo G. Cedillo
Davis, Cedillo & Mendoza, Inc.
755 E. Mulberry, Suite 500
San Antonio, Texas 78212
Counsel for Amicus Curiae Texas Appleseed

/s/ Edward S. Hubbard
Edward S. Hubbard

29
APPENDIX

Attached and incorporated by reference in Respondent’s Response to
Petition for Review is the following:

TAB 1 Memorandum Opinion in In re Jeffory Blackard
Amalgamated Local No. 55, United Auto., Aerospace and..., 396 F.Supp. 667 (1975)
89 L.R.R.M. (BNA) 2922, 77 Lab.Cas. P 11,051

Cases that cite this headnote
396 F.Supp. 667
United States District Court, W.D. New York.
[2] Labor and Employment
AMALGAMATED LOCAL NO. 55, UNITED Pensions and Other Benefits
AUTOMOBILE, AEROSPACE & AGRICULTURAL Arbitration clause in collective bargaining
IMPLEMENT WORKERS OF AMERICA, Plaintiff, agreement requiring arbitration of all issues
v. regarding interpretation or application of any
METAL AND ALLOY DIVISION OF SILVER term of the agreement applied to dispute
CREEK PRECISION CORPORATION, Defendant. as to whether there were arrearages of
employer's contributions to union welfare
No. Civ-74-397. fund required by the contract. Labor
| Management Relations Act, 1947, § 301, 29
June 19, 1975. U.S.C.A. § 185.

Union brought action to compel arbitration under 3 Cases that cite this headnote
collective bargaining agreement. On union's motion for
summary judgment, the District Court, Curtin, Chief
[3] Labor and Employment
Judge, held that arbitration clause applied to dispute as
Waiver and Estoppel
to whether there were arrearages in payments to union
welfare fund required by the contract; and that union had Union did not waive arbitration under
not waived arbitration either by filing a criminal charge collective bargaining agreement by filing
against one of the employer's officers or by filing unfair criminal charge against one of employer's
labor practice charge with the NLRB. officers under state labor law with respect to
the subject matter of the dispute, particularly
Plaintiff's motion for summary judgment granted. where union had already informed employer
of intention to arbitrate, or by filing unfair
labor practice charge with the NLRB,
particularly where the NLRB dismissed the
West Headnotes (3) charge because union's remedy was deemed
to be under contract arbitration provision.
Labor Law N.Y. § 198–c.
[1] Labor and Employment
Arbitration Favored; Presumption of 2 Cases that cite this headnote
Arbitrability
Labor and Employment
Scope of Inquiry; Merits of Controversy
Where party seeks to compel arbitration Attorneys and Law Firms
under a collective bargaining agreement,
court's role is narrowly limited to a *667 Lipsitz, Green, Fahringer, Roll, Schuller & James,
consideration whether the reluctant party did Buffalo, N.Y. (Richard Lipsitz, and Stuart M. Pohl,
agree to arbitrate the grievance, and order Buffalo, N.Y., of counsel), for plaintiff.
to arbitrate particular grievance should not
Moot, Sprague, Marcy, Landy, Fernbach & Smythe,
be denied unless it may be said with positive
Buffalo, N.Y. (John J. Phelan, Buffalo N.Y., of counsel),
assurance that the arbitration clause is not
for defendant.
susceptible of an interpretation that covers
the asserted dispute. Labor Management Opinion
Relations Act, 1947, § 301, 29 U.S.C.A. § 185.
CURTIN, Chief Judge.

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 1
Amalgamated Local No. 55, United Auto., Aerospace and..., 396 F.Supp. 667 (1975)
89 L.R.R.M. (BNA) 2922, 77 Lab.Cas. P 11,051

arbitrate the grievance.’ United Steelworkers of America
This is an action brought by Amalgamated Local No. 55 v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582, 80
pursuant to § 301 of the Labor Management Relations S.Ct. 1347, 1353, 4 L.Ed.2d 1409 (1960). Furthermore,
Act, 29 U.S.C. § 185, to compel arbitration under a
collective bargaining agreement. The agreement, which
was executed in 1968 and amended on September 1, 1972, an order to arbitrate the particular grievance should not
*668 contains an arbitration clause requiring all issues be denied unless it may be said with positive assurance
regarding interpretation or application of any term of that the arbitration clause is not susceptible of an
the agreement upon which the parties cannot agree to be interpretation that covers the asserted dispute. Doubts
submitted to the office of the New York State Board of should be resolved in favor of coverage. Id. at 582-83, 80
Mediation for a panel of nine names, from which the name S.Ct. at 1353.
of an arbitrator could be chosen to arbitrate the dispute. 1
In another case, United Steelworkers of America v.
The issue the plaintiff seeks to submit to arbitration
American Mfg. Co., 363 U.S. 564, 567-68, 80 S.Ct. 1343,
stems from defendant's alleged failure to contribute to an
1346, 4 L.Ed.2d 1403 (1960), decided on the same day as
employee welfare fund, as required by Article XI, Section
the above cited case, the role of the court was similarly
5 of the amended agreement. 2 The case is now before delineated:
the court on plaintiff's motion for summary judgment
brought pursuant to Rule 56 of the Federal Rules of Civil The function of the court is very limited when the
Procedure. parties have agreed to submit all questions of contract
interpretation to the arbitrator. It is confined to
The facts in this case are not in dispute. Defendant ascertaining whether the party seeking arbitration is
corporation terminated its manufacturing operations on making a claim which on its face is governed by the
or about August 13, 1973, at which time employees contract. Whether the moving party is right or wrong is
represented by plaintiff were laid off. 3 On September 14, a question of contract interpretation for the arbitrator.
1973, plaintiff union informed defendant that an arrearage In these circumstances the moving party should not be
in its contributions payable to the Local 55 UAW Welfare deprived of the arbitrator's judgment, when it was his
Fund, pursuant to Article XI, Section 5 of their collective judgment and all that it connotes that was bargained for.
bargaining agreement, had developed. Plaintiff received
no response and, therefore, again notified defendant Under the standards set forth above, and reiterated in
of the arrearage on February 27, 1974. At that time other Supreme Court cases, 4 this court must therefore
plaintiff also stated that if the amount was not paid initially make a determination whether the company
within ten days, the plaintiff would submit the dispute contractually bound itself to arbitrate. John Wiley & Sons,
to arbitration. Further letters followed in March and Inc. v. Livingston, 376 U.S. 543, 547, 84 S.Ct. 909, 11
April 1974, reiterating plaintiff's intention to arbitrate the L.Ed.2d 898 (1964); Atkinson v. Sinclair Refining Co.,
dispute. Thereafter plaintiff contacted the New York State 370 U.S. 238, 241, 82 S.Ct. 1318, 8 L.Ed.2d 462 (1962);
Mediation Board on March 26, 1974 and requested that Necchi v. Necchi Sewing Machine Sales Corp., 348 F.2d
a panel of nine names be submitted to the parties from 693 (2d Cir. 1965), cert. denied, 383 U.S. 909, 86 S.Ct. 892,
which an arbitrator could be selected pursuant to their 15 L.Ed.2d 664 (1966). After this primary determination
agreement. On April 11, 1974, plaintiff was informed by has been made, the decision of whether or not arbitration
both the Mediation Board and defendant's attorney that should be compelled can be made.
defendant refused to arbitrate the dispute. This action was [2] Plaintiff has submitted both the text of the arbitration
then begun on August 16, 1974. clause, Article VI, Section 4, and the insurance provision,
[1] The precise question raised by the plaintiff's summary Article XI, Section 5, contained in the September 1, 1972
judgment motion is whether the defendant's alleged failure contract, as amended. 5 Defendant has acknowledged
to pay into the union's welfare fund is an arbitrable dispute both the existence of this contract and the provisions
subject to the arbitration clause. In deciding this *669 in question. An issue has clearly arisen regarding
question, the role of the court under § 301 of the Labor
contributions to the welfare fund. 6 The arbitration
Management Relations Act has been narrowly limited to a
clause, in concise, unambiguous language, requires that all
consideration of ‘whether the reluctant party did agree to
disputes regarding any such term of the agreement must

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 2
Amalgamated Local No. 55, United Auto., Aerospace and..., 396 F.Supp. 667 (1975)
89 L.R.R.M. (BNA) 2922, 77 Lab.Cas. P 11,051

be submitted to arbitration. Since defendant has not given dispute between the parties; nor could it have served that
purpose since it was a criminal complaint based upon
the court any positive assurance that the insurance issue
different issues than those before this court and brought
is not covered by the arbitration clause, it is clear that
against an individual, Manuel Llop, not the defendant
the company has agreed to arbitrate disputes such as this.
corporation. The criminal court action was brought
John Wiley & Sons, Inc. v. Livingston, supra.
after plaintiff had informed defendant of its intention
to arbitrate the dispute if the amount was not paid
[3] Defendant has argued that plaintiff's motion for
to the welfare fund, clearly indicating that the criminal
summary judgment directing defendant to submit to
action was not brought in lieu of arbitration. Nor can
arbitration should not be granted because plaintiff has
plaintiff's action in filing a charge with the National Labor
repudiated its right to arbitration. This repudiation
Relations Board be construed as a waiver of their contract
occurred, according to defendant, through plaintiff's filing
rights to arbitration, Glass Bottle Blowers Association
of a criminal information *670 in the City Court
of the United States and Canada, AFL-CIO, et al. v.
of Buffalo on December 12, 1973, charging one of
Arkansas Glass Container Corp., 183 F.Supp. 829, 830-31
defendant's officers with a violation of § 198-c of the New
(E.D.Ark.1960), especially since the N.L.R.B. dismissed
York State Labor Law, 7 and through plaintiff's filing
the charge because defendant's remedy was deemed to be
an unfair labor practice charge with the National Labor
under the contract provision for arbitration. 9
Relations Board on April 18, 1974. 8 The court finds no
merit to defendant's argument that plaintiff has waived
arbitration. Only one circuit court of appeals has found Therefore, since it appears from the record that there is a
that a union's action in bringing suit in a federal district valid collective bargaining agreement between the parties
court against their employer for back wages, instead of which provides for arbitration of the present dispute,
seeking arbitration, was a waiver of the union's right to summary judgment *671 is granted for the plaintiff
compel arbitration. Morales Rivera v. Sea Land of Puerto against the defendant directing the defendant to submit to
Rico, Inc., 418 F.2d 725 (1st Cir. 1969). However, the arbitration. Plaintiff shall prepare judgment and present it
Morales Rivera case differs from the instant case in that to the court after notice to defendant.
the union had decided to file suit in the district court
instead of compelling arbitration under the collective So ordered.
bargaining agreement. In this case the action in City Court
All Citations
was not brought instead of arbitration. To the contrary,
plaintiff had informed defendant of the arrearage at the 396 F.Supp. 667, 89 L.R.R.M. (BNA) 2922, 77 Lab.Cas.
time the complaint was filed. The action instituted in P 11,051
City Court was not instituted to resolve the merits of the

Footnotes
1 Article VI, § 4 of the collective bargaining agreement, as amended, provides:
4. If the third step should fail to secure satisfactory settlement, the grievance may be submitted to the office of the New
York State Board of Mediation for a panel of nine (9) names.
(a) In the event that an arbitrator is required, he shall be selected from the arbitration panel provided either by mutual
agreement or by each party alternately striking off a name from the panel. The remaining name shall be the arbitrator
who shall arbitrate the grievance or grievances pending.
(b) The arbitrator shall fix and notify the parties of the time and place for arbitration of the grievance.
(c) Any issue involving the interpretation or application of any term of this agreement shall be initiated by the Union directly
at step 3. Upon the failure of the parties to agree, the Union may then appeal the issue to arbitration for a decision.
(d) The decision of the arbitrator shall be final and binding upon both parties, but he shall have no power either to
add to, subtract from or modify any of the terms, conditions or limitations of this agreement or any agreement made
supplementary hereto . . ..
2 Article XI, § 5 of the collective bargaining agreement, as amended, provides:
5. INSURANCE:

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 3
Amalgamated Local No. 55, United Auto., Aerospace and..., 396 F.Supp. 667 (1975)
89 L.R.R.M. (BNA) 2922, 77 Lab.Cas. P 11,051

(a) Effective February 1, 1972, the Company shall continue as a contributing employer to Local 55, UAW Welfare
Fund which has been established under an Agreement and Declaration of Trust dated September 1, 1958 which said
Agreement and Declaration of Trust the Company hereby ratifies and is deemed to be a part of this Agreement. The
Company will contribute the cost of $26.46 for each single, active working employee and $52.62 for each married, active
working employee to the Local 55, UAW Welfare Fund including employees on sick leave not to exceed twelve (12)
months for any one sick leave with an initial master list and subsequent monthly supplemental list for those for whom
premiums have been paid by the fifth (5th) day of each calendar mont . . ..
3 Defendant, in P6 of his answer, filed October 8, 1974, denies that the plaintiff's employee members were laid off.
4 For the third case in the famous Steelworkers' trilogy, see United States Steelworkers of America v. Enterprise Wheel
and Car Corp., 363 U.S. 593, 80 S.Ct. 1358, 4 L.Ed.2d 1424 (1960). The Second Circuit has applied the standard set
in the Steelworkers' trilogy, stating:
Only the most forceful evidence of a purpose to exclude the claim from arbitration can prevail. Strauss v. Silvercup Bakers,
353 F.2d 555, 557 (2d Cir. 1965). See also Publishers Association of New York City v. New York Mailers Union No. 6,
317 F.2d 624 (2d Cir. 1963).
5 Supra, nn. 1 and 2.
6 Plaintiff has stated that there have been arrearages in payments to the welfare fund, while defendant has denied the
allegation. Although it is not within the province of this court to pass on the merits of the allegation, it is clear that a
dispute does exist.
7 N.Y. Labor Law § 198-c (McKinney's Supp.1975) states:
1. In addition to any other penalty or punishment otherwise prescribed by law, any employer who is party to an agreement
to pay or provide benefits or wage supplements to employees or to a third party or fund for the benefit of employees
and who fails, neglects or refuses to pay the amount or amounts necessary to provide such benefits or furnish such
supplements within thirty days after such payments are required quired to be made, shall be guilty of a misdemeanor, and
upon conviction shall be punished as provided in section one hundred ninety-eight-a this article. Where such employer
is a corporation, the president, secretary, treasurer or officers exercising corresponding functions shall each be guilty
of a misdemeanor. 2. As used in this section, the term ‘benefits or wage supplements' includes, but is not limited to,
reimbursement for expenses; health, welfare and retirement benefits; and vacation, separation or holiday pay.
This charge was dismissed on February 24, 1974 because the court felt that plaintiff should seek other means of collecting
the monies due.
8 This charge was dismissed on May 24, 1974.
9 The reasons for the dismissal of the unfair labor charge by the National Labor Relations Board, similar to the reasons
of the City Court judge, did not go to the merits. According to a letter of the National Labor Relations Board dated May
24, 1974, the reasons for dismissal were as follows:
As a result of the investigation, it does not appear that further proceedings on the charge are warranted inasmuch as the
investigation revealed that all employees represented by the Charging Party were terminated more than eight months
ago as the Respondent closed its business for economic reasons. Furthermore, there was no successor to take over
and honor the collective bargaining agreement negotiated on behalf of the predecessor. It is also noted that the Union's
remedy for an enforcement of a contract in the circumstances herein is not within the jurisdiction of this Agency. I am,
therefore, refusing to issue complaint in this matter.

End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 4
AT & T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643 (1986)
106 S.Ct. 1415, 121 L.R.R.M. (BNA) 3329, 89 L.Ed.2d 648, 54 USLW 4339...

[2] Alternative Dispute Resolution
KeyCite Yellow Flag - Negative Treatment Existence and Validity of Agreement
Not Followed on State Law Grounds Local No. 1119, American 
Unless parties clearly and unmistakably
Federation State, County, and Mun. Employees, AFL-CIO v. Mesabi
provide otherwise, question of whether parties
Regional Medical Center, Minn.App., November 20, 1990
agreed to arbitrate is to be decided by court,
106 S.Ct. 1415
not arbitrator.
Supreme Court of the United States
2505 Cases that cite this headnote
AT & T TECHNOLOGIES, INC., Petitioner
v.
COMMUNICATIONS [3] Alternative Dispute Resolution
WORKERS OF AMERICA et al. Merits of Controversy
In deciding whether parties have agreed to
No. 84-1913. submit particular grievance to arbitration,
| court is not to rule on potential merits of
Argued Jan. 22, 1986. underlying claims.
|
Decided April 7, 1986. 2258 Cases that cite this headnote

Union sought intervention of court to compel arbitration
of dispute concerning company's layoff of employees. The [4] Alternative Dispute Resolution
United States District Court for the Northern District Construction in Favor of Arbitration
of Illinois, John F. Grady, J., ordered arbitration of Order to arbitrate particular grievance should
arbitrability issue, and employer appealed. The Court not be denied unless it may be said with
of Appeals, 751 F.2d 203, affirmed, and certiorari positive assurance that arbitration clause is
was granted. The Supreme Court, Justice White, held not susceptible of interpretation that covers
that it was for court, not arbitrator, to decide in asserted dispute; doubts should be resolved in
first instance whether parties to collective bargaining favor of coverage.
agreement intended to arbitrate grievances concerning
1332 Cases that cite this headnote
layoffs predicated on “lack of work” determination by
company.
[5] Labor and Employment
Vacated and remanded. Discharge and Layoff
It was for court, not arbitrator, to decide
Justice Brennan filed concurring opinion in which Chief in first instance whether parties to collective
Justice Burger and Justice Marshall joined. bargaining agreement intended to arbitrate
grievances concerning layoffs predicated on
“lack of work” determination by company.
West Headnotes (5)
900 Cases that cite this headnote

[1] Alternative Dispute Resolution
Contractual or Consensual Basis
Arbitration is matter of contract and party
cannot be required to submit to arbitration **1415 *643 Syllabus *
any dispute which he has not agreed so to
Petitioner employer and respondent Union are parties
submit.
to a collective-bargaining agreement covering telephone
1596 Cases that cite this headnote equipment installation workers. Article 8 of the agreement

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 1
AT & T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643 (1986)
106 S.Ct. 1415, 121 L.R.R.M. (BNA) 3329, 89 L.Ed.2d 648, 54 USLW 4339...

provides for arbitration of differences arising over bargaining agreements and arbitration clauses, or to
interpretation of the agreement. Article 9 provides that consider any other evidence that might demonstrate that
subject to certain limitations, but otherwise not subject to a particular grievance was not subject to arbitration. P.
the arbitration clause, petitioner is free to exercise certain 1420.
management functions, including the hiring, placement,
and termination of employees. Article 20 prescribes the 751 F.2d 203 (CA 7th 1984), vacated and remanded.
order in which employees will be laid off “[w]hen lack of
work necessitates Layoff.” The Union filed a grievance WHITE, J., delivered the opinion for a unanimous Court.
challenging petitioner's decision to lay off 79 installers BRENNAN, J., filed a concurring opinion, in which
from its Chicago location, claiming that there was no BURGER, C.J., and MARSHALL, J., joined, post, p. ---.
lack of work at that location and that therefore the
layoffs would violate Article 20. But petitioner laid off
the installers and refused to submit the grievance to Attorneys and Law Firms
arbitration on the ground that under Article 9 the layoffs
Rex E. Lee argued the cause for petitioner. With him on
were not arbitrable. The Union then sought to compel
the briefs were David W. Carpenter, Gerald D. Skoning,
arbitration by filing suit in Federal District Court, which,
Charles C. Jackson, Howard J. Trienens, Alfred A. Green,
after finding that the Union's interpretation of Article 20
and Joseph Ramirez.
was at least “arguable,” held that it was for the arbitrator,
not the court, to decide whether that interpretation had Laurence Gold argued the cause for respondents. With him
merit, and, accordingly, ordered petitioner to arbitrate. on the brief were Irving M. Friedman, Stanley Eisenstein,
The Court of Appeals affirmed. Harold A. Katz, David Silberman, and James Coppess.*

Held: The issue whether, because of express exclusion or * Briefs of amici curiae urging reversal were filed for the
other evidence, the dispute over interpretation of Article Chamber of Commerce of the United States by John S.
20 was subject to the arbitration clause, **1416 should Irving, Carl L. Taylor, and Stephen A. Bokat; and for
have been decided by the District Court and reviewed by the National Association of Manufacturers by Jan S.
the Court of Appeals, and should not have been referred Admundson and Gary D. Lipkin.
to the arbitrator. Pp. 1418-20.
David E. Feller filed a brief for the National Academy of
Arbitrators as amicus curiae urging affirmance.
(a) Under the principles set forth in the Steelworkers
Trilogy (Steelworkers v. American Mfg. Co., 363 U.S. 564, Opinion
80 S.Ct. 1343, 4 L.Ed.2d 1403; Steelworkers v. Warrior
& Gulf Navigation Co., 363 U.S. 574, 80 S.Ct. 1347, Justice WHITE delivered the opinion of the Court.
4 L.Ed.2d 1409; and Steelworkers v. Enterprise Wheel
& Car Corp., 363 U.S. 593, 80 S.Ct. 1358, 4 L.Ed.2d The issue presented in this case is whether a court
1424), it was the District Court's duty to interpret the asked to order arbitration of a grievance filed under a
collective-bargaining agreement and to determine whether collective-bargaining agreement must first determine that
the parties intended to arbitrate grievances concerning the parties intended to arbitrate the dispute, or whether
layoffs predicated on a “lack of work” determination that determination is properly left to the arbitrator.
by petitioner. If the court should determine that the
agreement so provides, then it would be for the arbitrator
to determine the relative merits of the parties' substantive I
interpretations of the agreement. Pp. 1418-20.
AT & T Technologies, Inc. (AT & T or the Company), and
*644 (b) This Court will not examine the collective- the Communications Workers of America (the Union)
bargaining agreement for itself and affirm the Court are parties to a collective-bargaining agreement which
of Appeals on the ground that the parties had agreed covers telephone equipment installation workers. Article
to arbitrate the dispute over the layoffs. It is not this 8 of this agreement *645 establishes that “differences
Court's function in the first instance to construe collective- arising with respect to the interpretation of this contract

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or the performance of any obligation hereunder” must by a lack of work but only whether the company *647
be referred to a mutually agreeable arbitrator upon the followed the proper order in laying off the employees.”
written demand of either party. This Article expressly does App. to Pet. for Cert. 10A.
not cover disputes “excluded from arbitration by other Finding that “the union's interpretation of Article 20 was
provisions of this contract.” 1 Article 9 provides that, at least ‘arguable,’ ” the court held that it was “for the
“subject to the limitations contained in the provisions arbitrator, not the court to decide whether the union's
of this contract, but otherwise not subject to the interpretation has merit,” and accordingly, ordered the
provisions of the arbitration clause,” AT & T is free Company to arbitrate. Id., at 11A.
to exercise certain management functions, including the
hiring and placement of employees and the termination of The Court of Appeals for the Seventh Circuit affirmed.
Communications Workers of America v. Western Electric
employment. 2 “When lack of work necessitates Layoff,”
Co., 751 F.2d 203 (1984). The Court of Appeals
Article 20 prescribes the order in which employees are to
understood the District Court to have ordered arbitration
be laid off. 3 of the threshold issue of arbitrability. Id., at 205, n. 4. The
court acknowledged the “general rule” that the issue of
**1417 On September 17, 1981, the Union filed a arbitrability is for the courts to decide unless the parties
grievance challenging AT & T's decision to lay off 79 stipulate otherwise, but noted that this Court's decisions
installers from its Chicago base location. The Union in Steelworkers v. Warrior & Gulf Navigation Co., 363
claimed that, because there was no lack of work at the U.S. 574, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960), and
Chicago location, the *646 planned layoffs would violate Steelworkers v. American Mfg. Co., 363 U.S. 564, 80 S.Ct.
Article 20 of the agreement. Eight days later, however, 1343, 4 L.Ed.2d 1403 (1960), caution courts to avoid
AT & T laid off all 79 workers, and soon thereafter, the becoming entangled in the merits of a labor dispute under
Company transferred approximately the same number of the guise of deciding arbitrability. From this observation,
installers from base locations in Indiana and Wisconsin to the court announced an “exception” to the general
the Chicago base. AT & T refused to submit the grievance rule, under which “a court should compel arbitration
to arbitration on the ground that under Article 9 the of the arbitrability issue where the collective bargaining
Company's decision to lay off workers when it determines agreement contains a standard arbitration clause, the
that a lack of work exists in a facility is not arbitrable. parties have not clearly excluded the arbitrability issue
from arbitration, and deciding the issue would entangle
The Union then sought to compel arbitration by filing the court in interpretation of substantive provisions of
suit in federal court pursuant to § 301(a) of the the collective bargaining agreement and thereby involve
Labor Management Relations Act, 29 U.S.C. § 185(a). 4 consideration of the merits of the dispute.” 751 F.2d, at
Communications Workers of America v. Western Electric 206.
Co., No. 82 C 772 (ND Ill., Nov. 18, 1983). Ruling on
cross-motions for summary judgment, the District Court **1418 All of these factors were present in this case.
reviewed the provisions of Articles 8, 9, and 20, and set Article 8 was a “standard arbitration clause,” and there
forth the parties' arguments as follows: was “no clear, unambiguous exclusion from arbitration of
terminations predicated by a lack of work determination.”
“Plaintiffs interpret Article 20 to require that there be Id., at 206-207. Moreover, although there were “colorable
an actual lack of work prior to employee layoffs and arguments” on both sides of the exclusion issue, if the
argue that there was no such lack of work in this court were to decide this question it would have to
case. Under plaintiffs' interpretation, Article 20 would interpret not only Article 8, but Articles 9 and 20 as well,
allow the union to take to arbitration the threshold both of which are “substantive *648 provisions of the
issue of whether the layoffs were justified by a lack of Agreement.” The court thus “decline[d] the invitation to
work. Defendant interprets Article 20 as merely providing decide arbitrability,” and ordered AT & T “to arbitrate
a sequence for any layoffs which management, in its the arbitrability issue.” Id., at 207.
exclusive judgment, determines are necessary. Under
defendant's interpretation, Article 20 would not allow for The court admitted that its exception was “difficult to
an arbitrator to decide whether the layoffs were warranted reconcile with the Supreme Court's discussion of a court's

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106 S.Ct. 1415, 121 L.R.R.M. (BNA) 3329, 89 L.Ed.2d 648, 54 USLW 4339...

duty to decide arbitrability in [John Wiley & Sons, Inc. clearly and unmistakably provide otherwise, the question
v. Livingston, 376 U.S. 543, 84 S.Ct. 909, 11 L.Ed.2d 898 of whether the parties agreed to arbitrate is to be decided
(1964) ].” The court asserted, however, that the discussion by the court, not the arbitrator. Warrior & Gulf, supra,
was “dicta,” and that this Court had reopened the issue 363 U.S., at 582-583, 80 S.Ct., at 1352-1353. See Operating
in Nolde Brothers, Inc. v. Bakery Workers, 430 U.S. 243, Engineers v. Flair Builders, Inc., 406 U.S. 487, 491, 92 S.Ct.
255, n. 8, 97 S.Ct. 1067, 1074, n. 8, 51 L.Ed.2d 300 (1977). 1710, 1712, 32 L.Ed.2d 248 (1972); Atkinson v. Sinclair
751 F.2d, at 206. Refining Co., 370 U.S. 238, 241, 82 S.Ct. 1318, 1320, 8
L.Ed.2d 462 (1962), overruled in part on other grounds,
We granted certiorari, 474 U.S. 814, 106 S.Ct. 56, 88 Boys Markets, Inc. v. Retail Clerks, 398 U.S. 235, 90 S.Ct.
L.Ed.2d 46 (1985), and now vacate the Seventh Circuit's 1583, 26 L.Ed.2d 199 (1970). Accord, Mitsubishi Motors
decision and remand for a determination of whether the Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626,
Company is required to arbitrate the Union's grievance. 105 S.Ct. 3346, 3353-3354, 87 L.Ed.2d 444 (1985).

The Court expressly reaffirmed this principle in John
Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 84 S.Ct.
II
909, 11 L.Ed.2d 898 (1964). The “threshold question”
The principles necessary to decide this case are not new. there was whether the court or an arbitrator **1419
They were set out by this Court over 25 years ago in a series should decide if arbitration provisions in a collective-
of cases known as the Steelworkers Trilogy: Steelworkers bargaining contract survived a corporate merger so as to
v. American Mfg. Co., supra; Steelworkers v. Warrior & bind the surviving corporation. Id., at 546, 84 S.Ct., at
Gulf Navigation Co., supra; and Steelworkers v. Enterprise 912. The Court answered that there was “no doubt” that
Wheel & Car Corp., 363 U.S. 593, 80 S.Ct. 1358, 4 L.Ed.2d this question was for the courts. “ ‘Under our decisions,
1424 (1960). These precepts have served the industrial whether or not the company was bound to arbitrate, as
relations community well, and have led to continued well as what issues it must arbitrate, is a matter to be
reliance on arbitration, rather than strikes or lockouts, as determined by the Court on the basis of the contract
the preferred method of resolving disputes arising during entered into by the parties.’ ... The duty to arbitrate
the term of a collective-bargaining agreement. We see no being of contractual origin, a compulsory submission to
reason either to question their continuing validity, or to arbitration cannot precede judicial determination that the
eviscerate their meaning by creating an exception to their collective bargaining agreement does in fact create such
general applicability. a duty.” Id., at 546-547, 84 S.Ct., at 912-913 (citations
omitted).
[1] The first principle gleaned from the Trilogy is that
“arbitration is a matter of contract and a party cannot [3] The third principle derived from our prior cases is
be required to submit to arbitration any dispute which that, in deciding whether the parties have agreed to submit
he has not agreed so to submit.” Warrior & Gulf, supra, a particular grievance to arbitration, a court is not to rule
363 U.S., at 582, 80 S.Ct., at 1353; American Mfg. on the potential merits of the underlying claims. Whether
Co., supra, 363 U.S., at 570-571, 80 S.Ct., at 1364-1365 “arguable” or not, indeed even if it appears to the court
(BRENNAN, J., concurring). This axiom recognizes the to be *650 frivolous, the union's claim that the employer
fact that arbitrators derive their authority to resolve has violated the collective-bargaining agreement is to be
disputes only because the parties have agreed in advance decided, not by the court asked to order arbitration,
to submit such grievances to *649 arbitration. Gateway but as the parties have agreed, by the arbitrator. “The
Coal Co. v. Mine Workers, 414 U.S. 368, 374, 94 S.Ct. 629, courts, therefore, have no business weighing the merits
635, 38 L.Ed.2d 583 (1974). of the grievance, considering whether there is equity
in a particular claim, or determining whether there
[2] The second rule, which follows inexorably from is particular language in the written instrument which
the first, is that the question of arbitrability-whether a will support the claim. The agreement is to submit all
collective-bargaining agreement creates a duty for the grievances to arbitration, not merely those which the court
parties to arbitrate the particular grievance-is undeniably will deem meritorious.” American Mfg. Co., 363 U.S., at
an issue for judicial determination. Unless the parties 568, 80 S.Ct., at 1346 (footnote omitted).

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[5] With these principles in mind, it is evident that
[4] Finally, it has been established that where the contract the Seventh Circuit erred in ordering the parties to
contains an arbitration clause, there is a presumption arbitrate the arbitrability question. It is the court's duty
of arbitrability in the sense that “[a]n order to arbitrate to interpret the agreement and to determine whether the
the particular grievance should not be denied unless it parties intended to arbitrate grievances concerning layoffs
may be said with positive assurance that the arbitration predicated on a “lack of work” determination by the
clause is not susceptible of an interpretation that covers Company. If the court determines that the agreement so
the asserted dispute. Doubts should be resolved in favor provides, then it is for the arbitrator to determine the
of coverage.” Warrior & Gulf, 363 U.S., at 582-583, relative merits of the parties' substantive interpretations of
80 S.Ct., at 1352-1353. See also Gateway Coal Co. v. the agreement. It was for the court, not the arbitrator, to
Mine Workers, supra, 414 U.S., at 377-378, 94 S.Ct., at decide in the first instance whether the dispute was to be
636-637. Such a presumption is particularly applicable resolved through arbitration.
where the clause is as broad as the one employed in this
case, which provides for arbitration of “any differences The Union does not contest the application of these
arising with respect to the interpretation of this contract or principles to the present case. Instead, it urges the Court to
the performance of any obligation hereunder....” In such examine the specific provisions of the agreement for itself
cases, “[i]n the absence of any express provision excluding and to affirm the Court of Appeals on the ground that the
a particular grievance from arbitration, we think only the parties had agreed to arbitrate the dispute over the layoffs
most forceful evidence of a purpose to exclude the claim at issue here. But it is usually not our function in the
from arbitration can prevail.” Warrior & Gulf, supra, 363 first instance to construe collective-bargaining contracts
U.S., at 584-585, 80 S.Ct., at 1353-1354. and arbitration clauses, or to consider any other evidence
that might unmistakably demonstrate that a particular
This presumption of arbitrability for labor disputes grievance was not to *652 be subject to arbitration. The
recognizes the greater institutional competence issue in the case is whether, because of express exclusion or
of arbitrators in interpreting collective-bargaining other forceful evidence, the dispute over the interpretation
agreements, “furthers the national labor policy of peaceful of Article 20 of the contract, the layoff provision, is not
resolution of labor disputes and thus best accords with subject to the arbitration clause. That issue should have
the parties' presumed objectives in pursuing collective been decided by the District Court and reviewed by the
bargaining.” Schneider Moving & Storage Co. v. Robbins, Court of Appeals; it should not have been referred to the
466 U.S. 364, 371-372, 104 S.Ct. 1844, 1849-1850, arbitrator.
80 L.Ed.2d 366 (1984) (citation *651 omitted). See
Gateway Coal Co., supra, 414 U.S., at 378-379, 94 The judgment of the Court of Appeals is vacated, and the
S.Ct., at 637-638. The willingness of parties to enter case is remanded for proceedings in conformity with this
into agreements that provide for arbitration of specified opinion.
disputes would be “drastically reduced,” however, if
a labor arbitrator had the “power to determine his It is so ordered.
own jurisdiction ....” Cox, Reflections Upon Labor
Arbitration, 72 Harv.L.Rev. 1482, 1509 (1959). Were this
the applicable rule, an arbitrator would not be constrained
Justice BRENNAN, with whom THE CHIEF JUSTICE
to resolve only those disputes that the parties have agreed
and Justice MARSHALL join, concurring.
in advance to settle by arbitration, but, instead, would be
I join the Court's opinion and write separately only to
empowered “to impose obligations outside the contract
supplement what has been said in order to avoid any
limited only by his understanding and conscience.” Ibid.
misunderstanding on remand and in future cases.
This result undercuts the longstanding federal policy
of promoting industrial harmony through the use of
The Seventh Circuit's erroneous conclusion that the
collective-bargaining agreements, and is antithetical to the
arbitrator should decide whether this dispute is arbitrable
function of a collective- **1420 bargaining agreement as
resulted from that court's confusion respecting the
setting out the rights and duties of the parties.
“arbitrability” determination that we have held must be
judicially made. Despite recognizing that Article 8 of the

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AT & T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643 (1986)
106 S.Ct. 1415, 121 L.R.R.M. (BNA) 3329, 89 L.Ed.2d 648, 54 USLW 4339...

collective-bargaining agreement “is a standard arbitration Gulf, supra, at 582-583, 80 S.Ct., at 1352-1353 (footnote
clause, providing for arbitration of ‘any differences arising omitted).
with respect to the interpretation of this contract or
the performance of any obligation hereunder,’ ” and The Company in Warrior & Gulf relied for its argument
that “there is no clear, unambiguous exclusion [of this that the dispute was not arbitrable on a “Management
dispute] from arbitration,” the Court of Appeals thought Functions” clause which, like Article 9 of the AT &
that “there [were] colorable arguments both for and T/CWA agreement, *654 excluded “matters which are
against exclusion.” Communications Workers of America strictly a function of management,” 363 U.S., at 576,
v. Western Electric Co., 751 F.2d 203, 206-207 (1984). The 80 S.Ct., at 1349, from the arbitration provision. We
“colorable arguments” referred to by the Court of Appeals recognized that such a clause “might be thought to
were the parties' claims concerning the meaning of Articles refer to any practice of management in which, under
9 and 20 of the collective-bargaining agreement: the Court particular circumstances prescribed by the agreement, it
of Appeals thought that if the Union's interpretation of is permitted to indulge.” Id., at 584, 80 S.Ct., at 1353.
Article 20 was correct and management *653 could not However, we also recognized that to read the clause this
order layoffs for reasons other than lack of work, the way would make arbitrability in every case depend upon
dispute was arbitrable; but if AT & T's interpretation of whether management could take the action challenged
Article 20 was correct and management was free to order by the Union; the arbitrability of every dispute would
layoffs for other reasons, the dispute was not arbitrable turn upon a resolution of the merits, and “the arbitration
under Article 9. Id., at 207. Because these were the very clause would be swallowed up by the exception.” Ibid.
issues that would be presented to the arbitrator if the Therefore, we held that, where a collective-bargaining
dispute was held to be arbitrable, the court reasoned that agreement contains a standard arbitration clause and
“determining arbitrability would enmesh a court in the the “exception” found in the Management Functions
merits of th[e] dispute,” ibid., and concluded that the clause is general, “judicial inquiry ... should be limited
arbitrability issue should be submitted to the arbitrator. to the search for an explicit provision which brings the
grievance under the cover of the [Management Functions]
The Court of Appeals was mistaken insofar as it thought clause....” Steelworkers v. American Mfg. Co., 363 U.S.
that determining arbitrability required resolution of the 564, 572, 80 S.Ct. 1343, 1365, 4 L.Ed.2d 1403 (1960)
parties' dispute with respect to the meaning of Articles (BRENNAN, J., concurring); Warrior & Gulf, supra, 363
9 and 20 of the collective-bargaining agreement. This U.S., at 584, 80 S.Ct., at 1353. “In the absence of any
is clear from our opinion in Steelworkers v. Warrior express provision excluding a particular grievance from
& Gulf **1421 Navigation Co., 363 U.S. 574, 80 arbitration, ... only the most forceful evidence of a purpose
S.Ct. 1347, 4 L.Ed.2d 1409 (1960). In Warrior & Gulf, to exclude the claim from arbitration can prevail....” 363
the Union challenged management's contracting out of U.S., at 584-585, 80 S.Ct., at 1353-1354.
labor that had previously been performed by Company
employees. The parties failed to resolve the dispute The Seventh Circuit misunderstood these rules of contract
through grievance procedures, and the Union requested construction and did precisely what we disapproved
arbitration; the Company refused, and the Union sued to of in Warrior & Gulf -it read Article 9, a general
compel arbitration under § 301 of the Labor Management Management Functions clause, to make arbitrability
Relations Act, 29 U.S.C. § 185. The collective-bargaining depend upon the merits of the parties' dispute. As
agreement contained a standard arbitration clause similar Warrior & Gulf makes clear, the judicial inquiry required
to Article 8 of the AT & T/CWA contract, i.e., providing to determine arbitrability is much simpler. The parties'
for arbitration of all differences with respect to the dispute concerns whether Article 20 of the collective-
meaning or application of the contract. We held that, in bargaining agreement limits management's authority to
light of the congressional policy making arbitration the order layoffs for reasons other than lack of work. The
favored method of dispute resolution, such a provision question for the court is “strictly confined,” id., at 582,
requires arbitration “unless it may be said with positive 80 S.Ct., at 1353, to whether the parties agreed to submit
assurance that the arbitration clause is not susceptible of disputes over the meaning of Article 20 to arbitration.
an interpretation that covers the asserted dispute. Doubts Because the collective-bargaining agreement contains a
should be resolved in favor of coverage.” Warrior & standard arbitration *655 clause, the answer must be

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AT & T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643 (1986)
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affirmative unless the contract contains explicit language bargaining agreement only where there is some special
reason to do so. Thus, it is appropriate for this Court
stating that disputes respecting Article 20 are not subject
to construe a collective-bargaining agreement where-as
to arbitration, or unless the party opposing arbitration-
in the Steelworkers Trilogy -our decision announces a
here AT & T-adduces “the most forceful evidence” to
new principle of law, since applying this principle may
this effect from the bargaining history. Under Warrior &
help to clarify our meaning. There is no such need,
Gulf, determining arbitrability does not require the court
however, where-as here-we simply reaffirm established
even to consider which party is correct with respect to the
principles. Moreover, since the determination left for
meaning of Article 20.
the Court of Appeals on remand is straightforward and
will require little time or effort, concerns for efficient
The Court remands this case so that the court below may
judicial administration do not require us to interpret the
apply the proper standard to determine arbitrability. The
agreement. Finally, because the parties have submitted to
Court **1422 states that “it is usually not our function
us only fragmentary pieces of the bargaining history, we
in the first instance to construe collective-bargaining
are not in a position properly to evaluate whether there
contracts and arbitration clauses, or to consider any other
is “the most forceful evidence” that the parties *656
evidence that might unmistakably demonstrate that a
did not intend for this dispute to be arbitrable. Therefore,
particular grievance was not to be subject to arbitration.”
I join the Court's opinion and concur in the Court's
Ante, at 1420. Of course, we have on numerous occasions
judgment remanding to the Court of Appeals.
construed collective-bargaining agreements “in the first
instance”; we did so, for example, in the three cases
comprising the Steelworkers Trilogy. See also John Wiley
& Sons, Inc. v. Livingston, 376 U.S. 543, 552-555, 84 All Citations
S.Ct. 909, 916-917, 11 L.Ed.2d 898 (1964); Packinghouse
Workers v. Needham Packing Co., 376 U.S. 247, 249-253, 475 U.S. 643, 106 S.Ct. 1415, 89 L.Ed.2d 648, 121
84 S.Ct. 773, 774-777, 11 L.Ed.2d 680 (1964). Nonetheless, L.R.R.M. (BNA) 3329, 54 USLW 4339, 104 Lab.Cas. P
I agree with the Court that we should interpret a collective- 11,758

Footnotes
* The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the
convenience of the reader. See United States v. Detroit Lumber Co., 200 U.S. 321, 337, 26 S.Ct. 282, 287, 50 L.Ed. 499.
1 Article 8 provides, in pertinent part, as follows:
“If the National and the Company fail to settle by negotiation any differences arising with respect to the interpretation of
this contract or the performance of any obligation hereunder, such differences shall (provided that such dispute is not
excluded from arbitration by other provisions of this contract, and provided that the grievance procedures as to such
dispute have been exhausted) be referred upon written demand of either party to an impartial arbitrator mutually agreeable
to both parties.” App. 21.
2 Article 9 states:
“The Union recognizes the right of the Company (subject to the limitations contained in the provisions of this contract, but
otherwise not subject to the provisions of the arbitration clause) to exercise the functions of managing the business which
involve, among other things, the hiring and placement of Employees, the termination of employment, the assignment of
work, the determination of methods and equipment to be used, and the control of the conduct of work.” Id., at 22.
3 Article 20 provides, in pertinent part, that “[w]hen lack of work necessitates Layoff, Employees shall be Laid-Off in
accordance with Term of Employment and by Layoff groups as set forth in the following [subparagraphs stating the order
of layoff].” Id., at 23. Article 1.11 defines the term “Layoff” to mean “a termination of employment arising out of a reduction
in the force due to lack of work.” Id., at 20.
4 Section 301(a), 61 Stat. 156, 29 U.S.C. § 185(a) states:
“Suits for violation of contracts between an employer and a labor organization representing
employees in an industry affecting commerce as defined in this chapter, or between any such
organizations, may be brought in any district court of the United States having jurisdiction of the
parties, without respect of the amount in controversy or without regard to the citizenship of the
parties.”

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AT & T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643 (1986)
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End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 8
AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011)
131 S.Ct. 1740, 179 L.Ed.2d 742, 79 USLW 4279, 161 Lab.Cas. P 10,368...

KeyCite Yellow Flag - Negative Treatment West Headnotes (13)
Disagreement Recognized by Wallace v. Red Bull Distributing Co., 
N.D.Ohio, July 23, 2013
131 S.Ct. 1740 [1] Alternative Dispute Resolution
Supreme Court of the United States Constitutional and statutory provisions
and rules of court
AT&T MOBILITY LLC, Petitioner, The provision of the Federal Arbitration Act
v. (FAA) stating that arbitration agreements in
Vincent CONCEPCION et ux. maritime transactions or contracts evidencing
transactions involving commerce are valid,
No. 09–893. irrevocable, and enforceable, save upon such
| grounds as exist at law or in equity for the
Argued Nov. 9, 2010. revocation of any contract, reflects both a
| liberal federal policy favoring arbitration and
Decided April 27, 2011. the fundamental principle that arbitration is a
matter of contract. 9 U.S.C.A. § 2.
Synopsis
Background: Customers brought putative class action 674 Cases that cite this headnote
against telephone company, alleging that company's offer
of a free phone to anyone who signed up for its cellphone
service was fraudulent to the extent that the company [2] Alternative Dispute Resolution
charged the customer sales tax on the retail value of Constitutional and statutory provisions
the free phone. The United States District Court for the and rules of court
Southern District of California, Dana M. Sabraw, J., In light of the liberal federal policy
2008 WL 5216255, denied company's motion to compel favoring arbitration and the fundamental
arbitration. Company appealed. The United States Court principle that arbitration is a matter
of Appeals for the Ninth Circuit, Carlos T. Bea, Circuit of contract, which are reflected in the
Judge, 584 F.3d 849, affirmed. Certiorari was granted. provision of the Federal Arbitration Act
(FAA) stating that arbitration agreements in
maritime transactions or contracts evidencing
transactions involving commerce are valid,
[Holding:] The Supreme Court, Justice Scalia, held that
irrevocable, and enforceable, save upon such
the Federal Arbitration Act preempts California's judicial
grounds as exist at law or in equity for
rule regarding the unconscionability of class arbitration
the revocation of any contract, courts must
waivers in consumer contracts, abrogating Discover Bank
place arbitration agreements on an equal
v. Superior Court, 36 Cal.4th 148, 30 Cal.Rptr.3d 76, 113
footing with other contracts, and enforce
P.3d 1100.
them according to their terms. 9 U.S.C.A. § 2.

902 Cases that cite this headnote
Reversed and remanded.

Justice Thomas filed a concurring opinion. [3] Alternative Dispute Resolution
Preemption
Justice Breyer filed a dissenting opinion, in which Justices States
Ginsburg, Sotomayor, and Kagan, joined. Particular cases, preemption or
supersession
The Federal Arbitration Act (FAA) preempts
California's judicial rule stating that a
class arbitration waiver is unconscionable

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under California law if it is found in a Substantive unconscionability
consumer contract of adhesion in a setting Under California law, a finding that
in which disputes between the contracting a contract is unconscionable requires a
parties predictably involve small amounts of procedural and a substantive element, the
damages, and if it is alleged that the party with former focusing on oppression or surprise
superior bargaining power has carried out a due to unequal bargaining power, the latter
scheme to deliberately cheat large numbers of on overly harsh or one-sided results. West's
consumers out of individually small sums of Ann.Cal.Civ.Code §§ 1668, 1670.5(a).
money, because that rule stands as an obstacle
to the accomplishment and execution of the 47 Cases that cite this headnote
full purposes and objectives of Congress in
enacting the FAA, which include ensuring
[6] Alternative Dispute Resolution
the enforcement of arbitration agreements
Preemption
according to their terms so as to facilitate
States
streamlined proceedings; abrogating Discover
Particular cases, preemption or
Bank v. Superior Court, 36 Cal.4th 148, 30
supersession
Cal.Rptr.3d 76, 113 P.3d 1100. 9 U.S.C.A. § 2;
West's Ann.Cal.Civ.Code §§ 1668, 1670.5(a). When state law prohibits outright the
arbitration of a particular type of claim,
149 Cases that cite this headnote the conflicting state rule is displaced by the
Federal Arbitration Act (FAA). 9 U.S.C.A. §
[4] Alternative Dispute Resolution 2.
Validity
137 Cases that cite this headnote
Alternative Dispute Resolution
Validity of assent
[7] Alternative Dispute Resolution
Alternative Dispute Resolution
Preemption
Unconscionability
States
Under the saving clause in the provision
Particular cases, preemption or
of the Federal Arbitration Act (FAA)
supersession
stating that arbitration agreements in
In light of the preemptive effect of the Federal
maritime transactions or contracts evidencing
Arbitration Act (FAA), a court may not
transactions involving commerce are valid,
rely on the uniqueness of an agreement to
irrevocable, and enforceable, save upon such
arbitrate as a basis for a state-law holding
grounds as exist at law or in equity for
that enforcement would be unconscionable,
the revocation of any contract, arbitration
for this would enable the court to effect what
agreements may be invalidated by generally
the state legislature cannot. 9 U.S.C.A. § 2.
applicable contract defenses, such as fraud,
duress, or unconscionability, but not by 173 Cases that cite this headnote
defenses that apply only to arbitration or that
derive their meaning from the fact that an
agreement to arbitrate is at issue. 9 U.S.C.A. [8] Alternative Dispute Resolution
§ 2. Constitutional and statutory provisions
and rules of court
888 Cases that cite this headnote While the saving clause, in the provision
of the Federal Arbitration Act (FAA)
[5] Contracts stating that arbitration agreements in
Procedural unconscionability maritime transactions or contracts evidencing
transactions involving commerce are valid,
Contracts

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irrevocable, and enforceable, save upon such For a class-action money judgment to bind
grounds as exist at law or in equity for absentees in litigation, class representatives
the revocation of any contract, preserves must at all times adequately represent absent
generally applicable contract defenses, class members, and absent members must be
nothing in it suggests an intent to preserve afforded notice, an opportunity to be heard,
state-law rules that stand as an obstacle to and a right to opt out of the class.
the accomplishment of the FAA's objectives.
9 U.S.C.A. § 2. 16 Cases that cite this headnote

259 Cases that cite this headnote
[13] Alternative Dispute Resolution
Contractual or consensual basis
[9] States Alternative Dispute Resolution
Congressional intent Constitutional and statutory provisions
A federal statute's preemption saving clause and rules of court
cannot in reason be construed as allowing a Arbitration is a matter of contract, and
common law right, the continued existence of the Federal Arbitration Act (FAA) requires
which would be absolutely inconsistent with courts to honor parties' expectations. 9
the provisions of the act; in other words, the U.S.C.A. § 1 et seq.
act cannot be held to destroy itself.
130 Cases that cite this headnote
5 Cases that cite this headnote

[10] Alternative Dispute Resolution
Constitutional and statutory provisions
and rules of court **1742 *333 Syllabus *
The principal purpose of the Federal
The cellular telephone contract between respondents
Arbitration Act (FAA) is to ensure that
(Concepcions) and petitioner (AT & T) provided for
private arbitration agreements are enforced
arbitration of all disputes, but did not permit classwide
according to their terms. 9 U.S.C.A. §§ 2–4.
arbitration. After the Concepcions were charged sales
248 Cases that cite this headnote tax on the retail value of phones provided free
under their service contract, they sued AT & T in
a California Federal District Court. Their suit was
[11] Alternative Dispute Resolution consolidated with a class action alleging, inter alia,
Nature, purpose, and right to arbitration that AT & T had engaged in false advertising and
in general fraud by charging sales tax on “free” phones. The
In bilateral arbitration, parties forgo the District Court denied AT & T's motion to compel
procedural rigor and appellate review of the arbitration under the Concepcions' contract. Relying on
courts in order to realize the benefits of the California Supreme Court's Discover Bank decision,
private dispute resolution: lower costs, greater it found the arbitration provision unconscionable because
efficiency and speed, and the ability to choose it disallowed classwide proceedings. The Ninth Circuit
expert adjudicators to resolve specialized agreed that the provision was unconscionable under
disputes. California law and held that the Federal Arbitration
Act (FAA), which makes arbitration agreements “valid,
8 Cases that cite this headnote irrevocable, and enforceable, save upon such grounds
as exist at law or in equity for the revocation of any
[12] Judgment contract,” 9 U.S.C. § 2, did not preempt its ruling.
Persons represented by parties

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Held: Because it “stands as an obstacle to the facilitate informal, streamlined proceedings. Parties may
accomplishment and execution of the full purposes and agree to limit the issues subject to arbitration, Mitsubishi
objectives of Congress,” Hines v. Davidowitz, 312 U.S. 52, Motors Corp. v. Soler Chrysler–Plymouth, Inc., 473 U.S.
67, 61 S.Ct. 399, 85 L.Ed. 581, California's Discover Bank 614, 628, 105 S.Ct. 3346, 87 L.Ed.2d 444, to arbitrate
rule is pre-empted by the FAA. Pp. 1745 – 1753. according to specific rules, Volt, supra, at 479, 109 S.Ct.
1248, and to limit with whom they will arbitrate, Stolt–
(a) Section 2 reflects a “liberal federal policy favoring Nielsen, supra, at ––––. Pp. 1746 – 1750.
arbitration,” Moses H. Cone Memorial Hospital v.
Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, (d) Class arbitration, to the extent it is manufactured
74 L.Ed.2d 765, and the “fundamental principle that by Discover Bank rather than consensual, interferes
arbitration is a matter of contract,” Rent–A–Center, West, with fundamental attributes of arbitration. The switch
Inc. v. Jackson, 561 U.S. ––––, ––––, 130 S.Ct. 2772, 177 from bilateral to class arbitration sacrifices arbitration's
L.Ed.2d 403 (2010). Thus, courts must place arbitration informality and makes the process slower, more costly,
agreements on an equal footing with other contracts, and more likely to generate procedural morass than
Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, final judgment. And class arbitration greatly increases
443, 126 S.Ct. 1204, 163 L.Ed.2d 1038, and enforce them risks to defendants. The absence of multilayered review
according to their terms, Volt Information Sciences, Inc. makes it more likely that errors will go uncorrected. That
v. Board of Trustees of Leland Stanford Junior Univ., 489 risk of error may become unacceptable when damages
U.S. 468, 478, 109 S.Ct. 1248, 103 L.Ed.2d 488. Section allegedly owed to thousands of claimants are aggregated
2's saving clause permits agreements to be invalidated and decided at once. Arbitration is poorly suited to these
by “generally applicable contract defenses,” but not by higher stakes. In litigation, a defendant may appeal a
defenses that apply **1743 only to arbitration or derive certification decision and a final judgment, but 9 U.S.C. §
their meaning from the fact that an agreement to arbitrate 10 limits the grounds on which courts can vacate arbitral
is at issue. Doctor's Associates, Inc. v. Casarotto, 517 U.S. awards. Pp. 1750 – 1753.
681, 687, 116 S.Ct. 1652, 134 L.Ed.2d 902. Pp. 1745 – 1746.
584 F.3d 849, reversed and remanded.
(b) In Discover Bank, the California Supreme Court held
that class waivers in consumer arbitration agreements are SCALIA, J., delivered the opinion of the Court, in which
unconscionable if the *334 agreement is in an adhesion ROBERTS, C. J., and KENNEDY, THOMAS, and
contract, disputes between the parties are likely to involve ALITO, JJ., joined. THOMAS, J., filed a concurring
small amounts of damages, and the party with inferior opinion. BREYER, J., filed a dissenting opinion, in which
bargaining power alleges a deliberate scheme to defraud. GINSBURG, SOTOMAYOR, and KAGAN, JJ., joined.
Pp. 1745 – 1747.

(c) The Concepcions claim that the Discover Bank rule is a Attorneys and Law Firms
ground that “exist[s] at law or in equity for the revocation
Andrew J. Pincus, Washington, DC, for Petitioner.
of any contract” under FAA § 2. When state law prohibits
outright the arbitration of a particular type of claim, Deepak Gupta, for Respondents.
the FAA displaces the conflicting rule. But the inquiry
is more complex when a generally applicable doctrine is Donald M. Falk, Mayer Brown LLP, Palo Alto, CA,
alleged to have been applied in a fashion that disfavors Neal Berinhout, Atlanta, GA, Kenneth S. Geller, Andrew
or interferes with arbitration. Although § 2's saving clause J. Pincus, Evan M. Tager, Archis A. Parasharami,
preserves generally applicable contract defenses, it does Kevin Ranlett, Mayer Brown LLP, Washington, DC, for
not suggest an intent to preserve state-law rules that Petitioner.
stand as an obstacle to the accomplishment of the FAA's
Opinion
objectives. Cf. Geier v. American Honda Motor Co., 529
U.S. 861, 872, 120 S.Ct. 1913, 146 L.Ed.2d 914. The **1744 Justice SCALIA delivered the opinion of the
FAA's overarching purpose is to ensure the enforcement Court.
of arbitration agreements according to their terms so as to

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*336 Section 2 of the Federal Arbitration Act (FAA)
makes agreements to arbitrate “valid, irrevocable, and The Concepcions purchased AT & T service, which was
enforceable, save upon such grounds as exist at law or advertised as including the provision of free phones; they
in equity for the revocation of any contract.” 9 U.S.C. were not charged for the phones, but they were charged
§ 2. We consider whether the FAA prohibits States $30.22 in sales tax based on the phones' retail value. In
from conditioning the enforceability of certain arbitration March 2006, the Concepcions filed a complaint against
agreements on the availability of classwide arbitration AT & T in the United States District Court for the
procedures. Southern District of California. The complaint was later
consolidated with a putative class action alleging, among
other things, that AT & T had engaged in false advertising
and fraud by charging sales tax on phones it advertised as
I
free.
In February 2002, Vincent and Liza Concepcion entered
into an agreement for the sale and servicing of cellular In March 2008, AT & T moved to compel
arbitration under the terms of its contract **1745
telephones with AT & T Mobility LCC (AT & T). 1 The
with the Concepcions. The Concepcions opposed the
contract provided for arbitration of all disputes between
motion, contending that the arbitration agreement was
the parties, but required that claims be brought in the
unconscionable and unlawfully exculpatory *338 under
parties' “individual capacity, and not as a plaintiff or
California law because it disallowed classwide procedures.
class member in any purported class or representative
The District Court denied AT & T's motion. It described
proceeding.” App. to Pet. for Cert. 61a. 2 The agreement AT & T's arbitration agreement favorably, noting, for
authorized AT & T to make unilateral amendments, which example, that the informal dispute-resolution process was
it did to the arbitration provision on several occasions. “quick, easy to use” and likely to “promp[t] full or ...
The version at issue in this case reflects revisions made in even excess payment to the customer without the need to
December 2006, which the parties agree are controlling. arbitrate or litigate”; that the $7,500 premium functioned
as “a substantial inducement for the consumer to pursue
The revised agreement provides that customers may the claim in arbitration” if a dispute was not resolved
initiate dispute proceedings by completing a one-page informally; and that consumers who were members of a
Notice of Dispute form available on AT & T's Web site. class would likely be worse off. Laster v. T–Mobile USA,
AT & T may *337 then offer to settle the claim; if it Inc., 2008 WL 5216255, *11–*12 (S.D.Cal., Aug.11, 2008).
does not, or if the dispute is not resolved within 30 days, Nevertheless, relying on the California Supreme Court's
the customer may invoke arbitration by filing a separate decision in Discover Bank v. Superior Court, 36 Cal.4th
Demand for Arbitration, also available on AT & T's Web 148, 30 Cal.Rptr.3d 76, 113 P.3d 1100 (2005), the court
site. In the event the parties proceed to arbitration, the found that the arbitration provision was unconscionable
agreement specifies that AT & T must pay all costs for because AT & T had not shown that bilateral arbitration
nonfrivolous claims; that arbitration must take place in adequately substituted for the deterrent effects of class
the county in which the customer is billed; that, for claims actions. Laster, 2008 WL 5216255, *14.
of $10,000 or less, the customer may choose whether the
arbitration proceeds in person, by telephone, or based The Ninth Circuit affirmed, also finding the provision
only on submissions; that either party may bring a claim unconscionable under California law as announced in
in small claims court in lieu of arbitration; and that Discover Bank. Laster v. AT & T Mobility LLC, 584
the arbitrator may award any form of individual relief, F.3d 849, 855 (2009). It also held that the Discover
including injunctions and presumably punitive damages. Bank rule was not preempted by the FAA because that
The agreement, moreover, denies AT & T any ability to rule was simply “a refinement of the unconscionability
seek reimbursement of its attorney's fees, and, in the event analysis applicable to contracts generally in California.”
that a customer receives an arbitration award greater than 584 F.3d, at 857. In response to AT & T's argument
AT & T's last written settlement offer, requires AT & T to that the Concepcions' interpretation of California law
pay a $7,500 minimum recovery and twice the amount of discriminated against arbitration, the Ninth Circuit
the claimant's attorney's fees. 3 rejected the contention that “ ‘class proceedings will

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reduce the efficiency and expeditiousness of arbitration’ agreements to arbitrate to be invalidated by “generally
” and noted that “ ‘Discover Bank placed arbitration applicable contract defenses, such as fraud, duress, or
agreements with class action waivers on the exact same unconscionability,” but not by defenses that apply only to
footing as contracts that bar class action litigation outside arbitration or that derive their meaning from the fact that
the context of arbitration.’ ” Id., at 858 (quoting Shroyer an agreement to arbitrate is at issue. Doctor's Associates,
v. New Cingular Wireless Services, Inc., 498 F.3d 976, 990 Inc. v. Casarotto, 517 U.S. 681, 687, 116 S.Ct. 1652, 134
(C.A.9 2007)). L.Ed.2d 902 (1996); see also Perry v. Thomas, 482 U.S.
483, 492–493, n. 9, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987).
We granted certiorari, 560 U.S. 923, 130 S.Ct. 3322, 176 *340 The question in this case is whether § 2 preempts
L.Ed.2d 1218 (2010). California's rule classifying most collective-arbitration
waivers in consumer contracts as unconscionable. We
refer to this rule as the Discover Bank rule.

*339 II
[5] Under California law, courts may refuse to enforce
[1] [2] The FAA was enacted in 1925 in response to any contract found “to have been unconscionable at
widespread judicial hostility to arbitration agreements. the time it was made,” or may “limit the application
See Hall Street Associates, L.L.C. v. Mattel, Inc., 552 U.S. of any unconscionable clause.” Cal. Civ.Code Ann. §
576, 581, 128 S.Ct. 1396, 170 L.Ed.2d 254 (2008). Section 1670.5(a) (West 1985). A finding of unconscionability
2, the “primary substantive provision of the Act,” Moses requires “a ‘procedural’ and a ‘substantive’ element, the
H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 former focusing on ‘oppression’ or ‘surprise’ due to
U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983), provides, unequal bargaining power, the latter on ‘overly harsh’
in relevant part, as follows: or ‘one-sided’ results.” Armendariz v. Foundation Health
Pyschcare Servs., Inc., 24 Cal.4th 83, 114, 99 Cal.Rptr.2d
“A written provision in any maritime transaction or a 745, 6 P.3d 669, 690 (2000); accord, Discover Bank, 36
contract evidencing a transaction involving commerce Cal.4th, at 159–161, 30 Cal.Rptr.3d 76, 113 P.3d, at 1108.
to settle by arbitration a controversy thereafter arising
out of such contract or transaction ... shall be valid, In Discover Bank, the California Supreme Court applied
irrevocable, and enforceable, save upon such grounds this framework to class-action waivers in arbitration
as exist at law or in equity for the revocation of any agreements and held as follows:
contract.” 9 U.S.C. § 2.
“[W]hen the waiver is found in a consumer contract
We have described this provision as reflecting both a of adhesion in a setting in which disputes between the
“liberal federal policy favoring arbitration,” Moses H. contracting parties predictably involve small amounts
Cone, supra, at 24, 103 S.Ct. 927, and the “fundamental of damages, and when it is alleged that the party with
principle that arbitration is a matter of contract,” Rent– the superior bargaining power has carried out a scheme
A–Center, West, Inc. v. Jackson, 561 U.S. ––––, ––––, 130 to deliberately cheat large numbers of consumers out
S.Ct. 2772, 2776, 177 L.Ed.2d 403 (2010). In line with of individually small sums of money, then ... the waiver
these principles, courts must place arbitration agreements becomes in practice the exemption of the party ‘from
on an equal footing with other contracts, Buckeye Check responsibility for [its] own fraud, or willful injury
Cashing, Inc. v. Cardegna, 546 U.S. 440, 443, 126 to the person or property of another.’ Under these
S.Ct. 1204, 163 L.Ed.2d 1038 (2006), and enforce them circumstances, such waivers are unconscionable under
according to their terms, Volt Information Sciences, Inc. California law and should not be enforced.” Id., at
v. **1746 Board of Trustees of Leland Stanford Junior 162, 30 Cal.Rptr.3d 76, 113 P.3d, at 1110 (quoting Cal.
Univ., 489 U.S. 468, 478, 109 S.Ct. 1248, 103 L.Ed.2d 488 Civ.Code Ann. § 1668).
(1989).
California courts have frequently applied this rule to
[3] [4] The final phrase of § 2, however, permits find arbitration agreements unconscionable. See, e.g.,
arbitration agreements to be declared unenforceable Cohen v. DirecTV, Inc., 142 Cal.App.4th 1442, 1451–1453,
“upon such grounds as exist at law or in equity for the 48 Cal.Rptr.3d 813, 819–821 (2006); Klussman v. Cross
revocation of any contract.” This saving clause permits Country *341 Bank, 134 Cal.App.4th 1283, 1297, 36

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Cal.Rptr.3d 728, 738–739 (2005); Aral v. EarthLink, Inc., Discover Bank. A court might reason that no consumer
134 Cal.App.4th 544, 556–557, 36 Cal.Rptr.3d 229, 237– would knowingly waive his right to full discovery, as
239 (2005). this would enable companies to hide their wrongdoing.
Or the court might simply say that such agreements are
exculpatory—restricting discovery would be of greater
benefit to the company than the consumer, since the
III
former is more likely to be sued than to sue. See Discover
Bank, supra, at 161, 30 Cal.Rptr.3d 76, 113 P.3d, at 1109
A (arguing that class waivers are similarly one-sided). And,
the reasoning would continue, because such a rule applies
The Concepcions argue that the Discover Bank rule, the general principle of unconscionability or public-policy
given its origins in California's unconscionability doctrine disapproval of exculpatory agreements, it is applicable
and California's policy against exculpation, is a ground to “any” contract and thus preserved by § 2 of the
that “exist[s] at law or in equity for the revocation of FAA. In practice, of course, the rule would have a
any contract” under FAA § 2. Moreover, they argue disproportionate impact on arbitration agreements; but
that even if we construe the Discover Bank rule as it would presumably apply to contracts purporting to
a prohibition on collective-action waivers rather than restrict discovery in litigation as well.
simply an application of unconscionability, the rule would
still be applicable to all dispute-resolution contracts,
Other examples are easy to imagine. The same argument
since California prohibits waivers of class litigation as might apply to a rule classifying as unconscionable
well. See America Online, Inc. v. Superior **1747 Ct., arbitration agreements that fail to abide by the Federal
90 Cal.App.4th 1, 17–18, 108 Cal.Rptr.2d 699, 711–713 Rules of Evidence, or that disallow an ultimate disposition
(2001). by a jury (perhaps termed “a panel of twelve lay
arbitrators” to help avoid preemption). Such examples
[6] [7] When state law prohibits outright the are not fanciful, since the judicial hostility towards
arbitration of a particular type of claim, the analysis is arbitration that prompted the FAA had manifested itself
straightforward: The conflicting rule is displaced by the in “a great variety” of “devices and formulas” declaring
FAA. Preston v. Ferrer, 552 U.S. 346, 353, 128 S.Ct. arbitration against public policy. Robert Lawrence Co.
978, 169 L.Ed.2d 917 (2008). But the inquiry becomes v. Devonshire Fabrics, Inc., 271 F.2d 402, 406 (C.A.2
more complex when a doctrine normally thought to be 1959). And although these statistics are not definitive, it
generally applicable, such as duress or, as relevant here, is worth noting that California's courts have been more
unconscionability, is alleged to have been applied in a likely to hold contracts to arbitrate unconscionable than
fashion that disfavors arbitration. In Perry v. Thomas, other contracts. Broome, An Unconscionable Applicable
482 U.S. 483, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987), for of the Unconscionability Doctrine: How the California
example, we noted that the FAA's preemptive effect might Courts are Circumventing the Federal Arbitration Act,
extend even to grounds traditionally thought to exist “ 3 Hastings Bus. L.J. 39, 54, 66 (2006); Randall,
‘at law or in equity for the revocation of any contract.’ *343 Judicial Attitudes Toward Arbitration and the
” Id., at 492, n. 9, 107 S.Ct. 2520 (emphasis deleted). We Resurgence of Unconscionability, 52 Buffalo L.Rev. 185,
said that a court may not “rely on the uniqueness of an 186–187 (2004).
agreement to arbitrate as a basis for a state-law holding
that enforcement would be unconscionable, for this would The Concepcions suggest that all this is just a parade
enable the court to effect what ... the state legislature of horribles, and no genuine worry. “Rules aimed
cannot.” Id., at 493, n. 9, 107 S.Ct. 2520. at destroying arbitration” or “demanding procedures
incompatible with arbitration,” they concede, **1748
An obvious illustration of this point would be a case “would be preempted by the FAA because they
finding unconscionable or unenforceable as against public cannot sensibly be reconciled with Section 2.” Brief for
policy *342 consumer arbitration agreements that Respondents 32. The “grounds” available under § 2's
fail to provide for judicially monitored discovery. The saving clause, they admit, “should not be construed to
rationalizations for such a holding are neither difficult to include a State's mere preference for procedures that
imagine nor different in kind from those articulated in

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are incompatible with arbitration and ‘would wholly to stay litigation of arbitral claims pending arbitration
eviscerate arbitration agreements.’ ” Id., at 33 (quoting of those claims “in accordance with the terms of the
Carter v. SSC Odin Operating Co., LLC, 237 Ill.2d 30, 50, agreement”; and § 4 requires courts to compel arbitration
340 Ill.Dec. 196, 927 N.E.2d 1207, 1220 (2010)). 4 “in accordance with the terms of the agreement” upon the
motion of either party to the agreement (assuming that
[8] [9] We largely agree. Although § 2's saving clause the “making of the arbitration agreement or the failure ...
preserves generally applicable contract defenses, nothing to perform the same” is not at issue). In light of these
in it suggests an intent to preserve state-law rules that provisions, we have held that parties may agree to limit
stand as an obstacle to the accomplishment of the FAA's the issues subject to arbitration, Mitsubishi Motors Corp.
objectives. Cf. Geier v. American Honda Motor Co., 529 v. Soler Chrysler–Plymouth, Inc., 473 U.S. 614, 628, 105
U.S. 861, 872, 120 S.Ct. 1913, 146 L.Ed.2d 914 (2000); S.Ct. 3346, 87 L.Ed.2d 444 (1985), **1749 to arbitrate
Crosby v. National Foreign Trade Council, 530 U.S. 363, according to specific rules, Volt, supra, at 479, 109 S.Ct.
372–373, 120 S.Ct. 2288, 147 L.Ed.2d 352 (2000). As we 1248, and to limit with whom a party will arbitrate its
have said, a federal statute's saving clause “ ‘cannot in disputes, Stolt–Nielsen, supra, at ––––, 130 S.Ct. at 1773.
reason be construed as [allowing] a common law right,
the continued existence of which would be absolutely The point of affording parties discretion in designing
inconsistent with the provisions of the act. In other words, arbitration processes is to allow for efficient, streamlined
the act cannot be held to destroy itself.’ ” American procedures tailored to the type of dispute. It can be
Telephone & Telegraph Co. v. Central Office Telephone, specified, *345 for example, that the decisionmaker be a
Inc., 524 U.S. 214, 227–228, 118 S.Ct. 1956, 141 L.Ed.2d specialist in the relevant field, or that proceedings be kept
222 (1998) (quoting Texas & Pacific R. Co. v. Abilene confidential to protect trade secrets. And the informality
Cotton Oil Co., 204 U.S. 426, 446, 27 S.Ct. 350, 51 L.Ed. of arbitral proceedings is itself desirable, reducing the cost
553 (1907)). and increasing the speed of dispute resolution. 14 Penn
Plaza LLC v. Pyett, 556 U.S. 247, ––––, 129 S.Ct. 1456,
*344 We differ with the Concepcions only in the 1460, 173 L.Ed.2d 398 (2009); Mitsubishi Motors Corp.,
application of this analysis to the matter before us. We supra, at 628, 105 S.Ct. 3346.
do not agree that rules requiring judicially monitored
discovery or adherence to the Federal Rules of Evidence The dissent quotes Dean Witter Reynolds Inc. v. Byrd,
are “a far cry from this case.” Brief for Respondents 470 U.S. 213, 219, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985),
32. The overarching purpose of the FAA, evident in as “ ‘reject[ing] the suggestion that the overriding goal
the text of §§ 2, 3, and 4, is to ensure the enforcement of the Arbitration Act was to promote the expeditious
of arbitration agreements according to their terms resolution of claims.’ ” Post, at 4 (opinion of BREYER,
so as to facilitate streamlined proceedings. Requiring J.). That is greatly misleading. After saying (accurately
the availability of classwide arbitration interferes with enough) that “the overriding goal of the Arbitration Act
fundamental attributes of arbitration and thus creates a was [not] to promote the expeditious resolution of claims,”
scheme inconsistent with the FAA. but to “ensure judicial enforcement of privately made
agreements to arbitrate,” 470 U.S., at 219, 105 S.Ct.
1238, Dean Witter went on to explain: “This is not to
say that Congress was blind to the potential benefit of
B the legislation for expedited resolution of disputes. Far
from it ....” Id., at 220, 105 S.Ct. 1238. It then quotes a
[10] The “principal purpose” of the FAA is to
House Report saying that “the costliness and delays of
“ensur[e] that private arbitration agreements are enforced
litigation ... can be largely eliminated by agreements for
according to their terms.” Volt, 489 U.S., at 478, 109
arbitration.” Ibid. (quoting H.R.Rep. No. 96, 68th Cong.,
S.Ct. 1248; see also Stolt–Nielsen S.A. v. AnimalFeeds Int'l
1st Sess., 2 (1924)). The concluding paragraph of this part
Corp., 559 U.S. ––––, ––––, 130 S.Ct. 1758, 1763, 176
of its discussion begins as follows:
L.Ed.2d 605 (2010). This purpose is readily apparent from
the FAA's text. Section 2 makes arbitration agreements “We therefore are not persuaded by the argument that
“valid, irrevocable, and enforceable” as written (subject, the conflict between two goals of the Arbitration Act—
of course, to the saving clause); § 3 requires courts enforcement of private agreements and encouragement

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of efficient and speedy dispute resolution—must be arbitrate on behalf of individuals when they may do so for
resolved in favor of the latter in order to realize the a class and reap far higher fees in the process. And faced
intent of the drafters.” 470 U.S., at 221, 105 S.Ct. 1238. with inevitable class arbitration, companies would have
less incentive to continue resolving potentially duplicative
In the present case, of course, those “two goals” do not claims on an individual basis.
conflict—and it is the dissent's view that would frustrate
both of them. Although we have had little occasion to examine
classwide arbitration, our decision in Stolt–Nielsen is
Contrary to the dissent's view, our cases place it instructive. In that case we held that an arbitration panel
beyond dispute that the FAA was designed to promote exceeded its power under § 10(a)(4) of the FAA by
arbitration. *346 They have repeatedly described the Act imposing class procedures based on policy judgments
as “embod[ying] [a] national policy favoring arbitration,” rather than the arbitration agreement itself or some
Buckeye Check Cashing, 546 U.S., at 443, 126 S.Ct. background principle of contract law that would affect
1204, and “a liberal federal policy favoring arbitration its interpretation. 559 U.S., at ––––, 130 S.Ct. at 1773–
agreements, notwithstanding any state substantive or 1776. We then held that the agreement at issue, which
procedural policies to the contrary,” Moses H. Cone, 460 was silent on the question of class procedures, could
U.S., at 24, 103 S.Ct. 927; see also Hall Street Assocs., 552 not be interpreted to allow them because the “changes
U.S., at 581, 128 S.Ct. 1396. Thus, in Preston v. Ferrer, brought about by the shift from bilateral arbitration
holding preempted a state-law rule requiring exhaustion to class-action arbitration” are “fundamental.” Id., at
of administrative remedies before arbitration, we said: “A ––––, 130 S.Ct. at 1776. This is obvious as a *348
prime objective of an agreement to arbitrate is to achieve structural matter: Classwide arbitration includes absent
‘streamlined proceedings and expeditious results,’ ” which parties, necessitating additional and different procedures
objective would be “frustrated” by requiring a dispute to and involving higher stakes. Confidentiality becomes
be heard by an agency first. 552 U.S., at 357–358, 128 S.Ct. more difficult. And while it is theoretically possible to
978. That rule, we said, would “at the least, hinder speedy select an arbitrator with some expertise relevant to the
resolution of the controversy.” Id., at 358, 128 S.Ct. 978. 5 class-certification question, arbitrators are not generally
knowledgeable in the often-dominant procedural aspects
**1750 California's Discover Bank rule similarly of certification, such as the protection of absent parties.
interferes with arbitration. Although the rule does not The conclusion follows that **1751 class arbitration, to
require classwide arbitration, it allows any party to a the extent it is manufactured by Discover Bank rather than
consumer contract to demand it ex post. The rule is consensual, is inconsistent with the FAA.
limited to adhesion contracts, Discover Bank, 36 Cal.4th,
at 162–163, 30 Cal.Rptr.3d 76, 113 P.3d, at 1110, but [11] First, the switch from bilateral to class arbitration
the times in which consumer contracts were anything sacrifices the principal advantage of arbitration—its
*347 other than adhesive are long past. 6 Carbajal v. informality—and makes the process slower, more costly,
H & R Block Tax Servs., Inc., 372 F.3d 903, 906 (7th and more likely to generate procedural morass than
Cir.2004); see also Hill v. Gateway 2000, Inc., 105 F.3d final judgment. “In bilateral arbitration, parties forgo the
1147, 1149 (C.A.7 1997). The rule also requires that procedural rigor and appellate review of the courts in
damages be predictably small, and that the consumer order to realize the benefits of private dispute resolution:
allege a scheme to cheat consumers. Discover Bank, supra, lower costs, greater efficiency and speed, and the ability
at 162–163, 30 Cal.Rptr.3d 76, 113 P.3d, at 1110. The to choose expert adjudicators to resolve specialized
former requirement, however, is toothless and malleable disputes.” 559 U.S., at ––––, 130 S.Ct. at 1775. But
(the Ninth Circuit has held that damages of $4,000 are before an arbitrator may decide the merits of a claim in
sufficiently small, see Oestreicher v. Alienware Corp., 322 classwide procedures, he must first decide, for example,
Fed.Appx. 489, 492 (2009) (unpublished)), and the latter whether the class itself may be certified, whether the
has no limiting effect, as all that is required is an allegation. named parties are sufficiently representative and typical,
Consumers remain free to bring and resolve their disputes and how discovery for the class should be conducted.
on a bilateral basis under Discover Bank, and some may A cursory comparison of bilateral and class arbitration
well do so; but there is little incentive for lawyers to illustrates the difference. According to the American

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Arbitration Association (AAA), the average consumer Third, class arbitration greatly increases risks to
arbitration between January and August 2007 resulted in defendants. Informal procedures do of course have a
a disposition on the merits in six months, four months if cost: The absence of multilayered review makes it more
the arbitration was conducted by documents only. AAA, likely that errors will go uncorrected. Defendants are
Analysis of the AAA's Consumer Arbitration Caseload, willing to accept the costs of these errors in arbitration,
online at http://www.adr.org/ si.asp?id=5027 (all Internet since their impact is limited to the size of individual
materials as visited Apr. 25, 2011, and available in Clerk disputes, and presumably outweighed by savings from
of Court's case file). As of September 2009, the AAA avoiding the courts. But when damages allegedly owed to
had opened 283 class arbitrations. Of those, 121 remained tens of thousands of potential claimants are aggregated
active, and 162 had been settled, withdrawn, or dismissed. and decided at once, the risk of an error will often
Not a single one, however, had *349 resulted in a final become unacceptable. Faced with even a small chance of a
award on the merits. Brief for AAA as Amicus Curiae devastating loss, defendants will be pressured into settling
in Stolt–Nielsen, O.T.2009, No. 08–1198, pp. 22–24. For questionable claims. Other courts have noted the risk of
those cases that were no longer active, the median time “in terrorem” settlements that class actions entail, see, e.g.,
from filing to settlement, withdrawal, or dismissal—not Kohen v. Pacific Inv. Management Co. LLC, 571 F.3d 672,
judgment on the merits—was 583 days, and the mean was 677–678 (C.A.7 2009), and class arbitration would be no
630 days. Id., at 24. 7 different.

[12] Second, class arbitration requires procedural Arbitration is poorly suited to the higher stakes of
formality. The AAA's rules governing class arbitrations class litigation. In litigation, a defendant may appeal a
mimic the Federal Rules of Civil Procedure for class certification decision on an interlocutory basis and, if
litigation. Compare AAA, Supplementary Rules for Class unsuccessful, may appeal from a final judgment as well.
Arbitrations (effective Oct. 8, 2003), online at http:// Questions of law are reviewed de novo and questions of
www.adr.org/ sp.asp? id=21936, with Fed. Rule Civ. Proc. fact for clear error. In contrast, 9 U.S.C. § 10 allows a court
23. And while parties can alter those procedures by to vacate an arbitral award only where the award “was
contract, an alternative is not obvious. If procedures are procured by corruption, fraud, or undue means”; “there
too informal, absent class members would not be bound was evident partiality or corruption in the arbitrators”;
by the arbitration. For a class-action money judgment to “the arbitrators were guilty of misconduct in refusing to
bind absentees in litigation, class representatives must at postpone the hearing ... or in refusing to hear evidence
all times adequately represent absent class members, and pertinent and material to the controversy[,] or of any
absent members must be afforded notice, an opportunity other misbehavior by which the rights of any party
to be heard, and a right to opt out of the class. Phillips have been prejudiced”; or if the “arbitrators exceeded
Petroleum Co. v. Shutts, 472 U.S. 797, 811–812, 105 S.Ct. their powers, or so imperfectly executed them that a
2965, 86 L.Ed.2d 628 (1985). At least this amount of mutual, final, and definite award ... was not made.” The
process would presumably be required for absent parties AAA rules do authorize judicial review of certification
to be bound by the results of arbitration. decisions, but this review is unlikely to have much effect
given these limitations; review under § 10 focuses on
We find it unlikely that in passing the FAA Congress misconduct *351 rather than mistake. And parties may
meant to leave the disposition of these procedural not contractually expand the grounds or nature of judicial
requirements to an arbitrator. Indeed, class arbitration review. Hall Street Assocs., 552 U.S., at 578, 128 S.Ct.
was not even envisioned by Congress when it passed the 1396. We find it hard to believe that defendants would bet
FAA in 1925; as the California Supreme Court admitted the company with no effective means of review, and even
in Discover Bank, class arbitration is a “relatively recent harder to believe that Congress would have intended to
development.” 36 Cal.4th, at 163, 30 Cal.Rptr.3d 76, 113 allow state courts to force such a decision. 8
P.3d, at 1110. And it **1752 is at the very *350 least
odd to think that an arbitrator would be entrusted with [13] The Concepcions contend that because parties may
ensuring that third parties' due process rights are satisfied. and sometimes do agree to aggregation, class procedures
are not necessarily incompatible with arbitration. But the
same could be said about procedures that the Concepcions

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admit States may not superimpose on arbitration: Parties Section 2 of the Federal Arbitration Act (FAA) provides
could agree to arbitrate pursuant to the Federal Rules that an arbitration provision “shall be valid, irrevocable,
of Civil Procedure, or pursuant to a discovery process and enforceable, save upon such grounds as exist at law or
rivaling that in litigation. Arbitration is a matter of in equity for the revocation of any contract.” 9 U.S.C. §
contract, and the FAA requires courts to honor parties' 2. The question here is whether California's Discover Bank
expectations. Rent–A– **1753 Center, West, 561 U.S., rule, see Discover Bank v. Superior Ct., 36 Cal.4th 148, 30
at ––––, 130 S.Ct. 2772, 2774. But what the parties in Cal.Rptr.3d 76, 113 P.3d 1100 (2005), is a “groun[d] ... for
the aforementioned examples would have agreed to is not the revocation of any contract.”
arbitration as envisioned by the FAA, lacks its benefits,
and therefore may not be required by state law. It would be absurd to suggest that § 2 requires only
that a defense apply to “any contract.” If § 2 means
The dissent claims that class proceedings are necessary anything, it *353 is that courts cannot refuse to enforce
to prosecute small-dollar claims that might otherwise slip arbitration agreements because of a state public policy
through the legal system. See post, at 9. But States cannot against arbitration, even if the policy nominally applies
require a procedure that is inconsistent with the FAA, to “any contract.” There must be some additional limit
even if it is desirable for unrelated reasons. Moreover, the on the contract defenses permitted by § 2. Cf. ante, at
claim here was most unlikely to go unresolved. As noted 17 (opinion of the Court) (state law may not require
earlier, the arbitration agreement provides that AT & T procedures that are “not arbitration as envisioned by the
will *352 pay claimants a minimum of $7,500 and twice FAA” and “lac[k] its benefits”); post, at 5 (BREYER, J.,
their attorney's fees if they obtain an arbitration award dissenting) (state law may require only procedures that are
greater than AT & T's last settlement offer. The District “consistent with the use of arbitration”).
Court found this scheme sufficient to provide incentive for
the individual prosecution of meritorious claims that are I write separately to explain how I would find that limit
not immediately settled, and the Ninth Circuit admitted in the FAA's text. As I would read it, the FAA requires
that aggrieved customers who filed claims would be that an agreement to arbitrate be enforced unless a party
“essentially guarantee[d]” to be made whole, 584 F.3d, successfully challenges the formation of the arbitration
at 856, n. 9. Indeed, the District Court concluded that agreement, such as by proving fraud or duress. 9 U.S.C.
the Concepcions were better off under their arbitration §§ 2, 4. Under this reading, I would reverse the Court of
agreement with AT & T than they would have been as Appeals because a district court cannot follow both the
participants in a class action, which “ could take months, FAA and the Discover Bank rule, which does not relate to
if not years, and which may merely yield an opportunity defects in the making of an agreement.
to submit a claim for recovery of a small percentage of a
few dollars.” Laster, 2008 WL 5216255, at *12. **1754 This reading of the text, however, has not been
fully developed by any party, cf. Brief for Petitioner 41,
n. 12, and could benefit from briefing and argument in
an appropriate case. Moreover, I think that the Court's
***
test will often lead to the same outcome as my textual
Because it “stands as an obstacle to the accomplishment interpretation and that, when possible, it is important in
and execution of the full purposes and objectives of interpreting statutes to give lower courts guidance from
Congress,” Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. a majority of the Court. See US Airways, Inc. v. Barnett,
399, 85 L.Ed. 581 (1941), California's Discover Bank rule 535 U.S. 391, 411, 122 S.Ct. 1516, 152 L.Ed.2d 589 (2002)
is preempted by the FAA. The judgment of the Ninth (O'Connor, J., concurring). Therefore, although I adhere
Circuit is reversed, and the case is remanded for further to my views on purposes-and-objectives pre-emption, see
proceedings consistent with this opinion. Wyeth v. Levine, 555 U.S. 555, ––––, 129 S.Ct. 1187, 173
L.Ed.2d 51 (2009) (opinion concurring in judgment), I
It is so ordered. reluctantly join the Court's opinion.

Justice THOMAS, concurring.

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Examining the broader statutory scheme, § 4 can be read
to clarify the scope of § 2's exception to the enforcement
I
of *355 arbitration agreements. When a party seeks to
The FAA generally requires courts to enforce arbitration enforce an arbitration agreement in federal court, § 4
agreements as written. Section 2 provides that “[a] written requires that “upon being satisfied that the making of
provision in ... a contract ... to settle by arbitration a the agreement for arbitration or the failure to comply
controversy thereafter arising out of such contract ... therewith is not in issue,” the court must order arbitration
shall *354 be valid, irrevocable, and enforceable, save “in accordance with the terms of the agreement.”
upon such grounds as exist at law or in equity for the
revocation of any contract.” Significantly, the statute Reading §§ 2 and 4 harmoniously, the “grounds ... for
does not parallel the words “valid, irrevocable, and the revocation” preserved in § 2 would mean grounds
enforceable” by referencing the grounds as exist for related to the **1755 making of the agreement. This
the “ invalidation, revocation, or nonenforcement” of would require enforcement of an agreement to arbitrate
any contract. Nor does the statute use a different unless a party successfully asserts a defense concerning the
word or phrase entirely that might arguably encompass formation of the agreement to arbitrate, such as fraud,
validity, revocability, and enforce-ability. The use of duress, or mutual mistake. See Prima Paint Corp. v. Flood
only “revocation” and the conspicuous omission of & Conklin Mfg. Co., 388 U.S. 395, 403–404, 87 S.Ct. 1801,
“invalidation” and “nonenforcement” suggest that the 18 L.Ed.2d 1270 (1967) (interpreting § 4 to permit federal
exception does not include all defenses applicable to any courts to adjudicate claims of “fraud in the inducement
contract but rather some subset of those defenses. See of the arbitration clause itself” because such claims “g[o]
Duncan v. Walker, 533 U.S. 167, 174, 121 S.Ct. 2120, to the ‘making’ of the agreement to arbitrate”). Contract
150 L.Ed.2d 251 (2001) (“It is our duty to give effect, if defenses unrelated to the making of the agreement—such
possible, to every clause and word of a statute” (internal as public policy—could not be the basis for declining to
quotation marks omitted)). enforce an arbitration clause. *

Concededly, the difference between revocability, on the
one hand, and validity and enforceability, on the other,
*356 II
is not obvious. The statute does not define the terms,
and their ordinary meanings arguably overlap. Indeed, Under this reading, the question here would be whether
this Court and others have referred to the concepts of California's Discover Bank rule relates to the making of an
revocability, validity, and enforceability interchangeably. agreement. I think it does not.
But this ambiguity alone cannot justify ignoring Congress'
clear decision in § 2 to repeat only one of the three In Discover Bank, 36 Cal.4th 148, 30 Cal.Rptr.3d 76,
concepts. 113 P.3d 1100, the California Supreme Court held that
“class action waivers are, under certain circumstances,
To clarify the meaning of § 2, it would be natural to look unconscionable as unlawfully exculpatory.” Id., at 65, 30
to other portions of the FAA. Statutory interpretation Cal.Rptr.3d 76, 113 P.3d, at 1112; see also id., at 161,
focuses on “the language itself, the specific context in 30 Cal.Rptr.3d 76, 113 P.3d, at 1108 (“[C]lass action
which that language is used, and the broader context of waivers [may be] substantively unconscionable inasmuch
the statute as a whole.” Robinson v. Shell Oil Co., 519 as they may operate effectively as exculpatory contract
U.S. 337, 341, 117 S.Ct. 843, 136 L.Ed.2d 808 (1997). clauses that are contrary to public policy”). The court
“A provision that may seem ambiguous in isolation is concluded that where a class-action waiver is found in
often clarified by the remainder of the statutory scheme ... an arbitration agreement in certain consumer contracts
because only one of the permissible meanings produces of adhesion, such waivers “should not be enforced.” Id.,
a substantive effect that is compatible with the rest of at 163, 30 Cal.Rptr.3d 76, 113 P.3d, at 1110. In practice,
the law.” United Sav. Assn. of Tex. v. Timbers of Inwood the court explained, such agreements “operate to insulate
Forest Associates, Ltd., 484 U.S. 365, 371, 108 S.Ct. 626, a party from liability that otherwise would be imposed
98 L.Ed.2d 740 (1988). under California law.” Id., at 161, 30 Cal.Rptr.3d 76, 113
P.3d, at 1108, 1109. The court did not conclude that a

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customer would sign such an agreement only if under California Civil Code. The first provision makes unlawful
**1756 the influence of fraud, duress, or delusion. all contracts “which have for their object, directly or in-
directly, to exempt anyone from responsibility for his
The court's analysis and conclusion that the arbitration own ... violation of law.” *358 Cal. Civ.Code Ann. § 1668
agreement was exculpatory reveals that the Discover Bank (West 1985). The second provision authorizes courts to
rule does not concern the making of the arbitration “limit the application of any unconscionable clause” in
agreement. Exculpatory contracts are a paradigmatic a contract so “as to avoid any unconscionable result.” §
example of contracts that will not be enforced because of 1670.5(a).
public policy. *357 15 G. Giesel, Corbin on Contracts
§§ 85.1, 85.17, 85.18 (rev. ed.2003). Indeed, the court The specific rule of state law in question consists of
explained that it would not enforce the agreements the California Supreme Court's application of these
because they are “ ‘against the policy of the law.’ ” 36 principles to hold that “some” (but not “all”) “class action
Cal.4th, at 161, 30 Cal.Rptr.3d 76, 113 P.3d, at 1108 waivers” in consumer contracts are exculpatory and
(quoting Cal. Civ.Code Ann. § 1668); see also 36 Cal.4th, unconscionable under California “law.” Discover Bank v.
at 166, 30 Cal.Rptr.3d 76, 113 P.3d, at 1112 (“Agreements Superior Ct., 36 Cal.4th 148, 160, 162, 30 Cal.Rptr.3d 76,
to arbitrate may not be used to harbor terms, conditions 113 P.3d 1100, 1108, 1110 (2005). In particular, in Discover
and practices that undermine public policy” (internal Bank the California Supreme Court stated that, when a
quotation marks omitted)). Refusal to enforce a contract class-action waiver
for public-policy reasons does not concern whether the
contract was properly made. “is found in a consumer contract of adhesion in
a setting in which disputes between the contracting
Accordingly, the Discover Bank rule is not a “groun[d] ... parties predictably involve small amounts of damages,
for the revocation of any contract” as I would read § 2 and when it is alleged that the party with the
of the FAA in light of § 4. Under this reading, the FAA superior bargaining power has carried out a scheme to
dictates that the arbitration agreement here be enforced deliberately cheat large numbers of consumers out of
and the Discover Bank rule is pre-empted. individually small sums of money, then ... the waiver
becomes in practice the exemption of the party ‘from
responsibility for [its] own fraud, or willful injury
**1757 to the person or property of another.’ ” Id., at
Justice BREYER, with whom Justice GINSBURG, 162–163, 30 Cal.Rptr.3d 76, 113 P.3d, at 1110.
Justice SOTOMAYOR, and Justice KAGAN join,
dissenting. In such a circumstance, the “waivers are unconscionable
The Federal Arbitration Act says that an arbitration under California law and should not be enforced.” Id., at
agreement “shall be valid, irrevocable, and enforceable, 163, 30 Cal.Rptr.3d 76, 113 P.3d, at 1110.
save upon such grounds as exist at law or in equity for the
revocation of any contract.” 9 U.S.C. § 2 (emphasis added). The Discover Bank rule does not create a “blanket policy
California law sets forth certain circumstances in which in California against class action waivers in the consumer
“class action waivers” in any contract are unenforceable. context.” Provencher v. Dell, Inc., 409 F.Supp.2d
In my view, this rule of state law is consistent with the 1196, 1201 (C.D.Cal.2006). Instead, it represents the
federal Act's language and primary objective. It does not “application of a more general [unconscionability]
“stan[d] as an obstacle” to the Act's “accomplishment and principle.” Gentry v. Superior Ct., 42 Cal.4th 443,
execution.” Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 457, 64 Cal.Rptr.3d 773, 165 P.3d 556, 564 (2007).
399, 85 L.Ed. 581 (1941). And the Court is wrong to hold Courts applying California law have enforced class-action
that the federal Act pre-empts the rule of state law. waivers where they satisfy general unconscionability
standards. See, e.g., *359 Walnut Producers of Cal.
v. Diamond Foods, Inc., 187 Cal.App.4th 634, 647–650,
114 Cal.Rptr.3d 449, 459–462 (2010); Arguelles–Romero
I
v. Superior Ct., 184 Cal.App.4th 825, 843–845, 109
The California law in question consists of an authoritative Cal.Rptr.3d 289, 305–307 (2010); Smith v. Americredit
state-court interpretation of two provisions of the Financial Servs., Inc., No. 09cv1076, 2009 WL 4895280

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(S.D.Cal., Dec.11, 2009); cf. Provencher, supra, at 1201 Alberto–Culver Co., 417 U.S. 506, 511, 94 S.Ct. 2449,
(considering Discover Bank in choice-of-law inquiry). And 41 L.Ed.2d 270 (1974) (quoting H.R.Rep. No. 96, at 2;
even when they fail, the parties remain free to devise other emphasis added).
dispute mechanisms, including informal mechanisms,
that, in context, will not prove unconscionable. See Volt Congress was fully aware that arbitration could provide
Information Sciences, Inc. v. Board of Trustees of Leland procedural and cost advantages. The House Report
Stanford Junior Univ., 489 U.S. 468, 479, 109 S.Ct. 1248, emphasized the “appropriate[ness]” of making arbitration
103 L.Ed.2d 488 (1989). **1758 agreements enforceable “at this time when there
is so much agitation against the costliness and delays of
litigation.” Id., at 2. And this Court has acknowledged
that parties may enter into arbitration agreements in
II
order to expedite the resolution of disputes. See Preston
v. Ferrer, 552 U.S. 346, 357, 128 S.Ct. 978, 169 L.Ed.2d
A 917 (2008) (discussing “prime objective of an agreement
to arbitrate”). See also Mitsubishi Motors Corp. v. Soler
The Discover Bank rule is consistent with the federal Act's Chrysler–Plymouth, Inc., 473 U.S. 614, 628, 105 S.Ct.
language. It “applies equally to class action litigation 3346, 87 L.Ed.2d 444 (1985).
waivers in contracts without arbitration agreements as it
does to class arbitration waivers in contracts with such
But we have also cautioned against thinking that
agreements.” 36 Cal.4th, at 165–166, 30 Cal.Rptr.3d 76, Congress' primary objective was to guarantee these
113 P.3d, at 1112. Linguistically speaking, it falls directly particular procedural advantages. Rather, that primary
within the scope of the Act's exception permitting courts to objective was to secure the “enforcement” of agreements
refuse to enforce arbitration agreements on grounds that to arbitrate. Dean Witter, 470 U.S., at 221, 105 S.Ct.
exist “for the revocation of any contract.” 9 U.S.C. § 2 1238. See also id., at 219, 105 S.Ct. 1238 (we “reject the
(emphasis added). The majority agrees. Ante, at 9. suggestion that the overriding goal of the Arbitration Act
was to promote the expeditious resolution of claims”);
id., at 219, 217–218, 105 S.Ct. 1238 (“[T]he intent of
B Congress” requires us to apply the terms of the Act
without regard to whether the result would be “possibly
The Discover Bank rule is also consistent with the inefficient”); cf. id., at 220, 105 S.Ct. 1238 (acknowledging
basic “purpose behind” the Act. Dean Witter Reynolds that “expedited resolution of disputes” might lead parties
Inc. v. Byrd, 470 U.S. 213, 219, 105 S.Ct. 1238, 84 to prefer arbitration). The relevant Senate Report points
L.Ed.2d 158 (1985). We have described that purpose as to the Act's basic purpose when it says that “[t]he purpose
one of “ensur[ing] judicial enforcement” of arbitration of the [Act] is clearly set forth in section 2,” S.Rep. No.
agreements. Ibid.; see also Marine Transit Corp. v. 536, at 2 (emphasis added), namely, the section that says
Dreyfus, 284 U.S. 263, 274, n. 2, 52 S.Ct. 166, 76 L.Ed. that an arbitration agreement “shall be valid, irrevocable,
282 (1932) (“ ‘The purpose of this bill is to make valid *362 and enforceable, save upon such grounds as exist
and enforceable agreements for arbitration’ ” (quoting at law or in equity for the revocation of any contract,” 9
H.R.Rep. No. 96, 68th Cong., 1st Sess., 1 (1924); emphasis U.S.C. § 2.
added)); 65 Cong. Rec.1931 (1924) ( “It creates no new
legislation, grants no new rights, except a remedy to Thus, insofar as we seek to implement Congress' intent,
enforce an agreement in commercial contracts and in we should think more than twice before invalidating a
*360 admiralty contracts”). As is well known, prior state law that does just what § 2 requires, namely, puts
to the federal Act, many courts expressed hostility to agreements to arbitrate and agreements to litigate “upon
arbitration, for example by refusing to order specific the same footing.”
performance of agreements to arbitrate. See S.Rep. No.
536, 68th Cong., 1st Sess., 2 (1924). The Act sought to
eliminate that hostility by placing agreements to arbitrate
III
“ ‘upon the same footing as other contracts.’ ” Scherk v.

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The majority's contrary view (that Discover Bank stands as H.R. 646 before the Subcommittees of the Committees on
an “obstacle” to the accomplishment of the federal law's the Judiciary, 68th Cong., 1st Sess., 15 (1924); Hearing
objective, ante, at 9–18) rests primarily upon its claims on S. 4213 and S. 4214 before a Subcommittee of
that the Discover Bank rule increases the complexity the Senate Committee on the Judiciary, 67th Cong.,
of arbitration procedures, thereby discouraging parties 4th Sess., 9–10 (1923); Dept. of Commerce, Secretary
from entering into arbitration agreements, and to that Hoover Favors Arbitration—Press Release (Dec. 28,
extent discriminating in practice against arbitration. 1925), Herbert Hoover Papers—Articles, Addresses, and
These claims are not well founded. Public Statements File—No. 536, p. 2 (Herbert Hoover
Presidential Library); Cohen & Dayton, The New Federal
For one thing, a state rule of law that would sometimes Arbitration Law, 12 Va. L.Rev. 265, 281 (1926); AAA,
set aside as unconscionable a contract term that forbids Year Book on Commercial Arbitration in the United
class arbitration is not (as the majority claims) like a rule States (1927). This last mentioned feature of the history
that would require “ultimate disposition by a jury” or —roughly equivalent bargaining power—suggests, if
“judicially monitored discovery” or use of “the Federal anything, that California's statute is consistent with, and
Rules of Evidence.” Ante, at 8, 9. Unlike the majority's indeed may help to further, the objectives that Congress
examples, class arbitration is consistent with the use of had in mind.
arbitration. It is a form of arbitration that is well known
in California and followed elsewhere. See, e.g., Keating Regardless, if neither the history nor present practice
v. Superior Ct., 109 Cal.App.3d 784, 167 Cal.Rptr. 481, suggests that class arbitration is fundamentally
492 (1980) (officially depublished); American Arbitration incompatible with arbitration itself, then on what basis
Association (AAA), Supplementary Rules for Class can the majority hold California's law pre-empted?
Arbitrations (2003), http://www.adr.org/sp.asp?id=21936
(as visited Apr. 25, 2011, and available in Clerk of Court's *363 For another thing, the majority's argument that
case file); JAMS, The Resolution Experts, Class Action the Discover Bank rule will discourage arbitration rests
Procedures (2009). Indeed, the AAA has told us that it critically upon the wrong comparison. The majority
has found class arbitration to be “a fair, balanced, and compares the complexity of class arbitration with that
efficient means of resolving class disputes.” Brief for AAA of bilateral arbitration. See ante, at 14. And it finds the
as Amicus Curiae in Stolt–Nielsen S.A. v. AnimalFeeds former more complex. See ibid. But, if incentives are at
Int'l Corp., O.T.2009, No. 08–1198, p. 25 (hereinafter issue, the relevant comparison is not “arbitration with
AAA Amicus Brief). And unlike the majority's examples, arbitration” but a comparison between class arbitration
the Discover Bank rule imposes equivalent limitations on and judicial class actions. After all, in respect to the
litigation; hence it cannot **1759 fairly be characterized relevant set of contracts, the Discover Bank rule similarly
as a targeted attack on arbitration. and equally sets aside clauses that forbid class procedures
—whether arbitration procedures or ordinary judicial
Where does the majority get its contrary idea—that procedures are at issue.
individual, rather than class, arbitration is a “fundamental
attribut[e]” of arbitration? Ante, at 9. The majority does Why would a typical defendant (say, a business) prefer a
not explain. And it is unlikely to be able to trace its present judicial class action to class arbitration? AAA statistics
view to the history of the arbitration statute itself. “suggest that class arbitration proceedings take more time
than the average commercial arbitration, but may take less
When Congress enacted the Act, arbitration procedures time than the average class action in court.” AAA Amicus
had not yet been fully developed. Insofar as Congress Brief 24 (emphasis added). Data from California courts
considered detailed forms of arbitration at all, it may well confirm that class arbitrations can take considerably less
have thought that arbitration would be used primarily time than in-court proceedings in which class certification
where merchants sought to resolve disputes of fact, not is sought. Compare ante, at 14 (providing statistics for
law, under the customs of their industries, where the class arbitration), with Judicial Council of California,
parties possessed roughly equivalent bargaining power. Administrative Office of the Courts, Class Certification
See Mitsubishi Motors, supra, at 646, 105 S.Ct. 3346 in California: Second Interim Report from the Study of
(Stevens, J., dissenting); Joint Hearings on S. 1005 and California Class Action Litigation 18 (2010) (providing

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statistics for class-action litigation in California courts). 687. See also ante, at 4, n. (THOMAS, J., concurring)
And a single class proceeding is surely more efficient (suggesting that, under certain circumstances, California
than thousands of separate proceedings for identical might remain free to apply its unconscionability doctrine).
claims. Thus, if speedy resolution of disputes were all that
mattered, then the Discover Bank rule would reinforce, *365 Because California applies the same legal principles
**1760 not obstruct, that objective of the Act. to address the unconscionability of class arbitration
waivers as it does to address the unconscionability of
The majority's related claim that the Discover Bank any other contractual provision, the merits of class
rule will discourage the use of arbitration because proceedings should not factor into our decision. If
“[a]rbitration is poorly suited to ... higher stakes” lacks California had applied its law of duress to void an
empirical support. Ante, at 16. Indeed, the majority arbitration agreement, would it matter if the procedures
provides no convincing reason to believe that parties are in the coerced agreement were efficient?
unwilling to submit High-Stake disputes to Arbitration.
and There are numerous counterexamples. Loftus, Rivals Regardless, the majority highlights the disadvantages of
Resolve Dispute Over Drug, Wall Street Journal, Apr. 16, class arbitrations, as it sees them. See ante, at 15–16
2011, p. B2 (discussing $500 million settlement in dispute (referring to the “greatly increase[d] risks to defendants”;
submitted to arbitration); Ziobro, Kraft Seeks Arbitration the “chance of a devastating loss” pressuring defendants
In Fight With Starbucks Over Distribution, Wall Street “into settling questionable claims”). But class proceedings
Journal, Nov. 30, 2010, p. B10 (describing initiation of an have countervailing advantages. In general agreements
arbitration in which the payout “could be higher” than that forbid the consolidation of claims can lead small-
$1.5 billion); Markoff, Software Arbitration Ruling Gives dollar claimants to abandon their claims rather than to
I.B.M. $833 Million From Fujitsu, N.Y. Times, Nov. 30, litigate. I suspect that it is true even here, for as the
1988, p. A1 (describing both companies as “pleased with Court of Appeals recognized, AT & T can avoid the
the ruling” resolving a licensing dispute). $7,500 payout (the payout that supposedly makes the
Concepcions' arbitration worthwhile) simply by paying
Further, even though contract defenses, e.g., duress the claim's face value, such that “the maximum gain to a
and unconscionability, slow down the dispute resolution customer for the hassle of arbitrating a $30.22 dispute is
process, federal arbitration law normally leaves such still just $30.22.” Laster v. AT & T Mobility **1761 LLC,
matters to the States. Rent–A–Center, West, Inc. v. 584 F.3d 849, 855, 856 (C.A.9 2009).
Jackson, 561 U.S. ––––, ––––, 130 S.Ct. 2772, 2775
(2010) (arbitration agreements “may be invalidated What rational lawyer would have signed on to represent
by ‘generally applicable contract defenses' ” (quoting the Concepcions in litigation for the possibility of fees
Doctor's Associates, Inc. v. Casarotto, 517 U.S. 681, 687, stemming from a $30.22 claim? See, e.g., Carnegie v.
116 S.Ct. 1652, 134 L.Ed.2d 902 (1996))). A provision in a Household Int'l, Inc., 376 F.3d 656, 661 (C.A.7 2004)
contract of adhesion (for example, requiring a consumer (“The realistic alternative to a class action is not 17
to decide very quickly whether to pursue a claim) might million individual suits, but zero individual suits, as only
increase the speed and efficiency of arbitrating a dispute, a lunatic or a fanatic sues for $30”). In California's
but the State can forbid it. See, e.g., Hayes v. Oakridge perfectly rational view, nonclass arbitration over such
Home, 122 Ohio St.3d 63, 67, 2009–Ohio–2054, ¶ 19, sums will also sometimes have the effect of depriving
908 N.E.2d 408, 412 (“Unconscionability is a ground claimants of their claims (say, for example, where claiming
for revocation of an arbitration agreement”); In re the $30.22 were to involve filling out many forms that
Poly–America, L. P., 262 S.W.3d 337, 348 (Tex.2008) require technical legal knowledge or waiting at great
(“Unconscionable contracts, however—whether relating length while a call is placed on hold). Discover Bank sets
to arbitration or not—are unenforceable under Texas forth circumstances in which the California courts believe
law”). The Discover Bank rule amounts to a variation on that the terms of consumer contracts can be manipulated
this theme. California is free to define unconscionability to *366 insulate an agreement's author from liability for
as it sees fit, and its common law is of no federal concern its own frauds by “deliberately cheat[ing] large numbers of
so long as the State does not adopt a special rule that consumers out of individually small sums of money.” 36
disfavors arbitration. Cf. Doctor's Associates, supra, at Cal.4th, at 162–163, 30 Cal.Rptr.3d 76, 113 P.3d, at 1110.

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Why is this kind of decision—weighing the pros and cons it if their belief happens to be the contrary”); Cohen &
Dayton, 12 Va. L.Rev., at 276 (the Act “is no infringement
of all class proceedings alike—not California's to make?
upon the right of each State to decide for itself what
**1762 contracts shall or shall not exist under its laws”).
Finally, the majority can find no meaningful support
for its views in this Court's precedent. The federal Act
These cases do not concern the merits and demerits of
has been in force for nearly a century. We have decided
class actions; they concern equal treatment of arbitration
dozens of cases about its requirements. We have reached
contracts and other contracts. Since it is the latter question
results that authorize complex arbitration procedures.
that is at issue here, I am not surprised that the majority
E.g., Mitsubishi Motors, 473 U.S., at 629, 105 S.Ct.
can find no meaningful precedent supporting its decision.
3346 (antitrust claims arising in international transaction
are arbitrable). We have upheld nondiscriminatory state
laws that slow down arbitration proceedings. E.g., Volt
Information Sciences, 489 U.S., at 477–479, 109 S.Ct. IV
1248 (California law staying arbitration proceedings until
completion of related litigation is not pre-empted). But we By using the words “save upon such grounds as exist
have not, to my knowledge, applied the Act to strike down at law or in equity for the revocation of any contract,”
a state statute that treats arbitrations on par with judicial Congress retained for the States an important role incident
and administrative proceedings. Cf. Preston, 552 U.S., at to agreements to arbitrate. 9 U.S.C. § 2. Through those
355–356, 128 S.Ct. 978 (Act pre-empts state law that vests words Congress reiterated a basic federal idea that has
primary jurisdiction in state administrative board). long informed the nature of this Nation's laws. We
have often expressed this idea in opinions that set forth
At the same time, we have repeatedly referred to the Act's presumptions. See, e.g., Medtronic, Inc. v. Lohr, 518
basic objective as assuring that courts treat arbitration U.S. 470, 485, 116 S.Ct. 2240, 135 L.Ed.2d 700 (1996)
agreements “like all other contracts.” Buckeye Check (“[B]ecause the States are independent sovereigns in our
Cashing, Inc. v. Cardegna, 546 U.S. 440, 447, 126 S.Ct. federal system, we have long presumed that Congress does
1204, 163 L.Ed.2d 1038 (2006). See also, e.g., Vaden v. not cavalierly pre-empt state-law causes of action”). But
Discover Bank, 556 U.S. 49, ––––, 129 S.Ct. 1262, 1273– federalism is as much a question of deeds as words. It often
1274, 173 L.Ed.2d 206 (2009);; Doctor's Associates, supra, takes the form of a concrete decision by this Court that
at 687, 116 S.Ct. 1652; Allied–Bruce Terminix Cos. v. respects the legitimacy of a State's action in an individual
Dobson, 513 U.S. 265, 281, 115 S.Ct. 834, 130 L.Ed.2d 753 case. Here, recognition of that federalist ideal, embodied
(1995); Rodriguez de Quijas v. Shearson/American Express, in specific language in this particular statute, should lead
Inc., 490 U.S. 477, 483–484, 109 S.Ct. 1917, 104 L.Ed.2d us to uphold California's law, not to strike it down. We do
526 (1989); Perry v. Thomas, 482 U.S. 483, 492–493, n. 9, not honor federalist principles in their breach.
107 S.Ct. 2520, 96 L.Ed.2d 426 (1987); Mitsubishi Motors,
supra, at 627, 105 S.Ct. 3346. And we have recognized With respect, I dissent.
that “[t]o immunize an arbitration agreement from judicial
challenge” on grounds applicable to all other contracts 19 NO. 4 Westlaw Journal Class Action 319 NO. 4
“would be to elevate it over other forms of contract.” Westlaw Journal Class Action 319 NO. 4 Westlaw Journal
*367 Prima Paint Corp. v. Flood & Conklin Mfg. Co., Class Action 319 NO. 4 Westlaw Journal Class Action 3
388 U.S. 395, 404, n. 12, 87 S.Ct. 1801, 18 L.Ed.2d 1270
All Citations
(1967); see also Marchant v. Mead–Morrison Mfg. Co.,
252 N.Y. 284, 299, 169 N.E. 386, 391 (1929) (Cardozo, 563 U.S. 333, 131 S.Ct. 1740, 179 L.Ed.2d 742, 79 USLW
C.J.) (“Courts are not at liberty to shirk the process of 4279, 161 Lab.Cas. P 10,368, 11 Cal. Daily Op. Serv. 4842,
[contractual] construction under the empire of a belief that 2011 Daily Journal D.A.R. 5846, 52 Communications
arbitration is beneficent any more than they may shirk Reg. (P&F) 1179, 22 Fla. L. Weekly Fed. S 957

Footnotes

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* The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the
convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U.S. 321, 337, 26 S.Ct. 282, 50
L.Ed. 499.
1 The Conceptions' original contract was with Cingular Wireless. AT & T acquired Cingular in 2005 and renamed the
company AT & T Mobility in 2007. Laster v. AT & T Mobility LLC, 584 F.3d 849, 852, n. 1 (C.A.9 2009).
2 That provision further states that “the arbitrator may not consolidate more than one person's claims, and may not otherwise
preside over any form of a representative or class proceeding.” App. to Pet. for Cert. 61a.
3 The guaranteed minimum recovery was increased in 2009 to $10,000. Brief for Petitioner 7.
4 The dissent seeks to fight off even this eminently reasonable concession. It says that to its knowledge “we have not ...
applied the Act to strike down a state statute that treats arbitrations on par with judicial and administrative proceedings,”
post, at 10 (opinion of BREYER, J.), and that “we should think more than twice before invalidating a state law that ... puts
agreements to arbitrate and agreements to litigate ‘upon the same footing’ ” post, at 4–5.
5 Relying upon nothing more indicative of congressional understanding than statements of witnesses in committee hearings
and a press release of Secretary of Commerce Herbert Hoover, the dissent suggests that Congress “thought that
arbitration would be used primarily where merchants sought to resolve disputes of fact ... [and] possessed roughly
equivalent bargaining power.” Post, at 6. Such a limitation appears nowhere in the text of the FAA and has been explicitly
rejected by our cases. “Relationships between securities dealers and investors, for example, may involve unequal
bargaining power, but we [have] nevertheless held ... that agreements to arbitrate in that context are enforceable.” Gilmer
v. Interstate/Johnson Lane Corp., 500 U.S. 20, 33, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991); see also id., at 32–33, 111 S.Ct.
1647 (allowing arbitration of claims arising under the Age Discrimination in Employment Act of 1967 despite allegations of
unequal bargaining power between employers and employees). Of course the dissent's disquisition on legislative history
fails to note that it contains nothing—not even the testimony of a stray witness in committee hearings—that contemplates
the existence of class arbitration.
6 Of course States remain free to take steps addressing the concerns that attend contracts of adhesion—for example,
requiring class-action-waiver provisions in adhesive arbitration agreements to be highlighted. Such steps cannot,
however, conflict with the FAA or frustrate its purpose to ensure that private arbitration agreements are enforced according
to their terms.
7 The dissent claims that class arbitration should be compared to class litigation, not bilateral arbitration. Post, at 6–7.
Whether arbitrating a class is more desirable than litigating one, however, is not relevant. A State cannot defend a rule
requiring arbitration-by-jury by saying that parties will still prefer it to trial-by-jury.
8 The dissent cites three large arbitration awards (none of which stems from classwide arbitration) as evidence that parties
are willing to submit large claims before an arbitrator. Post, at 7–8. Those examples might be in point if it could be
established that the size of the arbitral dispute was predictable when the arbitration agreement was entered. Otherwise, all
the cases prove is that arbitrators can give huge awards—which we have never doubted. The point is that in class-action
arbitration huge awards (with limited judicial review) will be entirely predictable, thus rendering arbitration unattractive. It
is not reasonably deniable that requiring consumer disputes to be arbitrated on a classwide basis will have a substantial
deterrent effect on incentives to arbitrate.
* The interpretation I suggest would be consistent with our precedent. Contract formation is based on the consent of the
parties, and we have emphasized that “[a]rbitration under the Act is a matter of consent.” Volt Information Sciences, Inc.
v. Board of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 479, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989).
The statement in Perry v. Thomas, 482 U.S. 483, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987), suggesting that § 2 preserves
all state-law defenses that “arose to govern issues concerning the validity, revocability, and enforceability of contracts
generally,” id., at 493, n. 9, 107 S.Ct. 2520, is dicta. This statement is found in a footnote concerning a claim that the
Court “decline[d] to address.” Id., at 493, n. 9, 107 S.Ct. 2520. Similarly, to the extent that statements in Rent–A–Center,
West, Inc. v. Jackson, 561 U.S. ––––, –––– n. 1, 130 S.Ct. 2772, 2778 n. 1 (2010), can be read to suggest anything
about the scope of state-law defenses under § 2, those statements are dicta, as well. This Court has never addressed
the question whether the state-law “grounds” referred to in § 2 are narrower than those applicable to any contract.
Moreover, every specific contract defense that the Court has acknowledged is applicable under § 2 relates to contract
formation. In Doctor's Associates, Inc. v. Casarotto, 517 U.S. 681, 687, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996),
this Court said that fraud, duress, and unconscionability “may be applied to invalidate arbitration agreements without
contravening § 2.” All three defenses historically concern the making of an agreement. See Morgan Stanley Capital
Group Inc. v. Public Util. Dist. No. 1 of Snohomish Cty., 554 U.S. 527, 547, 128 S.Ct. 2733, 171 L.Ed.2d 607 (2008)
(describing fraud and duress as “traditional grounds for the abrogation of [a] contract” that speak to “unfair dealing

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at the contract formation stage”); Hume v. United States, 132 U.S. 406, 411, 414, 10 S.Ct. 134, 33 L.Ed. 393 (1889)
(describing an unconscionable contract as one “such as no man in his senses and not under delusion would make” and
suggesting that there may be “contracts so extortionate and unconscionable on their face as to raise the presumption
of fraud in their inception” (internal quotation marks omitted)).

End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 19
Capital Income Properties-LXXX v. Blackmon, 843 S.W.2d 22 (1992)

KeyCite Yellow Flag - Negative Treatment Attorneys and Law Firms
Distinguished by Loy v. Harter, Tex.App.-Texarkana, February 10, 2004 
843 S.W.2d 22 *22 Kelly M. Crawford and C. Kent Adams, Dallas,
Supreme Court of Texas. Scott G. Campbell, New York City, for relators.

CAPITAL INCOME PROPERTIES–LXXX; Cary N. Goldberg, Chicago, IL, Thomas L. Busby,
CRI, Inc.; William B. Dockser; Martin C. Corpus Christi, Ronald A. Schy, Chicago, IL, Kathryn
F. Green, Corpus Christi, Bruce W. Collins, Dallas, for
Schwartzberg; H. William Willoughby;
respondent.
C.R.C.C. of Corpus Christi, Ltd.; CRICO–
Texas Growth Partners Limited Partnership Opinion
and Crico Securities Corporation, Relators,
v. PER CURIAM.
The Honorable Robert M. Capital Income Properties–LXXX and seven other
BLACKMON, Judge, Respondent. defendants (collectively CIP) have filed a motion for leave
to file a petition for writ of mandamus, requesting that
No. D–2848.
we direct the trial court to compel arbitration of the
|
claims raised by thirty plaintiffs in the underlying suit.
Dec. 16, 1992.
Concluding that CIP has established that the trial court
Limited partnership petitioned for writ of mandamus abused its discretion in refusing to order arbitration and
to compel arbitration of limited partners' claims against that CIP does not have an adequate remedy by appeal, we
limited partnership. The Supreme Court held that conditionally grant the relief requested. 1
arbitration was required.
Plaintiffs, residents of fourteen different states, purchased
Petition granted. shares in CIP, a District *23 of Columbia limited
partnership formed to develop and operate a Corpus
Christi hotel. Article 12.01 of the limited partnership
agreement provided that “any dispute, controversy or
West Headnotes (1)
claim arising out of or in connection with or relating to
this Agreement ... shall, upon the request of any party
[1] Alternative Dispute Resolution involved, be submitted to and settled by arbitration....”
Disputes and Matters Arbitrable Under Plaintiffs filed suit in 1991, seeking return of their
Agreement initial investments plus damages based on fraud, breach
Limited partners' claims that limited of fiduciary duty, negligent misrepresentation, and
partnership breached fiduciary duty in violation of the Deceptive Trade Practices Act. Urging
operating and managing partnership, the application of the Texas General Arbitration Act,
repeatedly misrepresenting financial health TEX.REV.CIV.STAT.ANN. art. 224—238–6 (the Texas
of operation, and fraudulently inducing Act), and the Federal Arbitration Act, 9 U.S.C. § 1–16 (the
investments arose out of and related to Federal Act), CIP requested that the trial court compel
limited partnership agreement, and, thus, arbitration.
arbitration was required under provision
of agreement requiring arbitration of any At the conclusion of a hearing on the motion to compel
dispute, controversy, or claim arising out of or arbitration, the trial court determined that the agreement
in connection with or relating to agreement. to arbitrate was binding and enforceable but that the
claims raised were not within the scope of the arbitration
42 Cases that cite this headnote clause. CIP's request for mandamus relief from the
Thirteenth Court of Appeals was denied.

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 1
Capital Income Properties-LXXX v. Blackmon, 843 S.W.2d 22 (1992)

After reviewing the mandamus record before us, we Painter, 827 S.W.2d 103, 105 (Tex.App.—Austin 1992,
writ denied).
conclude that although the trial court correctly concluded
that the arbitration clause is valid and enforceable, it
It is also undisputed that the Plaintiffs claim that CIP
abused its discretion in failing to compel arbitration
breached its fiduciary duty to them in operating and
under the Federal Act. 2 We have recently reiterated the
managing the partnership, in repeatedly misrepresenting
strong policy preference for enforcing arbitration clauses.
the financial health of the operation, and in fraudulently
Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266 (Tex.1992)
inducing them to invest in the partnership. These claims
(orig. proceeding). The Federal Act, which applies to
arise out of and relate to the limited partnership
transactions “involving commerce,” dictates enforcement
agreement. In Anglin we held that Deceptive Trade
of an arbitration agreement upon evidence that a written
Practice Act claims may be subject to arbitration, 842
agreement to arbitrate exists and that the claims raised
S.W.2d at 271, and the United States Supreme Court
are within the scope of the agreement. The Federal Act
has held that a claim of fraud in the inducement unless
is part of the substantive law of Texas. Southland Corp.
specifically directed to the making of the arbitration clause
v. Keating, 465 U.S. 1, 14–16, 104 S.Ct. 852, 860–61, 79
does not defeat application of that clause to the agreement
L.Ed.2d 1 (1984); Anglin, 842 S.W.2d at 271; Batton v.
as a whole. Prima Paint Corp., 388 U.S. at 406, 87 S.Ct. at
Green, 801 S.W.2d 923, 927 (Tex.App.—Dallas 1990, no
1807; Mesa Operating, 797 F.2d at 244.
writ). In Anglin we also concluded that a party denied
the benefit of an agreement to arbitrate is without an
*24 Accordingly, because CIP has shown that a written
adequate remedy by appeal when pursuing application
arbitration agreement exists and that the Plaintiffs' claims
of the Federal Act in state court, and that mandamus is
fall within the scope of that agreement, without hearing
therefore appropriate. 842 S.W.2d at 271.
oral argument and pursuant to Texas Rule of Appellate
Procedure 122, a majority of the court conditionally
The undisputed facts of this case establish the applicability
grants the writ of mandamus and directs the trial court
of the Federal Act: citizens from a number of different
to order that all claims proceed to arbitration under the
states have purchased interests from a business entity in
Federal Arbitration Act. The clerk is instructed to issue
one state for the purpose of carrying out a commercial
the writ only should the trial court fail to follow our
venture in another state. See Prima Paint v. Flood &
direction.
Conklin Mfg. Co., 388 U.S. 395, 401 n. 7, 87 S.Ct. 1801,
1805 n. 7, 18 L.Ed.2d 1270 (1967); Mesa Operating Ltd.
Partnership v. Louisiana Intrastate Gas Corp., 797 F.2d All Citations
238, 243 (5th Cir.1986); Lost Creek Util. v. Travis Indep.
843 S.W.2d 22

Footnotes
1 CIP also filed an application for writ of error from the judgment of the Thirteenth Court of Appeals dismissing CIP's
interlocutory appeal for want of jurisdiction. Capital Income Properties–LXXX v. Waldman, 835 S.W.2d 152 (Tex.App.—
Corpus Christi 1992). The court of appeals held that the arbitration clause was not enforceable under Texas law and that
federal law did not permit an interlocutory appeal in state court. That application is denied by separate order.
2 Section 2 of the Federal Act provides that:
a written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle
by arbitration a controversy thereafter arising out of such contract or transaction, ... shall be valid, irrevocable, and
enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 2
Consorcio Rive, S.A. de C.V. v. Briggs Of Cancun, Inc., 134 F.Supp.2d 789 (2001)

[3] Alternative Dispute Resolution
134 F.Supp.2d 789 Suing or participating in suit
United States District Court,
In order to substantially invoke judicial
E.D. Louisiana.
process, for purposes of determining waiver
CONSORCIO RIVE, S.A. DE C.V. of right to arbitrate, party must have actively
v. participated in lawsuit or some other type of
act inconsistent with desire to arbitrate.
BRIGGS OF CANCUN, INC., et al
2 Cases that cite this headnote
No. Civ.A. 99–2204.
|
March 14, 2001. [4] Alternative Dispute Resolution
Suing or participating in suit
Mexican lessor brought action under Convention on
Merely initiating litigation, without more,
the Recognition and Enforcement of Foreign Arbitral
does not effect waiver of right to arbitrate
Awards to enforce arbitration award entered in Mexico
because no actual prejudice results from that
against American lessee. After bench trial, the District
isolated action.
Court, Barbier, J., held that: (1) lessor did not waive its
right to arbitrate dispute by filing criminal complaint in Cases that cite this headnote
Mexico against lessee's president, and (2) lessee was not
“unable to present its case.”
[5] Alternative Dispute Resolution
Award enforced. Proceedings
Mexican lessor did not waive its right
under Convention on the Recognition and
Enforcement of Foreign Arbitral Awards to
West Headnotes (7) arbitrate dispute with American lessee by
filing criminal complaint in Mexico against
[1] Alternative Dispute Resolution lessee's president; criminal complaint did
Enforcement and recognition of awards not amount to substantial invocation of
judicial process, was not inconsistent with
Waiver of right to arbitrate is not defense
lessor's intention to arbitrate, and did not
to enforcement of foreign arbitral award
prejudice lessee with respect to ongoing
under Convention on the Recognition
arbitration. Convention on the Recognition
and Enforcement of Foreign Arbitral
and Enforcement of Foreign Arbitral Awards,
Awards. Convention on the Recognition and
Art. I et seq., 9 U.S.C.A. § 201 note.
Enforcement of Foreign Arbitral Awards,
Art. I et seq., 9 U.S.C.A. § 201 note. 1 Cases that cite this headnote
Cases that cite this headnote
[6] Alternative Dispute Resolution
Proceedings
[2] Alternative Dispute Resolution
Suing or participating in suit American lessee was not “unable to present
its case,” for purposes of Convention on
Waiver or right to arbitrate requires both
the Recognition and Enforcement of Foreign
substantial invocation of judicial process and
Arbitral Awards, as result of Mexican lessor's
either detriment or prejudice to other party.
filing of criminal complaint against lessee's
2 Cases that cite this headnote president; lessee could have participated
by means other than president's physical
presence at arbitration, and lessee did

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Consorcio Rive, S.A. de C.V. v. Briggs Of Cancun, Inc., 134 F.Supp.2d 789 (2001)

participate to extent that it designated In accordance with Federal Rule of Civil Procedure
arbitrator and filed over 80 pages of legal 52(a), the Court now renders its findings of fact and
argument and documentation in support of conclusions of law on the two remaining 1 and related
its position. Convention on the Recognition issues: (1) whether plaintiff, Consorcio Rive (“Rive”),
and Enforcement of Foreign Arbitral Awards, waived its right to invoke arbitration of the dispute
Art. I et seq., 9 U.S.C.A. § 201 note. between the parties by filing a criminal Statement
of Facts; and (2) whether the filing of the criminal
Cases that cite this headnote
Statement of Facts precluded Briggs of Cancun, Inc.
(“Briggs of Cancun”) from meaningfully participating
[7] Alternative Dispute Resolution in the arbitration proceedings, thus providing it with
Failure to Arbitrate a defense to the enforcement of the arbitral award
Fear of arrest and extradition do not pursuant to article V(1)(b) of the Convention on
constitute inability to attend arbitration the Recognition and Enforcement of Foreign Arbitral
hearing. Awards (“Convention”), codified at 9 U.S.C. § 201 et seq.

Cases that cite this headnote To the extent the findings of fact are more properly
classified as conclusions of law, they should be so
considered; and to the extent the conclusions of law are
more properly classified as findings of fact, they should be
Attorneys and Law Firms so considered.

*790 Randall A. Smith, Andrew Lewis Kramer, Smith,
Jones & Fawer, New Orleans, LA, for Plaintiff.
I. FINDINGS OF FACT
Robert A. Kutcher, Nicole S. Tygier, Vicki A. Turko,
Choplin, Wagner, Cole, Richard, Reboul & Kutcher, 1. Rive is a corporation organized and existing under the
LLP, Metairie, LA, for Defendants. laws of the Country of Mexico, with its principal place of
business in Mexico City, Mexico.
Opinion
2. Briggs of Cancun is a corporation organized and
BARBIER, District Judge. existing under the laws of the State of Louisiana, with its
principal place of business in Metairie, Louisiana.
This matter came on for trial before the Court, sitting
without a jury, on February 5 and 6, 2001. At the
3. On October 1, 1991, Rive, represented by Eugenio
conclusion of the trial, and upon consideration of all of
Riquelme Valdez, and Briggs of Cancun, represented
the evidence and arguments of counsel, the Court dictated
by David A. Briggs, Jr. (“David Briggs”) entered into
oral findings of fact and conclusions of law on the issue
an “Agreement” by which Rive provided property and
of whether Briggs of Cancun, Inc., and David Briggs
permits for Briggs of Cancun *791 to open a restaurant
Enterprises, Inc. should be considered a single business
and bar called Fat Tuesdays in Cancun, Mexico.
enterprise for purposes of the instant dispute. In summary,
the Court found that these two entities do not comprise
4. As memorialized in clause 35 of the Agreement, both
a single business enterprise, and thus that any arbitration
parties specifically agreed as follows:
award confirmed in this proceeding may only be enforced
against Briggs of Cancun, Inc. THIRTY FIFTH.—Any
controversy or claim arising out
At that time, the Court also allowed the parties until of, or related to, this agreement,
February 14, 2001 to file post-trial memoranda on the or the making, performance,
remaining issues, after which it took the matter under or interpretation thereof, shall
submission. be finally settled by arbitration
pursuant to the then-prevailing

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Consorcio Rive, S.A. de C.V. v. Briggs Of Cancun, Inc., 134 F.Supp.2d 789 (2001)

rules of the INTERAMERICAN 6. As a result of a dispute relating to payments due under
COMMERCIAL ARBITRATION the Agreement, Rive initiated an arbitration proceeding
COMMISSION and the arbitrators against Briggs of Cancun in January of 1996 in Mexico.
shall be appointed in accordance
with such rules. All arbitration 7. On or about February 14, 1996, David Briggs,
proceedings shall take place Jr. responded to the Inter–American Commercial
in Monterrey, N.L., Mexico, Arbitration Commission, designating an arbitrator.
and the laws applicable to
the arbitration procedure shall 8. On or about March 26, 1996, Rive submitted its formal
be the laws of Mexico. The arbitration demand.
award of the arbitrator shall be
the sole and exclusive remedy 9. On or about August 14, 1996, Rive attorney Jose
between the parties regarding any Manuel Gomez Mont Ureta filed a criminal Statement
claims, counterclaims, issues, or of Facts requesting that the Attorney General for the
accountings presented or pled to State of Quintana Roo, Mexico initiate an investigation of
the arbitrator; shall be made and Adalberto de Luna Zuniga, Javier Ramirez Meza, David
shall promptly be payable free of A. Briggs, Jr., and Raul Torres Rivera, alleging a criminal
any tax, deduction, or offset; and conspiracy by them to prevent Rive “from exercising its
any costs, fees, or taxes incident full rights in its capacity as lessor regarding the property
to enforcing the award shall, to in question.” Exh. 174, 4.
the maximum extent permitted
by law, be charged against the 10. David Briggs testified that following the filing of the
party resisting such enforcement. criminal Statement of Facts, he did not enter Mexico for
Judgment upon the award of the fear of being detained until after the criminal matter was
arbitrator may be entered in the cleared up in 1998.
court having jurisdiction thereof,
or application may be made to 11. On or about November 26, 1996, Briggs of Cancun
such court for a judicial acceptance answered the allegations of Rive in the arbitration matter
of the award or an order of by filing a brief and attaching relevant exhibits.
enforcement. The prevailing party in
any such arbitration shall be entitled 12. Thereafter, the arbitration continued and the parties
to recovery of all administration fees were given the opportunity to offer further evidence,
and arbitration fees paid. All other which was only presented by Rive, because Briggs of
costs expenses and fees incurred by Cancun refused to participate in the arbitration due to
either party in connection with such alleged criminal proceedings in Cancun.
arbitration (including attorneys' fees
incurred) shall be borne by the party *792 13. On or about August 22, 1997, David Briggs,
so incyurring [sic] such fees. and Danny Drago, Chief Financial Officer of David
Briggs Enterprises, Inc., 2 received a letter from the
5. On November 2, 1991, Rive and Briggs of Cancun United Mexican States Solicitor of the General Republic,
also entered into an “Management Agreement” and requesting their appearance on October 5, 1997. The letter
a “Commodatum Agreement” for the operation of stated that failure to appear would result in a “remand
the Fat Tuesdays restaurant in Cancun. Like the [of] the current investigation to the Federal Penal Court
original Agreement, the Management and Commodatum so that the corresponding arrest warrant may be issued.”
Agreements also provided for controversies or claims to Exh. 181.
be resolved by arbitration.
14. David Briggs testified that he voluntarily chose not to
comply with the request to appear on October 5, 1997.

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Consorcio Rive, S.A. de C.V. v. Briggs Of Cancun, Inc., 134 F.Supp.2d 789 (2001)

15. There was conflicting testimony at trial as to whether
an arrest warrant was actually issued for David Briggs. 23. In April 1999, Rive made formal demand on Briggs
While a document was introduced which appears to of Cancun at the address set forth in the Agreement for
reference a pending arrest warrant against David Briggs the *793 arbitration award and costs, but received no
(Rec.Doc. 178), as well as a document denominated an response.
“amparo” which purports to suspend a warrant (Rec.Doc.
176), no actual arrest warrant for David Briggs was 24. To date, Briggs of Cancun has not paid Rive any
introduced at trial. amount in satisfaction of the arbitration award.

16. At trial, David Briggs testified that he did not seek 25. Rive has never expressly waived its right to arbitration
alternative ways to appear at the hearings, such as by under the agreements between Rive and Briggs of Cancun.
telephone, nor did he send a Briggs of Cancun company
representative to appear on behalf of the company. 26. Neither Rive nor Briggs of Cancun were parties to any
criminal proceedings in Cancun, Mexico.
17. In addition, for reasons not explained by the evidence
adduced at trial, Briggs of Cancun attorney Andres
Gonzalez also failed to appear at the hearings. David
II. CONCLUSIONS OF LAW
Briggs testified that he did not instruct Mr. Gonzales not
to attend the arbitration hearing. 1. The instant litigation has been filed pursuant to the
Convention on the Recognition and Enforcement of
18. Briggs of Cancun has never presented to this Court Foreign Arbitral Awards (the “Convention”), codified at
a single piece of evidence or information that it alleges 9 U.S.C. § 201 et seq., to which both Mexico and the
it would have presented to the arbitrators, but did not, United States are signatories.
because it was precluded from participating fully in the
arbitration. 2. Because the Convention was negotiated pursuant to
the Treaty power set forth in the U.S. Constitution,
19. On November 6, 1997, the Mexican arbitration board and Congress passed enabling legislation to make the
held a final hearing, of which all parties were given Convention the highest law of the land, the Convention
proper notice. 3 Although Briggs of Cancun did not must be enforced over all prior inconsistent rules of law.
appear, Rive's counsel presented written conclusions, and Sedco, Inc. v. Petroleos Mexicanos Mexican National Oil
subsequently answered questions from the arbitrators. Co., 767 F.2d 1140, 1145 (5th Cir.1985).
Rec. Docs. 142 & 172 at 256 (“Laudo Definitivo”). No
oral testimony was presented at that hearing. 3. An action or proceeding falling under the Convention is
deemed to arise under the laws and treaties of the United
20. On June 24, 1998, the Mexican arbitration board: (1) States. 9 U.S.C. § 203.
ruled that the Agreement was rescinded due to Briggs
of Cancun's breaches; (2) awarded Rive $150,000 from 4. Federal district courts have original jurisdiction over
Briggs of Cancun for obligations under the October 1, such an action or proceeding, and venue is proper in
1991 agreement; (3) awarded Rive $110,000 from Briggs any district in which, save for the arbitration agreement,
of Cancun for costs and expenses; (4) awarded Rive an action or proceeding with respect to the controversy
$2,500,000 from Briggs of Cancun for damages resulting between the parties could be brought, or in such district
from the breach; and (5) awarded Rive 15% interest after which embraces the place designated in the agreement as
Briggs of Cancun was notified of decision. the place of arbitration if such place is within the United
States. 9 U.S.C. § 204.
21. The arbitration award, totaling $2,760,000, excluding
interest, was not served on the parties until March 8, 1999. 5. Under 9 U.S.C. § 202, the following arbitration awards
fall under the Convention:
22. Rive paid all arbitration costs, totaling approximately
$33,000.

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for recognition and enforcement shall, at the time of
An arbitration agreement or arbitral the application, supply:
award arising out of a legal
relationship, whether contractual (a) The duly authenticated original award or a duly
or not, which is considered as certified copy thereof;
commercial, including a transaction,
contract, or agreement described in (b) The original agreement referred to in article II or
section 2 of this title, falls under the a duly certified copy thereof.
Convention. An agreement or award
arising out of such a relationship 10. Article II of the Convention requires that there be an
which is entirely between citizens of “agreement in writing” under which the parties agree to
the United States shall be deemed submit to arbitration all or any differences which have
not to fall under the Convention arisen or may arise between them in respect of a defined
unless that relationship involves legal relationship, whether contractual or not, concerning
property located abroad, envisages a subject matter capable of settlement by arbitration. The
performance or enforcement term “agreement in writing” includes an arbitral clause
abroad, or has some other in a contract or an arbitration agreement, signed by the
reasonable relation with one or parties or contained in an exchange of letters of telegrams.
more foreign states. For the purpose
of this section a corporation is a 11. There is no dispute in this matter that the arbitral
citizen of the United States if it award and the relevant agreements between Rive and
is incorporated or has its principal Briggs of Cancun have been supplied to the Court.
place of business in the United
States. 12. Thus, under the terms of the Convention and the
enabling federal statute, this Court has the authority to
recognize and enforce the arbitral award at issue in this
6. Under Article III of the Convention, “[e]ach
matter.
Contracting State shall recognize arbitral awards as
binding and enforce them in accordance with the rules
13. Numerous federal courts have recognized that “[T]he
of procedure of the territory where the award is relied
1958 Convention clearly shifted the burden of proof to
upon ...” 9 U.S.C. § 201 note.
the party defending against enforcement and limited his
defenses to seven set forth in Article V.” Parsons &
6. The Fifth Circuit has stated that awards of foreign
Whittemore Overseas Co. v. Societe Generale de L'Industrie
arbitrators that fall under the Convention are to be
du Papier, 508 F.2d 969, 973 (2d Cir.1974).
enforced by U.S. courts “just as easily as domestic arbitral
awards.” Schlumberger Technology Corp. v. United States,
14. Under Article V(1), recognition and enforcement may
195 F.3d 216, 217 (5th Cir.1999).
be refused if the party resisting the award furnished
to the competent authority where the recognition and
8. The Convention requires a U.S. court to treat a foreign
enforcement is sought, proves that:
arbitral award as it would a domestic award, subject to
limited defenses, including incapacity of a party, illegality (a) the parties to the agreement were under some
of the agreement, lack of due process, an award outside incapacity, or the agreement is not valid under the law
the scope of arbitration, an improper arbitration panel, to which the parties have subjected it or, failing any
or when the arbitration award has been vacated or is not indication thereon, under the law of the country where
final. Id., citing Convention, arts. III & V. the award was made; or

9. Article IV of the Convention provides the procedure for (b) the party against whom the award is invoked was not
enforcing arbitral awards and reads, in part: given proper notice of the appointment of the arbitrator
or of the arbitration proceedings or was otherwise
*794 1. To obtain the recognition and enforcement unable to present his case; or
mentioned in the preceding article, the party applying

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“[w]aiver will be found when the party seeking arbitration
(c) the award deals with a difference not contemplated substantially invokes the judicial process to the detriment
by or not falling within the terms of the submission to or prejudice of the other party.” Miller Brewing Co. v.
arbitration, or it contains decisions on matters beyond Fort Worth Dist. Co., 781 F.2d 494, 497 (5th Cir.1986).
the scope of the submission to arbitration; however, if Thus, waiver (if permissible at all in the context presented)
the decisions on matters submitted to arbitration can be requires both a substantial invocation of the judicial
separated from those not so submitted, that part of the process and either detriment or prejudice to the other
award which contains decisions on matters submitted to party.
arbitration may be recognized and enforced; or
19. Further, in evaluating whether a waiver occurred
(d) the composition of the arbitral authority or the
under applicable law, it must be borne in mind that
arbitral procedure was not in accordance with the
“[w]aiver of arbitration is not a favored finding, and there
agreement of the parties, or, failing such agreement, was
is a presumption against it.” Id. at 496.
not in accordance with the law of the country where the
arbitration took place; or
20. In the same vein, the United States Supreme Court has
(e) the award has not yet become binding on the parties, stated that “any doubts concerning the scope of arbitrable
or has been set aside or suspended by a competent issues should be resolved in favor of arbitration, whether
authority of the country in which, or under the law of the problem at hand is the construction of the contract
which, that award was made. itself or an allegation of waiver, delay, or a like defense to
arbitrability.” Moses H. Cone Memorial Hosp. v. Mercury
9 U.S.C. § 201 note. Construction Corp., 460 U.S. 1, 24–25, 103 S.Ct. 927, 941,
74 L.Ed.2d 765 (1983).
15. Additionally, Article V(2) provides that recognition
and enforcement may be refused if the competent [3] 21. In considering what amounts to a substantial
authority finds that: invocation of the judicial process, federal courts have
required active participation in a lawsuit or some other
(a) the subject matter of the difference is not capable type of act inconsistent with the desire to arbitrate. For
of settlement by arbitration under the law of that [the example, in Parcel Tankers, Inc. v. Formosa Plastics Corp.,
forum] country; or 569 F.Supp. 1459, 1467 (S.D.Tex.1983), the district court
found that “[a]ctions constituting waiver may include,
*795 (b) the recognition or enforcement of the award
inter alia, some combination of filing an answer, setting
would be contrary to the public policy of that [the
up a counterclaim, pursuing discovery, and moving
forum] country.
for a continuance prior to moving for a stay pending
9 U.S.C. § 201 note. arbitration.”

16. According to the Convention and repeated federal 22. With respect to prejudice, the Fifth Circuit has found
decisions in this and other circuits, these are the only that “[w]hen one party reveals a disinclination to resort to
available defenses to an action to enforce a foreign arbitral arbitration on any phase of suit involving all parties, those
award. parties are prejudiced by being forced to bear the expenses
of a trial ... Arbitration is designed to avoid this very
[1] 17. Waiver of the right to arbitrate is not among the expense. Substantially invoking the litigation machinery
seven defenses to enforcement of a foreign arbitral award qualifies as the kind of prejudice ... that is the essence of
set forth in the Convention. Thus, as a matter of law, waiver.” E.C. Ernst, Inc. v. Manhattan Construction Co. of
defendant's argument that the arbitration award should Texas, 559 F.2d 268, 269 (5th Cir.1977).
not be enforced by this Court because plaintiff waived it
is unavailing. 4 [4] 23. “[M]erely initiating litigation, without more, does
not effect a waiver” because no actual prejudice results
[2] 18. Alternatively, even if defendant's waiver defense from that isolated action. Lauricia v. Microstrategy Inc.,
was not precluded by the Convention, in the Fifth Circuit, 114 F.Supp.2d 489 (E.D.Va.2000).

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Consorcio Rive, S.A. de C.V. v. Briggs Of Cancun, Inc., 134 F.Supp.2d 789 (2001)

construed. Parsons & Whittemore Overseas Co. v. Societe
[5] 24. The Court finds that Rive's filing of a Statement of Generale de L'Industrie du Papier, 508 F.2d 969, 975 (2d
Facts with the Attorney General in Quintana Roo did not Cir.1974).
amount to substantial invocation of the judicial process,
and was not inconsistent *796 with Rive's intention [6] 29. In the instant case, the Court finds that Briggs
to arbitrate, especially given the fact that the Statement of Cancun was not “unable to present its case,” because
of Facts was filed eight months after arbitration was Briggs of Cancun could have participated by means other
requested. Further, Rive's actions in filing the Statement than David Briggs's physical presence at the arbitration.
of Facts did not prejudice Briggs of Cancun with respect to For instance, Briggs of Cancun could have sent a company
the ongoing arbitration. Accordingly, Rive did not waive representative to attend; could have sent its attorney to
its right to arbitration in this matter. attend; or David Briggs could have attended by telephone.

25. Article V(1)(b) of the Convention states that a foreign 30. Moreover, the evidence indicates that Briggs of
arbitration award can be refused confirmation where a Cancun did participate to the extent that it designated an
party lacked notice or was “otherwise unable to present arbitrator and filed over 80 pages of legal argument and
his case.” 9 U.S.C. § 201 note. This defense “basically documentation in support of its position. Because Briggs
corresponds to the due process defense that a party was of Cancun has brought forward no additional information
not given ‘the opportunity to be heard at a meaningful or evidence that it would have presented at the arbitration
time and in a meaningful manner’ as defined in Mathews v. if it had the opportunity to do so, the Court finds that
Eldridge, 424 U.S. 319, 333, 96 S.Ct. 893, 902, 47 L.Ed.2d Briggs of Cancun did have an opportunity to meaningfully
18.” Generica Ltd. v. Pharmaceutical Basics, Inc., 125 F.3d participate in the arbitration.
1123, 1129 (7th Cir.1997) (other citations omitted).
31. In a case presenting analogous facts, the district
26. Because Briggs of Cancun was continuously informed court in Empresa Constructora Contex Limitada v. Iseki,
of all hearing dates and was provided sufficient 106 F.Supp.2d 1020, 1026 (S.D.Cal.2000), held that the
opportunity to present witnesses and evidence in defense defendant's due process rights under the Convention
of the action, Briggs of Cancun was given proper notice of were not violated when the corporate defendant's owner
the arbitration proceedings. and C.E.O., as well as other corporate representatives,
failed to attend the arbitration held in Chile claiming
27. The due process guarantee incorporated in article V(1) that they feared arrest. Finding that because the
(b) of the Convention requires that “an arbitrator must defendant was a corporate entity distinct from *797
provide a fundamentally fair hearing.” Generica Ltd., 125 its owners and representatives and could therefore be
F.3d at 1130. “A fundamentally fair hearing is one that adequately represented by counsel competent to handle
‘meets “the minimal requirements of fairness”—adequate the company's defense, defendant did not prevail in its
notice, a hearing on the evidence, and an impartial V(1)(b) defense.
decision by the arbitrator.’ ” Id. “[P]arties that have
chosen to remedy their disputes through arbitration rather [7] 32. Additionally, it has also been held that fear
than litigation should not expect the same procedures of arrest and extradition do not constitute an inability
they would find in the judicial arena.” Id. Essentially, in to attend an arbitration hearing. See, Nat'l Dev. Co. v.
exchange for the convenience and other benefits obtained Khashoggi, 781 F.Supp. 959 (S.D.N.Y.1992).
through arbitration, parties lose “the right to seek redress
from the court for all but the most exceptional errors at 33. For the foregoing reasons, the Court finds that
arbitration.” Dean v. Sullivan, 118 F.3d 1170, 1173 (7th Briggs of Cancun's defense under article V(1)(b) of the
Cir.1997). Convention must fail. The Court also specifically finds
that even if there was a valid arrest warrant pending
28. Consistent with the federal policy of encouraging against David Briggs for some period of time, Briggs of
arbitration and enforcing arbitration awards, the defense Cancun is not entitled to a defense under article V(1)(b)
that a party was “unable to present its case” raised of the Convention because Briggs of Cancun could have
pursuant to article V(1)(b) of the Convention is narrowly participated through its Mexican attorney or corporate

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Consorcio Rive, S.A. de C.V. v. Briggs Of Cancun, Inc., 134 F.Supp.2d 789 (2001)

representative or by telephone. Further, Briggs of Cancun 35. Similarly, the Court does not revisit the issue of
whether the arbitration award is final, because the
has not demonstrated that it was prejudiced in any way
issue was previously determined by Judge Schwartz, and
by whatever restrictions the alleged criminal action might
further, is mooted by the fact that Briggs of Cancun did
have imposed, because it has not pointed to exonerating
not post a bond as requested by the Court.
evidence that it would have presented, but could not, but
for the filing of the criminal Statement of Facts.
36. Thus, the Court ORDERS that the Mexican
arbitration award dated June 24, 1998 be and it is hereby
34. The Court need not consider the parties' discussion
recognized and enforced against Briggs of Cancun, Inc. in
of the public policy defense under the Convention,
all respects.
because that defense is not one of the narrow issues
preserved for trial following Judge Schwartz's ruling on
37. The Court FURTHER ORDERS the parties to
the Motion to Reconsider the grant of summary judgment
submit, within ten days from entry of this order, a joint
in plaintiff's favor. However, if it were before the Court,
proposed form for final judgment in accordance with these
the Court would find that its conclusion that due process
findings and conclusions.
requirements were met undermines this argument, and
that enforcement of this award does not violate the public
policies of Mexico, the United States, or the State of All Citations
Louisiana.
134 F.Supp.2d 789

Footnotes
1 On September 20, 2000, Judge Schwartz entered an order granting reconsideration of his prior order dismissing Briggs'
counterclaims. The issue for reconsideration was limited solely to the waiver issue (Briggs' Ninth Defense). Rec. Doc. 91.
2 David Briggs Enterprises, Inc. is a related entity which the Court has previously ruled is not an “alter ego” for Briggs of
Cancun, Inc.
3 The notice defense is not one that was specifically preserved by Judge Schwartz. Nonetheless, the Court observes that
the documentary evidence presented at trial demonstrated that Briggs was informed that the arbitration would take place
on November 6, 1997 at 11:00 a.m. See, e.g., Rec. Doc. 169, at 10285. While Briggs' attorney subsequently misstated
the date in correspondence to the Chamber of Commerce of Mexico City (Rec.Doc. 141), the error was pointed out to him
in a subsequent letter from the Chairman of the Chamber of Commerce. Rec. Doc 170. At any rate, Gonzalez' mistake
and its correction do not alter the fact that notice that the hearing would occur on November 6, 1997 was provided, and
the hearing was subsequently held on November 6, 1997.
4 Moreover, it appears from the evidence that the argument that the filing of the criminal Statement of Facts resulted in
a waiver of arbitration by Rive was considered and rejected by the arbitration committee. See Rec. Doc. 169, ¶ c; Rec.
Doc. 141 ¶ c.

End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 8
No Shepard’s Signal™
As of: August 28, 2015 3:43 PM EDT

Cooper Indus., LLC v. Pepsi-Cola Metro. Bottling Co.
Court of Appeals of Texas, Fourteenth District, Houston
August 25, 2015, Opinion Filed
NO. 14-14-00562-CV

Reporter
2015 Tex. App. LEXIS 8882

COOPER INDUSTRIES, LLC, COOPER INDUSTRIES, LTD., Judgment reversed and remanded.
COOPER US, INC., AND COOPER INDUSTRIES, PLC,
Appellants v. PEPSI-COLA METROPOLITAN BOTTLING LexisNexis® Headnotes
CO., INC., AND WHITMAN INSURANCE COMPANY LTD.,
Appellees Civil Procedure > ... > Alternative Dispute Resolution > Arbitration >
Arbitrability
Prior History: [*1] On Appeal from the 80th District Court,
Civil Procedure > ... > Arbitration > Federal Arbitration Act > General
Harris County, Texas. Trial Court Cause No. 2011-77606. Overview

Civil Procedure > Appeals > Standards of Review > Questions of Fact
Core Terms & Law

arbitration, appellees, parties, Guaranty, Mutual, discovery, Civil Procedure > Appeals > Standards of Review > De Novo Review
termination, compel arbitration, waive, arbitration clause, pet, Contracts Law > Contract Conditions & Provisions > Arbitration
right to arbitration, trial court, settlement, invoked, motion to Clauses
compel arbitration, tortious interference, estoppel, dealer, merits,
obligations, signatory, judicial process, non-signatory, disputes, HN1 When the Federal Arbitration Act governs an arbitration
movant, surety, arbitration agreement, fraudulent transfer, denial clause, a Texas trial court conducts a summary proceeding under
of motion Texas procedural rules to make the gateway determination of
arbitrability, and it applies Texas substantive law regarding
whether a litigant must arbitrate. When the trial court does not
Case Summary sign written findings or conclusions, an appellate court may
uphold the court's order on any theory supported by the evidence,
Overview and the appellate court implies all factual findings supported by
the record that are necessary to the order. Appellate courts defer to
HOLDINGS: [1]-An order denying appellants' motion to compel
the trial court's factual determinations that are supported by
arbitration was improper because the agreements required
sufficient evidence, but we review the trial court's legal
arbitration and appellees did not show that appellants waived their
determinations de novo.
right to arbitrate since appellants never opposed arbitration before
filing its motion to compel; [2]-Because appellee's tortious
Governments > Courts > Judicial Comity
interference claims depended on the existence of the
manufacturer's obligation in the Stock Purchase Agreement HN2 Texas courts may presume that another state's law is the
(SPA), which appellants guaranteed, appellants could compel same as Texas law absent proof or argument to the contrary. The
signatory appellee to arbitrate those claims under the SPA; [3]- party requesting application of a foreign law has the initial burden
The record did not demonstrate the extent to which appellees pre- of showing that the foreign law conflicts with Texas law.
trial costs were self-inflicted and accordingly, there was no
showing that appellants unequivocally waived their right to Contracts Law > Contract Conditions & Provisions > Arbitration
arbitration by substantially invoking the judicial process. Clauses

Civil Procedure > ... > Alternative Dispute Resolution > Arbitration >
Outcome
General Overview

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2015 Tex. App. LEXIS 8882, *1

HN3 Arbitration cannot be ordered in the absence of an Civil Procedure > ... > Alternative Dispute Resolution > Arbitration >
General Overview
agreement to arbitrate. The party moving for arbitration has the
initial burden to present evidence that a valid arbitration HN7 A guarantor or surety of a party's obligation under a contract
agreement exists. If there is an agreement to arbitrate, the party containing an arbitration clause may invoke or be bound by that
must also establish that the claims asserted fall within the scope of clause in a suit regarding the obligation.
the agreement.
Civil Procedure > ... > Alternative Dispute Resolution > Arbitration >
Civil Procedure > ... > Alternative Dispute Resolution > Arbitration > General Overview
General Overview
Contracts Law > Contract Conditions & Provisions > Arbitration
HN4 Whether a non-signatory can compel arbitration questions Clauses
the existence of a valid arbitration agreement between the parties
HN8 In general, an arbitration agreement contained within a
and therefore is a gateway matter for the court to decide.
contract survives the termination or repudiation of the contract as
Civil Procedure > ... > Alternative Dispute Resolution > Arbitration > a whole. If the contract does not state that the duty to arbitrate
General Overview ends with the termination of the contract, the strong policies
favoring arbitration should ordinarily lead the court to conclude
Contracts Law > Contract Conditions & Provisions > Arbitration
that the obligation to arbitrate, especially as to claims that accrued
Clauses
during the term of the contract, survives the expiration of the
Contracts Law > ... > Estoppel > Equitable Estoppel > General contract.
Overview

Torts > Business Torts > Commercial Interference > General Overview Contracts Law > Contract Interpretation > General Overview

HN5 A person who has agreed to arbitrate disputes with one party HN9 No single contractual provision taken alone should be given
may in some cases be required to arbitrate related disputes with controlling effect; rather, all the provisions must be considered
others. In particular, a signatory plaintiff who seeks to derive a with reference to the whole instrument.
direct benefit from a contract with an arbitration clause may be
Contracts Law > Contract Conditions & Provisions > Arbitration
equitably estopped from refusing arbitration. Although the
Clauses
boundaries of direct-benefits estoppel are not always clear, the
signatory generally must arbitrate claims if liability arises from a Civil Procedure > ... > Alternative Dispute Resolution > Arbitration >
contract with an arbitration clause, but not if liability arises from Waiver
general obligations imposed by law. When the facts are not Contracts Law > Defenses > General Overview
disputed, the application of estoppel is a question of law, not a
matter committed to the trial court's discretion. Tortious HN10 Once an arbitration movant establishes a valid arbitration
interference claims do not fall comfortably within either category. agreement that encompasses the claims at issue, a trial court has
no discretion to deny the motion to compel arbitration unless the
Torts > ... > Commercial Interference > Contracts > General Overview opposing party proves a defense to arbitration such as waiver.

HN6 The obligation not to interfere with existing contracts is a Civil Procedure > ... > Alternative Dispute Resolution > Arbitration >
general obligation imposed by law, but it is not imposed on the Waiver
parties to that contract because a party cannot interfere tortiously
Civil Procedure > ... > Alternative Dispute Resolution > Arbitration >
with its own contract. A person must be a stranger to a contract to
General Overview
interfere tortiously with it. Thus, a signatory generally is not
required to arbitrate a tortious interference claim against a Civil Procedure > Appeals > Standards of Review > De Novo Review
complete stranger to his contract and its arbitration clause. But if Civil Procedure > Appeals > Standards of Review > Questions of Fact
the signatory plaintiff's right to recover and its damages depend & Law
on the existence of the contract containing the arbitration clause,
or if the non-signatory defendant is an agent or affiliate of a HN11 A party can waive a contractual right to arbitrate either
signatory, then the plaintiff can be compelled to arbitrate its claim. expressly or by implication. Whether waiver has

Contracts Law > Contract Conditions & Provisions > Arbitration
Clauses

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occurred is a question of law for the court that is reviewed de
novo. Because public policy favors arbitration, there is a strong HN16 Whether a party has waived an arbitration right is a
presumption against waiver of the right to arbitrate. Express question of law that is reviewed de novo. If the trial court is called
waiver arises when a party affirmatively indicates that it wishes to upon to resolve factual disputes about the conduct in which the
resolve the case in the judicial forum rather than in arbitration. party engaged, an appellate court defers to the trial court's implied
fact findings if they are supported by sufficient evidence.
Civil Procedure > ... > Subject Matter Jurisdiction > Jurisdiction Over
Actions > Exclusive Jurisdiction Contracts Law > Contract Conditions & Provisions > Arbitration
Clauses
Civil Procedure > ... > Alternative Dispute Resolution > Arbitration >
Waiver Civil Procedure > ... > Alternative Dispute Resolution > Arbitration >
Waiver
Civil Procedure > ... > Venue > Motions to Transfer > General
Overview HN15 With regard to waiving an arbitration clause, courts
consider a wide variety of factors in deciding whether a party
HN12 Moving to dismiss in favor of exclusive jurisdiction in
substantially invoked the litigation process, such as: whether the
another court is equivalent to moving to transfer venue or filing a
party who pursued arbitration was the plaintiff or the defendant;
notice of removal to another court. The Supreme Court of Texas
how long the party who pursued arbitration delayed before
and many other courts have held that such actions do not waive a
seeking arbitration; when the party who pursued arbitration
right to arbitrate.
learned of the arbitration clause's existence; how much of the
pretrial activity related to the merits rather than to arbitrability or
Civil Procedure > ... > Venue > Motions to Transfer > General
jurisdiction; how much time and expense has been incurred in
Overview
litigation; whether the party who pursued arbitration sought or
HN13 A motion to transfer venue does not seek a final opposed arbitration earlier in the case; whether the party who
determination of the litigation. pursued arbitration filed affirmative claims or dispositive motions;
how much discovery has been conducted and who initiated the
Civil Procedure > ... > Alternative Dispute Resolution > Arbitration > discovery; whether the discovery sought would be useful in
Waiver arbitration; what discovery would be unavailable in arbitration;
whether activity in court would be duplicated in arbitration; when
Contracts Law > Contract Conditions & Provisions > Arbitration
Clauses the case was to be tried; and whether the party who pursued
arbitration sought judgment on the merits.
HN14 A party waives an arbitration clause by implication when it
substantially invokes the judicial process to the other party's Contracts Law > Contract Conditions & Provisions > Arbitration
detriment or prejudice. The hurdle of proving implied waiver is a Clauses
high bar. In close cases, the strong presumption against waiver Civil Procedure > ... > Alternative Dispute Resolution > Arbitration >
should govern. Waiver must be decided on a case-by-case basis, Waiver
and we look to the totality of the circumstances. The party's
conduct must be unequivocally inconsistent with claiming a HN17 The quantum of litigation conduct that constitutes
known right to arbitration. "substantial" invocation of the litigation process depends on the
context. A party who enjoys substantial direct benefits by gaining
Civil Procedure > ... > Alternative Dispute Resolution > Arbitration > an advantage in the pretrial litigation process should be barred
Waiver from turning around and seeking arbitration with the spoils. Delay
alone generally does not establish waiver. Even substantially
Contracts Law > Contract Conditions & Provisions > Arbitration
Clauses invoking the judicial process does not waive a party's arbitration
rights unless the opposing party proves that it suffered prejudice
Civil Procedure > Appeals > Standards of Review > Questions of Fact as a result. The arbitration opponent must provide proof of
& Law
prejudice to overcome the strong presumption against waiver. In
Civil Procedure > Appeals > Standards of Review > De Novo Review the context of waiver of an arbitration right, prejudice relates to
the inherent unfairness in terms of delay, expense, or damage to a
Evidence > Weight & Sufficiency
party's legal position that occurs when the

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party's opponent forces it to litigate an issue and later seeks to
arbitrate that same issue. A party cannot attempt to have it both Opinion
ways by switching between litigation and arbitration to its own
advantage. This is an interlocutory appeal from an order denying a motion to
compel arbitration. Appellee Pepsi-Cola Metropolitan Bottling
Civil Procedure > Pretrial Matters > Alternative Dispute Resolution > Co. ("Metro") sued appellants Cooper Industries, LLC, Cooper
Mediation Industries, Ltd., Cooper US, Inc., and Cooper Industries, PLC
Civil Procedure > Settlements > General Overview (collectively, "Cooper"), seeking to enforce two agreements.
Appellee Whitman Insurance Company Ltd. later joined the suit
Civil Procedure > Preliminary Considerations > Venue > General
as a plaintiff. Cooper filed a motion to compel arbitration pursuant
Overview
to the agreements. The trial court denied the motion after a
Contracts Law > Contract Conditions & Provisions > Forum Selection hearing without making findings of fact or conclusions of law.
Clauses
On appeal, Cooper argues the trial court erred because the
HN18 Settlement negotiations and mediation do not substantially agreements require arbitration and appellees did not show that
invoke the judicial process, nor are they inconsistent with a desire Cooper waived its right to arbitrate. We agree that the trial court
to arbitrate. Likewise, venue and jurisdictional motions do not erred in denying Cooper's motion to compel arbitration. We
constitute substantial invocation of the judicial process because therefore reverse the trial court's order, render judgment ordering
they do not relate to the merits of the case. A dismissal of all arbitration of appellees' claims against the Cooper defendants who
claims to enforce a clause requiring litigation in another forum is are parties to this appeal,1 and remand this case to the trial court
a determination that the merits of the claims should be determined for further proceedings [*2] consistent with this opinion,
elsewhere; therefore, enforcement of such a forum-selection including the grant of an appropriate stay.
clause is a non-merits basis for dismissal.
Background
Contracts Law > Contract Conditions & Provisions > Arbitration
Clauses This case concerns indemnification obligations regarding asbestos
Civil Procedure > ... > Alternative Dispute Resolution > Arbitration > claims. Appellees' second amended petition and Cooper's motion
Waiver to compel arbitration provide the pertinent background of the
parties' dispute.2 We begin by discussing the various transactions
Civil Procedure > Discovery & Disclosure > Discovery
that resulted in the current alignment of the parties because they
HN19 Propounding discovery will not, in and of itself, result in are relevant to our disposition of the case.
waiver of the right to compel arbitration. Length of delay alone is
IC Industries—Metro's predecessor—acquired Abex Corporation
not a basis for inferring waiver.
and Pneumo Corporation, two companies that manufactured
products containing asbestos. IC Industries sold its stock in both
Counsel: For Appellants: J. Christopher Reynolds, Solace
companies to PA Holdings under a Stock Purchase Agreement
Kirkland Southwick, HOUSTON, TX.
("SPA"). [*3] Under the SPA, IC Industries agreed to indemnify
PA Holdings against certain claims filed between August 29,
For Appellee: Winstol D. Carter, Jr., David J. Levy, John M.
1988 and August 29, 1998, and PA Holdings agreed to indemnify
Deck, HOUSTON, TX; Allyson Newton Ho, DALLAS TX.
IC Industries and its affiliates against claims filed after August 29,
1998. As explained below, a Cooper entity later guaranteed an
Judges: Panel consists of Justices Jamison, Busby, and Brown.
indemnity of PA Holdings' successor. The SPA provides that if
any controversy or claim arising out of or relating to the
Opinion by: J. Brett Busby

1 Although Cooper Holdings, Ltd. joined appellants in the motion to compel arbitration, the trial court did not rule on the motion with respect to
Cooper Holdings, Ltd. The notice of appeal does not list Cooper Holdings, Ltd. as an appellant. Accordingly, Cooper Holdings, Ltd. is not an
appellant in this case. We therefore do not address whether it was entitled to arbitration of Metro's and Whitman's claims.
2 Appellees filed a third amended petition after Cooper had filed its motion to compel arbitration.

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agreement has not been resolved within twenty-one days after trust received [*5] a cash payment and notes to be paid over five
notice is given, either party may initiate arbitration to resolve the years.
dispute.
In response to the 2011 settlement agreement, Metro filed this
PA Holdings subsequently became Pneumo Abex, LLC. IC lawsuit alleging various causes of action, among them tortious
Industries became appellee Metro through a merger and name interference with contractual relations, conspiracy to commit
change. Whitman's predecessor was a captive insurance carrier tortious interference, fraudulent transfers, and conspiracy to
affiliated with IC Industries, and Whitman is now a subsidiary of commit fraudulent transfers.3 The suit named several defendants,
Metro. including the Cooper appellants.4 Whitman later joined the suit as
a plaintiff, claiming that as successor to an affiliate of IC
Pneumo Abex eventually sold one of its product lines to Wagner Industries, it is entitled to indemnification from Pneumo Abex
Electronic Corporation through an Asset Purchase Agreement under the SPA. Metro and Whitman alleged that the settlement
("APA"). Under the APA, Wagner agreed to indemnify and hold agreement was the end result of collusive efforts by the
Pneumo Abex harmless for any obligations Pneumo Abex owed defendants that left Pneumo Abex and the trust with a finite
to Metro and Whitman. Like the SPA, the APA contains an amount of assets. In particular, Metro and Whitman alleged that
arbitration provision. In section 13.2(c), the APA provides that the defendants "conspired to buy their way out of uncapped
any dispute arising in connection with the agreement [*4] and not guaranty obligations" and made Pneumo Abex's performance of
settled by the parties within sixty days after notice is given "shall its indemnity obligations to Metro and Whitman more
be finally settled by arbitration . . . ." The provision states that "burdensome, difficult, and expensive, if not impossible."
"[a]ny party may request a court to provide interim relief without
waiving the agreement to arbitrate." Citing the Federal Arbitration Act, Cooper filed a motion to
compel arbitration under various agreements, including the SPA
Wagner's then-parent company, Cooper Industries, LLC, and the Mutual Guaranty. After an unreported hearing, the court
guaranteed Wagner's indemnification of Pneumo Abex under a denied the motion. This interlocutory appeal followed. See 9
Mutual Guaranty agreement signed in 1994. Section 6 of the U.S.C. § 16(a)(1)(B) (West 2009); Tex. Civ. Prac. & Rem. Code
Mutual Guaranty provides that any claim or dispute "arising in Ann. § 51.016 (West 2015).
connection with" this agreement shall be resolved in accordance
with sections 13.2(b) and (c) of the APA, thus explicitly Analysis
incorporating the arbitration provision of the APA.
On appeal, Cooper argues that the trial court erred in denying the
Pneumo Abex filed a lawsuit in New York against various motion to compel arbitration because (1) Metro's and Whitman's
Cooper defendants, contending that Cooper Industries, LLC was claims are subject to arbitration under the SPA and the Mutual
mismanaging its assets and thus endangering the Mutual Guaranty, and (2) Cooper has not waived the right to arbitrate as
Guaranty. Metro and Whitman were not parties to that suit. In to either Metro or Whitman. We address each issue in turn.
2011, the Cooper defendants and Pneumo Abex reached a
settlement agreement, which the judge in the New York lawsuit HN1 When the Federal Arbitration Act governs an arbitration
approved. Under the settlement agreement, PCT International clause, a Texas trial court conducts a summary proceeding under
Holdings, Inc.—then-owner of Pneumo Abex—transferred its Texas procedural rules to make the gateway determination of
ownership interest to a trust. Cooper Industries' indemnities were arbitrability, and it applies Texas substantive law regarding
released and, in exchange, the whether a litigant must arbitrate. [*7] 5 See In

3 Appellees pled additional causes of action later abandoned; therefore, we need not analyze them.

4 Metro originally brought this action against Cooper Industries, LLC, Cooper [*6] Industries Ltd., Cooper Holdings, Ltd., Cooper US, Inc., Cooper
Industries, PLC, M & F Worldwide Corp., MAFCO Worldwide Corp., MAFCO Consolidated Group, LLC, PCT International Holdings, Inc., and the
Pneumo Abex Asbestos Claims Settlement Trust. The third amended petition also names Mcg Intermediate Holdings Inc. as a defendant.
5 The APA states that it is governed by Delaware law, but the parties do not discuss Delaware law. The SPA contains a clause stating that the "law of
the State of New York shall govern the parties' dispute." In appellees' response to Cooper's motion to compel arbitration, they argued that New York
law governs the arbitration provision in the SPA. On appeal, however, appellees assert that we need not

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re Weekley Homes, L.P., 180 S.W.3d 127, 130 (Tex. 2005) (orig. Whether a non-signatory can compel arbitration questions the
proceeding). Because the trial court did not sign written findings existence of a valid arbitration agreement between the parties and
or conclusions, we may uphold the court's order on any theory therefore is a gateway matter for the court to decide. See In re
supported by the evidence, and we imply all factual findings Weekley Homes, L.P., 180 S.W.3d 127, 130 (Tex. 2005).
supported by the record that are necessary to the order. In re
W.E.R., 669 S.W.2d 716, 717 (Tex. 1984) (per curiam); Rush v. The supreme court has recognized that HN5 "[a] person who has
Barrios, 56 S.W.3d 88, 96 (Tex. App.—Houston [14th Dist.] 2001, agreed to arbitrate disputes with one party may in some cases be
pet. denied). We defer to the trial court's factual determinations required to arbitrate related disputes with others." Meyer v.
that are supported by sufficient evidence, but we review the trial WMCO-GP, LLC, 211 S.W.3d 302, 304 (Tex. 2006). In particular,
court's legal determinations de novo. In re Labatt Food Serv., a signatory plaintiff who seeks to derive a "direct benefit" from a
L.P., 279 S.W.3d 640, 643 (Tex. 2009). contract with an arbitration clause may be equitably estopped
from refusing arbitration. Id. at 305; see also In re Kellogg, 166
I. Cooper established that appellees' claims fall within the S.W.3d at 739 (discussing direct-benefits estoppel of non-
scope of valid arbitration agreements that Cooper can invoke. signatories). Although the boundaries of direct-benefits estoppel
are not always clear, the signatory generally must arbitrate claims
Cooper's first issue asks whether the trial court erred in refusing to if liability arises from a contract with an arbitration clause, but not
compel arbitration because appellees' claims are founded on two if liability arises from general obligations imposed by law. In re
contracts that contain mandatory arbitration provisions. HN3 Vesta Ins. Group, Inc., 192 S.W.3d 759, 761 (Tex. 2006) (per
Arbitration cannot be ordered in the absence of an agreement to curiam). When the [*10] facts are not disputed, the application of
arbitrate. Freis v. Canales, 877 S.W.2d 283, 284 (Tex. 1994) (orig. estoppel is a question of law, not a matter committed to the trial
proceeding) (per curiam). The party moving for arbitration has the court's discretion. See Meyer, 211 S.W.3d at 308.
initial burden to present evidence that a valid arbitration
agreement exists. In re Koch Indus., Inc., 49 S.W.3d 439, 444 Tortious interference claims do not fall comfortably within either
(Tex. App.—San Antonio 2001, orig. proceeding). If there is an category. In re Vesta, 192 S.W.3d at 761. HN6 The obligation not
agreement to arbitrate, the party must also establish that the to interfere with existing contracts is a general obligation imposed
claims asserted fall within the scope of the agreement. In re by law, but it is not imposed on the parties to that contract because
Kellogg Brown & Root, Inc., 166 S.W.3d 732, 737 (Tex. 2005). a party cannot interfere tortiously with its own contract. Id. (citing
Holloway v. Skinner, 898 S.W.2d 793, 796 (Tex. 1995)). A person
A. Cooper may compel arbitration against Metro under the must be a stranger to a contract to interfere tortiously with it. Id.
SPA. (citing Morgan Stanley & Co. v. Texas Oil Co., 958 S.W.2d 178,
179 (Tex. 1997)). Thus, a signatory generally is not "required to
Cooper argues that Metro's claims are subject to arbitration under arbitrate a tortious interference claim against a complete stranger
the SPA, which contains a broad clause requiring arbitration of to his contract and its arbitration clause." Id. at 763. But if the
[*9] any controversy or claim arising out of or relating to the signatory plaintiff's right to recover and its damages depend on
agreement. The parties to the SPA are Pneumo Abex and a the existence of the contract containing the arbitration clause, or if
company that later became known as Metro. Metro is thus a the non-signatory defendant is an agent or affiliate of a signatory,
signatory to the agreement, but Cooper is not. Appellees Metro then the plaintiff can be compelled to arbitrate its claim. Meyer,
and Whitman respond that Cooper cannot compel arbitration as a 211 S.W.3d at 306-07; In re Vesta, 192 S.W.3d at 762; PER
non-signatory. HN4

address the question whether Texas or New York law applies because Cooper is not entitled to compel arbitration under either state's laws. Cooper,
for its part, contends that Texas law is entirely consistent with New York law, and that it is entitled to arbitration under the law of both states.

HN2 Texas courts may presume that another state's law is the same as Texas [*8] law absent proof or argument to the contrary. Coca-Cola Co. v.
Harmar Bottling Co., 218 S.W.3d 671, 685 (Tex. 2006). The party requesting application of a foreign law has the initial burden of showing that the
foreign law conflicts with Texas law. Greenberg Traurig of New York, P.C. v. Moody, 161 S.W.3d 56, 70 (Tex. App.—Houston [14th Dist.] 2004, no
pet.). Because all parties assert the outcome is the same under both New York and Texas law, and the parties do not address Delaware law, we apply
Texas law.

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2015 Tex. App. LEXIS 8882, *10
Group, L.P. v. Dava Oncology, L.P., 294 S.W.3d 378, 387-88 Ford, although nonsignatories to the agreement between WMCO
(Tex. App.—Dallas 2009, no pet.); see also In re Kellogg, 166 and the dealer, could compel arbitration under the agreement's
S.W.3d at 739 (listing estoppel and agency among the theories for arbitration clause. Id. at 308.6
requiring arbitration with non-signatory).
Similarly, appellees' tortious interference claims against Cooper in
Cooper contends that it may enforce the arbitration clause under their second amended petition depend on the existence of the SPA
the supreme court's opinion in Meyer. Appellees argue [*11] that and Cooper's guaranty of Pneumo Abex's performance
Meyer is distinguishable because the non-signatories in that case thereunder. See Smith v. Kenda Capital, LLC, 451 S.W.3d 453,
were not strangers to the agreement, as they contend Cooper is 460 (Tex. App.—Houston [14th Dist.] 2014, no pet.) ("[D]irect
here. benefits estoppel analysis focuses on whether a contract
containing the clause at issue also [*13] includes other terms on
In Meyer, Ford Motor Company's agreement with one of its which the signatory plaintiff must rely to prosecute its claims.").
dealers provided Ford with an assignable right of first refusal to As discussed above, the SPA required Pneumo Abex to
acquire the dealer's business if the dealer decided to sell. 211 indemnify Metro's predecessor, and Cooper and its then-
S.W.3d at 304. When the dealer later signed an agreement to sell subsidiary guaranteed that indemnity in 1994. Appellees allege
its business to WMCO, Ford exercised its right and assigned that that in 2011, Cooper tortiously caused (and conspired with others
right to Meyer and his company. Id. WMCO then sued the dealer, to cause) Pneumo Abex to breach its indemnity obligation to
Meyer, and Ford, alleging, among other things, that Meyer Metro under the SPA, which contains an arbitration clause.7 If
tortiously interfered with WMCO's agreement to buy the dealer's Pneumo Abex did not breach the SPA in restructuring the
business. Id. Meyer and Ford moved to compel arbitration under a guaranty and other commitments backing its indemnity
clause in the agreement between the dealer and WMCO. Id. at obligation, then there would be no claim for tortious interference
304-05. Meyer and Ford contended that because WMCO made or conspiracy. Moreover, the remedies appellees seek under each
the agreement with the dealer, WMCO was equitably estopped cause of action are the direct benefit of the indemnity obligation
from refusing arbitration. Id. at 305. The supreme court agreed, to Metro under the SPA: they request injunctive relief obligating
noting that WMCO's claims against Ford and Meyer "depend on Cooper to fund any shortfall in the trust set up to pay the
the existence of" WMCO's agreement with the dealer: indemnity, or alternatively damages for the loss of Cooper's
guaranty of that indemnity—damages that cannot be calculated
If [the dealer] properly terminated the [agreement with without reference to the terms of the indemnity obligation in the
WMCO], based on Ford's exercise of its right of first refusal, SPA. For these reasons, Meyer supports Cooper's ability to
then there would be no claim for tortious interference, no [*12] compel Metro to arbitrate its tortious interference claims under the
need to decide whether Ford validly exercised the right of first SPA's [*14] arbitration clause.
refusal, and no need to decide whether Meyer and Ford
conspired to violate statutes protecting dealers from certain Relying on our decision in Brewer & Pritchard, P.C. v. AMKO
actions by manufacturers. Resources International, LLC,8 appellees argue that Cooper
nevertheless cannot compel arbitration because it is a complete
Id. at 307. The court also considered it important that WMCO's stranger to the SPA. They point out that Cooper had no
damages "cannot be calculated without reference to the relationship with the SPA's signatories—Metro's predecessor and
[agreement]." Id. The court thus held that Meyer and Pneumo Abex—when the SPA was executed, and that the SPA
itself did not require Cooper to

6 In a portion of the Meyer opinion, the supreme court also noted allegations of substantially interdependent and concerted misconduct. 211 S.W.3d at
307-08. But the court compelled arbitration on a theory of direct-benefits estoppel, and it declined to adopt a theory of concerted-misconduct estoppel
in a subsequent case. In re Merrill Lynch Trust Co. FSB, 235 S.W.3d 185, 191 & n.22 (Tex. 2007) (orig. proceeding). We rely solely on the theory of
direct-benefits estoppel here.
7 Alternatively, appellees allege that Cooper's actions rendered Pneumo Abex's performance of its obligations to Metro under the SPA more difficult,
if not impossible.
8 No. 14-13-00113-CV, 2014 Tex. App. LEXIS 7627, 2014 WL 3512836, at *11 (Tex. App.—Houston [14th Dist.] July 15, 2014, no. pet.) (mem.
op.) (holding buyer of leases was stranger to seller's fee agreement with law firm that had represented seller in dispute with lease operator, and
therefore firm could not use arbitration clause in fee agreement to compel buyer to arbitrate claims regarding buyer's failure to pay firm a portion of
sales price).

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2015 Tex. App. LEXIS 8882, *14
guarantee Pneumo Abex's performance. We do not agree that agreement. The parties to the Mutual Guaranty are Pneumo Abex
these facts defeat direct-benefits estoppel. and Cooper Industries, LLC. Thus, appellees Whitman and Metro
are not parties to the Mutual Guaranty. Nevertheless, direct-
Unlike in Brewer & Pritchard, Cooper guaranteed the benefits estoppel can also require non-signatory plaintiffs to
performance of one of the agreement's signatories, Pneumo Abex, arbitrate if they seek to derive a direct benefit from a contract
in 1994—long before the allegedly tortious 2011 transactions containing an arbitration clause. See In re Kellogg, 166 S.W.3d at
made the basis of this suit. [*15] Moreover, Brewer & Pritchard 739-741 (considering whether plaintiff's claims seek to enforce
did not involve a non-signatory defendant seeking to compel contract [*18] or stand independently of contract).
arbitration with a signatory plaintiff (as our inquiry under the SPA
does), nor did it address whether the plaintiff's right to recover and In their second amended petition, appellees seek to enforce
its damages depended on the existence of the agreement Cooper's obligations under the Mutual Guaranty. They allege that
containing the arbitration clause. Metro's tortious interference Cooper's acts of tortious interference in connection with the 2011
claims do depend on the existence of the SPA, so Meyer supports settlement (and its agreement with the other defendants to
arbitration of those claims as explained above. Other courts agree interfere) were undertaken with a specific intent to cap its
that HN7 a guarantor or surety of a party's obligation under a guaranty obligation, and that Cooper engaged in fraudulent
contract containing an arbitration clause may invoke or be bound transfers (and conspired to do so) when it obtained a release of its
by that clause in a suit regarding the obligation.9 Because Metro's guaranty obligation in exchange for certain payments to the trust.
tortious interference claims depend on the existence of Pneumo The remedies appellees seek include an injunction obligating
Abex's indemnity obligation in the SPA, which Cooper Cooper to fund any shortfall in the trust set up to pay the
guaranteed, we hold Cooper may compel signatory Metro to indemnity Cooper had guaranteed, or alternatively damages in the
arbitrate those claims under the SPA.10 amount of the shortfall. In short, appellees are claiming the benefit
of the Mutual Guaranty, so they are estopped from avoiding the
B. Cooper may compel arbitration against Whitman and burden of its arbitration clause. See In re Kellogg, 166 S.W.3d at
Metro under the Mutual Guaranty despite its termination. 739.

Cooper also argues that both Whitman's and Metro's claims are Appellees respond that arbitration can no longer be compelled
independently subject to arbitration under the 1994 Mutual under the Mutual Guaranty because Cooper, Pneumo Abex, and
Guaranty agreement, which broadly requires arbitration of any others terminated that agreement following the 2011 settlement.
dispute arising in connection with the They point to the following language in the termination
agreement:

9 See, e.g.,Choctaw Generation L.P. v. Am. Home Assur. Co., 271 F.3d 403, 406-08 (2d Cir. 2001) (holding surety for one party's obligation under a
construction contract containing arbitration clause could compel other party to arbitrate its claims against surety even though surety was not a party to
construction contract and surety contract contained no arbitration clause because the controversy presented [*16] was linked to the construction
contract); T-Mobile USA, Inc. v. Montijo, No. C12-1317RSM, 2012 U.S. Dist. LEXIS 176236, 2012 WL 6194204, at *4 (W.D. Wa. Dec. 11, 2012)
(same as to guarantors); Bimota SPA v. Rousseau, 628 F. Supp. 2d 500, 505-06 (S.D.N.Y. 2009) (same); Fujian Pac. Elec. Co. v. Bechtel Power
Corp., No. C 04-3126 MHP, 2004 U.S. Dist. LEXIS 23472, 2004 WL 2645974, at *6-7 (N.D. Cal. Nov. 19, 2004) (same); see also Bell v. Campbell,
143 S.W. 953, 956-57 (Tex. Civ. App.—Amarillo 1911, writ ref'd) (holding sureties bound by arbitration agreement and award against principal);
Empire Steel Corp. v. Omni Steel Corp., 378 S.W.2d 905, 911 (Tex. Civ. App.—Fort Worth 1964, writ ref'd n.r.e.) (same as to guarantors). We note
that in a subsequent case, the Second Circuit described Choctaw as involving a situation in which the non-signatory surety (American Home) was
explicitly named in the underlying contract as having certain tasks to perform thereunder. Ross v. Am. Exp. Co., 547 F.3d 137, 145 (2d Cir. 2008).
The Choctaw opinion does not appear to support this characterization. See 271 F.3d at 403-05, 407 (noting that underlying contract required party to
post and replenish letter of credit, and that American Home contracted separately with party to issue bond securing party's performance but was not
party to underlying contract). In any event, none of the cases cited at the beginning of this footnote attach importance to whether the surety or
guarantor is identified by name in the underlying agreement containing the arbitration clause.
10 Because we conclude that Whitman is bound to arbitrate its claims under the 1994 [*17] Mutual Guaranty, as discussed below, we do not address
whether Cooper could compel Whitman to arbitrate under the SPA. We also note that the parties have not separately addressed whether Cooper could
compel Metro to arbitrate its claims of fraudulent transfer and conspiracy to commit fraudulent transfer. We likewise need not address that issue under
the SPA given our conclusion below that Metro is bound to arbitrate those claims under the Mutual Guaranty.

EDWARD HUBBARD
Page 9 of 14
2015 Tex. App. LEXIS 8882, *18
The Dallas Court of Appeals agreed, noting that the termination
Effective as of the Closing, and notwithstanding [*19] any agreement was a new agreement with new consideration that
provision of the Mutual Guaranty to the contrary, the Mutual unconditionally released the parties from all previous obligations.
Guaranty shall be fully, finally and irrevocably terminated and [*21] Id. at 321-22, 323.
of no further force or effect, and no Party nor any other Person
shall have any further obligation or liability under the Mutual This case differs from TransCore in two critical respects. First,
Guaranty from and after Closing. the backward-looking release language in the TransCore
termination agreement is absent here. This termination agreement,
...
which was entered into effective April 5, 2011, only eliminates
Each Party hereby irrevocably consents and agrees that any any "further obligation" to arbitrate under the Mutual Guaranty
dispute regarding this Agreement shall be brought only to the "from and after" termination. The provision agreeing to bring
exclusive jurisdiction of the federal or state courts located in disputes regarding the termination agreement only to New York
New York County, New York . . . . courts does not address the handling of disputes under the Mutual
Guaranty.12 Thus, the termination agreement leaves intact the
We disagree with appellees that this language cuts off the estoppel obligation under the Mutual Guaranty to arbitrate disputes
effect of the Mutual Guaranty's arbitration clause. "arising in connection with the agreement" up to the point of
termination. Appellees' claims challenge Cooper's acts leading up
HN8 In general, as our sister court has held, an "arbitration to and including the 2011 settlement, which was entered into as of
agreement contained within a contract survives the termination or February 1, 2011. Because those claims arise in connection with
repudiation of the contract as a whole." Cleveland Constr. Inc. v. the Mutual Guaranty agreement as explained above, the
Levco Constr. Inc., 359 S.W.3d 843, 854 (Tex. App.—Houston termination agreement does not affect the obligation to arbitrate
[1st Dist.] 2012, pet. dism'd)) (citing Henry v. Gonzalez, 18 them.
S.W.3d 684, 690 (Tex. App.—San Antonio 2000, pet. dism'd)).11
Our facts illustrate the sensible result of applying this rule here. Second, the termination agreement in TransCore was between the
Appellees' position is that the Mutual Guaranty was tortiously and parties to the original agreement: one party seeking to compel
fraudulently terminated by Cooper and that the court should, in arbitration under the original agreement, and another party [*22]
effect, require Cooper to honor its guaranty notwithstanding the arguing that the termination agreement ended its obligation to
termination. Having asked the court to ignore the Mutual arbitrate. Here, appellees are not parties to the termination
Guaranty's termination, appellees can hardly complain if its clause agreement. Instead, appellees are third parties trying to revive the
requiring [*20] arbitration of any dispute "arising in connection obligations of the original agreement. The logical force of the
with" the agreement is also given effect. doctrine of direct-benefits estoppel—which was not at issue in
TransCore—supports requiring appellees to arbitrate their claims.
Appellees urge us instead to follow TransCore Holdings, Inc. v.
Rayner, 104 S.W.3d 317 (Tex. App.—Dallas 2003, pet. denied). In Appellees' claims against Cooper hinge on the existence of the
TransCore, parties including TransCore and Rayner entered into a Mutual Guaranty, and the gist of their case is to undo its
stock purchase agreement containing an arbitration clause. Id. at termination. If Cooper "properly terminated the" Mutual
319. Subsequently, the parties entered into a termination Guaranty, then "there would be no claim for tortious interference"
agreement that included a backward-looking mutual release of or fraudulent transfer and no need to determine whether Cooper
obligations and claims and a forward-looking provision requiring "conspired" with the other defendants to do so. Meyer, 211
actions relating to the agreement to be brought in court. Id. at 320- S.W.3d at 307. Appellees cannot have it both ways, picking and
21, 323. Rayner argued that the termination agreement released choosing which portions of the Mutual Guaranty should be
him from his obligation to arbitrate TransCore's claim that he enforced and which portions should not. See id. at 306; cf. Coker
made misrepresentations prior to termination. Id. at 321. v. Coker, 650 S.W.2d 391, 393 (Tex.

11 See also Butchers, Food Handlers & Allied Workers Union, Local 174 v. Hebrew Nat'l Kosher Foods, Inc., 818 F.2d 283, 287 (2d Cir. 1987) ("If
the contract does not state that the duty to arbitrate ends with the termination of the contract, the strong policies favoring arbitration should ordinarily
lead the court to conclude that the obligation to arbitrate—especially as to claims that accrued during the term of the contract—survives the expiration
of the contract.").
12 See Valero Energy Corp. v. Teco Pipeline Co., 2 S.W.3d 576, 587 (Tex. App.—Houston [14th Dist.] 1999, no pet.).

EDWARD HUBBARD
Page 10 of 14
2015 Tex. App. LEXIS 8882, *22
1983) (HN9 "No single [contractual] provision taken alone waived the right to arbitrate by first moving to dismiss the case in
[should] be given controlling effect; rather, all the provisions must favor of adjudication in New York based on principles of
be considered with reference to the whole instrument"). exclusive jurisdiction, comity, and forum non conveniens. In its
motion, Cooper argued that the New York court that approved the
We hold that the termination of the Mutual Guaranty agreement 2011 settlement had exclusive jurisdiction over questions
between Cooper and Pneumo Abex did not abrogate Cooper's regarding that settlement.
ability [*23] to compel arbitration of appellees' claims under that
agreement. In addition, as explained above, Cooper may compel HN12 Moving to dismiss in favor of exclusive jurisdiction in
arbitration of Metro's claims under the SPA. Accordingly, we another court is equivalent, for present purposes, to moving to
sustain Cooper's first issue and hold that the trial court erred to the transfer venue or filing a notice of removal to another court. The
extent it denied Cooper's motion to compel arbitration on the Supreme Court of Texas and many other courts have held that
ground that appellees' claims do not fall within the scope of valid such actions do not waive a right to arbitrate. E.g., Richmont
arbitration agreements that Cooper can invoke. Holdings, Inc. v. Superior Recharge Sys., L.L.C., 455 S.W.3d 573,
576 (Tex. 2015) (per curiam); In re Citigroup Global Markets,
II. Cooper did not expressly waive its right to arbitrate Inc., 258 S.W.3d 623, 626 (Tex. 2008).13
appellees' claims.
In Richmont Holdings, Superior and Richmont signed an asset
HN10 Once the arbitration movant establishes a valid arbitration purchase agreement with an arbitration clause, and Superior's
agreement that encompasses the claims at issue, a trial court has part-owner, Blake, signed a related employment agreement with
no discretion to deny the motion to compel arbitration unless the Richmont that contained a Dallas County forum selection clause.
opposing party proves a defense to arbitration such as waiver. 455 S.W.3d at 575. Superior and Blake later sued Richmont in
J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003); Denton County on various causes of action and sought a
In re First Merit Bank, N.A., 52 S.W.3d 749, 753-54 (Tex. 2001) declaration that a covenant not to compete in the employment
(orig. proceeding). Cooper's second and third issues ask whether agreement was unenforceable. Id. In response, Richmont moved
the trial court erred to the extent it denied the motion to compel by to transfer venue to Dallas County and also filed a separate suit
finding that Cooper waived its right to arbitration against Metro against Blake in Dallas County to enforce the covenant not to
and Whitman. compete. Id. Richmont later filed a motion to compel arbitration
in the Denton County suit, but the trial court denied the motion.
HN11 A party can waive a contractual right to arbitrate either Id. at 576.
expressly or by implication. Sedillo v. Campbell, 5 S.W.3d 824,
826 (Tex. App.—Houston [14th Dist.] 1999, no pet.). Whether The supreme court held that the motion should have been granted
waiver has occurred is a question of law for the court that we because Richmont had not waived arbitration. Id. The court
review de novo. Perry Homes v. Cull, 258 S.W.3d 580, 598 (Tex. explained that "[m]erely filing suit does not waive arbitration,
2008). Because public policy favors arbitration, there is [*24] a even when the movant, as in this case, files a second, separate suit
strong presumption against waiver of the right to arbitrate. In re in another county based in [*26] part on a contract at issue in the
Bruce Terminix Co., 988 S.W.2d 702, 704 (Tex. 1998) (orig. first action. Nor, we think, does moving to transfer venue. The
proceeding). motion does not address the merits of the case." Id. (citations
omitted).
Express waiver arises when a party affirmatively indicates that it
wishes to resolve the case in the judicial forum rather than in Thus, Richmont went far beyond asserting—as Cooper did
arbitration. See Okorafor v. Uncle Sam & Assocs., Inc., 295 here—that another forum was the only correct place to decide the
S.W.3d 27, 39 (Tex. App.—Houston [1st Dist.] 2009, pet. struck). parties' disputes. Richmont actually filed a second suit in the other
Appellees contend that Cooper expressly forum, yet the supreme court held that act did not waive
Richmont's ability to compel

13 See also In re Bruce Terminix Co., 988 S.W.2d at 704 (citing case holding no waiver by defendant who removed case from state to federal court);
In re Frost Nat'l Bank, 13-07-00748-CV, 2008 Tex. App. LEXIS 8570, 2008 WL 4889836, at *3 (Tex. App.—Corpus Christi Nov. 7, 2008, no pet.)
(holding party did not waive right to compel arbitration by moving to transfer venue [*25] based on provision in agreement) (mem. op.); Global Fin.
Servs., L.L.C. v. Estate of McLean, No. 04-07-627-CV, 2008 Tex. App. LEXIS 1034, 2008 WL 372521, at *3 (Tex. App.—San Antonio Feb. 13,
2008, no pet.) (mem. op.); Granite Constr. Co. v. Beaty, 130 S.W.3d 362, 367 (Tex. App.—Beaumont 2004, no pet.) (HN13 "[A] motion to transfer
venue does not seek a final determination of the litigation.").

EDWARD HUBBARD
Page 11 of 14
2015 Tex. App. LEXIS 8882, *26
arbitration in the original suit. Richmont therefore supports the
conclusion that Cooper did not waive its right to arbitration. • whether the party who pursued arbitration was the plaintiff or
the defendant;
Similarly, in In re Citigroup Global Markets, the supreme court
• how long the party who pursued arbitration delayed before
held that Citigroup did not waive arbitration despite its previous
seeking arbitration;
attempts to transfer the case to a federal multidistrict litigation
court in New York. 258 S.W.3d at 626. The court held that despite • when the party who pursued arbitration learned of the
statements in various transfer pleadings about the case's similarity arbitration clause's existence;
to others already transferred, the potential savings in consolidated
• how much of the pretrial activity related to the merits rather
discovery, and the potential convenience of parties and witnesses
than to arbitrability or jurisdiction;
in consolidated proceedings, Citigroup did not expressly waive its
right to arbitrate. Id. As the court explained, "we disagree . . . that • how much time and expense has been incurred in litigation;
transfer to an MDL court is necessarily inconsistent [*27] with
• whether the party who pursued arbitration sought or opposed
seeking arbitration." Id.
arbitration earlier in the case;
Appellees urge that Citigroup is distinguishable because in that • whether the party who pursued arbitration filed affirmative
case, the party seeking to compel arbitration expressly reserved claims or dispositive motions;
the right to request arbitration early on. See id. But the court in
Citigroup did not hold that a party must expressly reserve its right • how much discovery has been conducted and who initiated
the discovery;
to arbitrate before seeking to transfer a case. Rather, Citigroup
simply noted that the party "never opposed arbitration." Id. The • whether the discovery sought would be useful in arbitration;
same is true here: Cooper never opposed arbitration before filing
• what discovery would be unavailable in arbitration;
its motion to compel. Accordingly, we hold the trial court erred to
the extent it denied the motion to compel arbitration on the ground • whether activity in court would be duplicated in arbitration;
that Cooper expressly waived its right to arbitrate.
• when the case was to be tried; and

III. Cooper did not waive its right to arbitrate by implication. • whether the party who pursued arbitration sought judgment on
the merits.
HN14 A party waives an arbitration clause by implication when it
substantially invokes the judicial process to the other party's Baty v. Bowen, Miclette & Britt, Inc., 423 S.W.3d 427, 433 (Tex.
detriment or prejudice. Perry Homes, 258 S.W.3d at 589-90. The App.—Houston [14th Dist.] 2013, pet. denied) (citing Perry
hurdle of proving implied waiver is a high bar. Kennedy Hodges, Homes, 258 S.W.3d at 591-92).
L.L.P. v. Gobellan, 433 S.W.3d 542, 545 (Tex. 2014) (per curiam).
In close cases, the "strong presumption against waiver" should HN17 The quantum of litigation conduct that constitutes
govern. Perry Homes, 258 S.W.3d at 593. "substantial" invocation of the litigation process depends on the
context. See Perry Homes, 258 S.W.3d at 593. A party who
Waiver must be decided on a case-by-case basis, and we look to enjoys substantial direct benefits by gaining an advantage in the
the totality of the circumstances. Id. at 592. The party's conduct pretrial litigation process should be barred from turning around
must be unequivocally inconsistent with claiming [*28] a known and seeking arbitration with the spoils. Id. Delay alone generally
right to arbitration. See Van Indep. Sch. Dist. v. McCarty, 165 does not establish waiver. See In re Serv. Corp. Int'l, 85 S.W.3d
S.W.3d 351, 353 (Tex. 2005).14 HN15 We consider a wide variety 171, 174 (Tex. 2002) (orig. proceeding).
of factors in deciding whether a party substantially invoked the
litigation process, such as: "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." In re Bruce

14 As noted above, HN16 whether a party has waived an arbitration right is a question [*29] of law that this Court reviews de novo. See Perry
Homes, 258 S.W.3d at 598. If the trial court is called upon to resolve factual disputes about the conduct in which the party engaged, this Court defers
to the trial court's implied fact findings if they are supported by sufficient evidence. See id.

EDWARD HUBBARD
Page 12 of 14
2015 Tex. App. LEXIS 8882, *29
Terminix Co., 988 S.W.2d 702, 704 (Tex. 1998). The arbitration incurred approximately $3,500,000 in fees and $94,000 in other
opponent must provide proof of prejudice to overcome the strong costs." Appellees also argue that Cooper substantially
presumption against waiver. In re Vesta, 192 S.W.3d at 763. In the invoked the judicial process by moving for a continuance and
context of waiver of an arbitration right, "prejudice" relates to the agreeing to an extension of discovery.
inherent unfairness in terms of delay, expense, or damage to a
party's legal position that occurs when the party's opponent forces We disagree with appellees' position that Cooper substantially
it to litigate an issue and later seeks to arbitrate [*30] that same invoked the judicial process. In holding that substantial invocation
issue. Perry Homes, 258 S.W.3d at 597. A party cannot attempt to had occurred in Perry Homes, the Supreme Court of Texas noted
have it both ways by switching between litigation and arbitration the extensive discovery propounded by the movants but stated
to its own advantage. See Okorafor, 295 S.W.3d at 40 (citing In re that discovery is not the only measure of waiver under the totality-
Fleetwood Homes of Texas, L.P., 257 S.W.3d 692, 694 (Tex. of-the-circumstances test. Perry Homes, 258 S.W.3d at 596.15 The
2008)). court then pointed out that the movants had objected stridently to
arbitration before changing their minds and seeking arbitration
To support their position that Cooper substantially invoked the shortly before the trial setting. Id. The court also invoked the rule
judicial process, appellees assert that Cooper "inexplicably [*32] that one cannot wait until the eve of trial to request
delayed" moving to compel arbitration until May 2014, twenty- arbitration, observing that "most of the discovery in the case had
eight months after it was sued. Appellees further contend that already been completed before [movants] requested arbitration."
Cooper participated in extensive discovery related to the merits. Id.
They point out that Cooper sought admissions that Metro is
"seeking to void and/or avoid the transfers incident to the The facts here are different from those in Perry Homes and more
creations of the [trust]" and that Pneumo Abex did "not owe a analogous to In re Vesta, in which the supreme court held that
duty to [Metro] to ensure that it obtained consideration that was at arbitration had not been waived. 192 S.W.3d at 763-64. The
least equal to the value" of Cooper's obligations. Appellees argue parties moving for arbitration in Vesta had litigated for two years
that those requests relate directly to their claims of fraudulent and engaged in discovery, but they did not initially oppose
transfer and tortious interference. arbitration. See Perry Homes, 258 S.W.3d at 600 (distinguishing
Vesta on those grounds). Furthermore, the Vesta case was not
They also point to Cooper's request for the production of "all close to trial, and the party opposing arbitration incurred most of
documents and communications that show what amount would its discovery expenses in obtaining discovery rather than
have constituted 'equivalent value' with respect to the settlement providing it. Id.
of the New York Lawsuit" and "all documents (if any) in which
Whitman Insurance Company . . . is identified, as an entity and/or Like the parties moving to compel arbitration in Vesta, Cooper
a party [*31] that is entitled to indemnification . . . pursuant to the did not oppose arbitration at any time during the case. In addition,
terms of the SPA." Appellees declare that they have produced although the parties had engaged in some merits discovery, this
more than 21,000 documents, and argue that Cooper is trying to case was not on the eve of trial when Cooper filed its motion to
have it both ways by moving to compel arbitration only after compel arbitration in May 2014—approximately four months
16
receiving extensive discovery responses. The affidavit of after Whitman joined the case as [*33] a plaintiff. The record
appellees' counsel states that, "[t]o date, [appellees'] attorneys and shows that during the first ten months of the case, from December
staff have spent over 9,000 hours working on the lawsuit and 2011 to October 2012, the parties were engaged in settlement
negotiations and Metro sought to extend trial deadlines for

15See also G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502, 514 (Tex. 2015) (collecting cases in which "we have declined to find
waiver even when the movant itself propounded written discovery").
16 Although appellees point to evidence (summarized above) that substantial merits discovery had occurred, the record also contains indications that
the situation was not like that in Perry Homes, in which most discovery had been completed. According to a filing by appellees in [*34] February
2014, no "meaningful merits discovery" had yet been received from Cooper given the litigation over jurisdictional issues. In April 2014, appellees
moved to modify the docket control order, stating that the parties had been "prevented . . . from being able to engage in meaningful document
discovery on the merits until recently," and that "no fact-witness depositions have been taken on the merits as of this date."

EDWARD HUBBARD
Page 13 of 14
2015 Tex. App. LEXIS 8882, *33
that reason.17 Much of the second year was spent on venue by itself is insufficient to waive the right to arbitrate. See In re
motions, jurisdictional motions, and mediation, which failed in Serv. Corp. Int'l, 85 S.W.3d at 174; see also [*36] Granite, 130
November 2013. HN18 Settlement negotiations and mediation do S.W.3d at 367 ("Length of delay alone is not a basis for inferring
not substantially invoke the judicial process, nor are they waiver.").
inconsistent with a desire to arbitrate. See Tex. Residential Mortg.,
L.P. v. Portman, 152 S.W.3d 861, 863-64 (Tex. App.—Dallas Cooper is in court because appellees sued it, and Cooper did not
2005, no pet.). Likewise, venue and jurisdictional motions do not seek disposition on the merits. See G.T. Leach Builders, LLC v.
constitute substantial invocation of the judicial process because Sapphire V.P., LP, 458 S.W.3d 502, 512-13 (Tex. 2015) (noting
they do not relate to the merits of the case. See Granite, 130 similar factors in holding right to arbitrate had not been waived).
S.W.3d at 367; Deep Water Slender Wells, Ltd. v. Shell Intern. Appellees have not shown that Cooper obtained discovery it
Exploration & Prod., Inc., 234 S.W.3d 679, 695 (Tex. App.— otherwise would not have obtained, and this case was not on the
Houst.[14th Dist.] 2007, pet. denied) ("A dismissal of all claims eve of trial. As for the expenses appellees incurred in prosecuting
to enforce a clause requiring litigation in another forum is a their suit, the affidavit does not delineate which costs were
determination that the merits of the claims should be determined incurred in litigating against Cooper and which costs were
elsewhere; therefore, enforcement of such a forum-selection incurred in litigating against the other named defendants. Nor
clause is a nonmerits basis for dismissal."). does it address which costs were incurred in obtaining or
responding to discovery. The costs thus likely include those
Appellees cite Tuscan Builders, LP v. 1437 SH6 L.L.C., 438 associated with litigating the claims against the other named
S.W.3d 717 (Tex. App.—Houston [1st Dist.] 2014, pet. denied), a defendants and those associated with appellees' efforts at
case in which the First Court of Appeals held that the movant obtaining discovery from Cooper. The record does not
substantially invoked the judicial process. Appellees assert that demonstrate the extent to which appellees "pre-trial costs were . . .
this case is similar because the movant in Tuscan waited for more self-inflicted." In re Vesta, 192 S.W.3d at 763. Accordingly, we
than a year after the lawsuit was filed before seeking [*35] hold appellants have not shown that Cooper unequivocally
arbitration, did not accompany its answer with a notice to pursue waived its right to arbitration by substantially invoking the
arbitration, completed written discovery on the merits, inspected judicial process. Perry Homes, 258 S.W.3d at 593.
property at issue in the lawsuit, designated experts, and joined in a
motion to extend the discovery period and postpone trial. Id. at Having concluded that under the totality of the [*37]
722-23. circumstances, Cooper did not substantially invoke the judicial
process, we need not address whether appellees suffered
This case is distinguishable from Tuscan Builders. The party prejudice. We sustain Cooper's second and third issues and hold
seeking to compel arbitration in Tuscan Builders filed a third- the trial court erred to the extent it ruled that Cooper waived its
party action and conducted a building inspection that likely would right to arbitration of appellees' claims.
not have been available in arbitration. Id. at 723. The court
concluded that the motion to compel arbitration was "more Conclusion
consistent with a late-game tactical decision than an intent to
preserve the right to arbitrate." Id. at 722. In this case, by contrast, For these reasons, the trial court erred in denying the Cooper
Cooper did not file counterclaims, and appellees do not contend appellants' motion to compel arbitration. We reverse the trial
that any merits discovery obtained would not have been available court's order denying the motion, render judgment ordering
in arbitration. Appellees also "do[] not allege that the discovery arbitration of appellees' claims against the Cooper defendants who
already conducted would not be useful in arbitration." In re Vesta, are parties to this appeal, and remand this case to the trial court for
192 S.W.3d at 763; see also Granite, 130 S.W.3d at 367 (HN19 further proceedings consistent with this opinion, including the
"Propounding discovery will not, in and of itself, result in waiver grant of an appropriate stay. See Tex. Civ. Prac. & Rem. Code
of the right to compel arbitration"). Cooper's twenty-eight-month Ann. § 171.025(a) (West 2011).
delay is but one factor, which
/s/ J. Brett Busby

17 Metro filed its original petition on December 30, 2011. On October 31, 2012, Metro filed an unopposed motion to modify the scheduling order and
request for Rule 166 Conference. Metro asserted that the "parties have been engaged in extensive settlement negotiations in an effort to resolve this
case. Because the parties' efforts have been focused on resolving the matter short of litigating the issue, the parties request an extension and
modification of this Court's docket control order."

EDWARD HUBBARD
Page 14 of 14
2015 Tex. App. LEXIS 8882, *37

Justice

EDWARD HUBBARD
DIRECTV, Inc. v. Imburgia, 136 S.Ct. 463 (2015)
193 L.Ed.2d 365, 84 USLW 4018, 166 Lab.Cas. P 61,659...

KeyCite Yellow Flag - Negative Treatment West Headnotes (9)
Declined to Extend by 24th Senatorial Dist. Republican Committee v. 
Alcorn, 4th Cir.(Va.), April 19, 2016
136 S.Ct. 463 [1] Courts
Supreme Court of the United States Decisions of United States Courts as
Authority in State Courts
DIRECTV, INC., Petitioner States
v. Federal Supremacy; Preemption
Amy IMBURGIA et al. Lower court judges are free to note their
disagreement with a decision of the Supreme
No. 14–462.
Court, but the Supremacy Clause forbids state
|
courts to dissociate themselves from federal
Argued Oct. 6, 2015.
law because of disagreement with its content
|
or a refusal to recognize the superior authority
Decided Dec. 14, 2015.
of its source. U.S.C.A. Const. Art. 6, cl. 2.
Synopsis
3 Cases that cite this headnote
Background: Consumer brought action against satellite
television service provider, seeking damages for early
termination fees that allegedly violated California law. [2] Alternative Dispute Resolution
The Superior Court, Los Angeles County, No. BC398295, Preemption
John Shepard Wiley, Jr., J., denied provider's motion States
to compel arbitration, and provider appealed. The Particular cases, preemption or
California Court of Appeal, Rothschild, Acting P.J., 225 supersession
Cal.App.4th 338, 170 Cal.Rptr.3d 190, affirmed, and Federal Arbitration Act is a law of the United
certiorari was granted. States; consequently, the judges of every State
must follow it. U.S.C.A. Const. Art. 6, cl. 2; 9
U.S.C.A. § 1 et seq.
[Holding:] The Supreme Court, Justice Breyer, held that
5 Cases that cite this headnote
under arbitration clause in parties' contract, providing
that it was invalid if “law of your state” made its class
arbitration waiver unenforceable, “law of your state” did [3] Alternative Dispute Resolution
not include California law invalidating class arbitration Validity
waivers that was valid at time the contract was entered Alternative Dispute Resolution
into, but was later ruled preempted by the Federal Choice of law
Arbitration Act.
The Federal Arbitration Act allows parties to
an arbitration contract considerable latitude
Reversed and remanded. to choose what law governs some or all of
its provisions, including the law governing
Justice Thomas filed a dissenting opinion. enforceability of a class-arbitration waiver. 9
U.S.C.A. § 1 et seq.
Justice Ginsburg filed a dissenting opinion in which
17 Cases that cite this headnote
Justice Sotomayor joined.

[4] Federal Courts
Review of State Courts

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 1
DIRECTV, Inc. v. Imburgia, 136 S.Ct. 463 (2015)
193 L.Ed.2d 365, 84 USLW 4018, 166 Lab.Cas. P 61,659...

Interpretation of a contract is ordinarily a Judicial construction; role, authority,
matter of state law to which the Supreme and duty of courts
Court defers. Judicial construction of a statute ordinarily
applies retroactively.
3 Cases that cite this headnote
Cases that cite this headnote
[5] Courts
Decisions of United States Courts as [9] Contracts
Authority in State Courts Construction against party using words
California courts are the ultimate authority on The reach of the canon construing contract
California law. language against the drafter must have limits,
no matter who the drafter was.
1 Cases that cite this headnote
Cases that cite this headnote
[6] Alternative Dispute Resolution
Preemption
States
Particular cases, preemption or West Codenotes
supersession
Recognized as Preempted
Under arbitration clause in contract between West's Ann.Cal.Civ.Code §§ 1751, 1781(a)
consumer and satellite television service
provider, providing that it was invalid if
“law of your state” made its class arbitration *464 Syllabus *
waiver unenforceable, “law of your state” did
not include California law invalidating class Petitioner DIRECTV, Inc., and its customers entered
arbitration waivers that was valid at time into a service agreement that included a binding
the contract was entered into, but was later arbitration provision with a class-arbitration waiver.
ruled preempted by the Federal Arbitration It specified that the entire arbitration provision was
Act; interpreting the provision as applying unenforceable if the “law of your state” made class-
to invalid state law did not place arbitration arbitration waivers unenforceable. The agreement also
contracts on equal footing with all other declared that the arbitration clause was governed by the
contracts or give due regard to federal policy Federal Arbitration Act. At the time that respondents,
favoring arbitration. 9 U.S.C.A. § 2. California residents, entered into that agreement with
DIRECTV, California law made class-arbitration waivers
23 Cases that cite this headnote unenforceable, see Discover Bank v. Superior Court, 36
Cal.4th 148, 30 Cal.Rptr.3d 76, 113 P.3d 1100. This Court
subsequently held in AT & T Mobility LLC v. Concepcion,
[7] Contracts
563 U.S. 333, 131 S.Ct. 1740, 179 L.Ed.2d 742, however,
Existing law as part of contract
that California's Discover Bank rule was pre-empted by the
Under general California contract principles, Federal Arbitration Act, 9 U.S.C. § 2.
references in a contract to California law
incorporate the California Legislature's power When respondents sued petitioner, the trial court denied
to change the law retroactively. DIRECTV's request to order the matter to arbitration,
and the California Court of Appeal affirmed. The court
1 Cases that cite this headnote
thought that California law would render class-arbitration
waivers unenforceable, so it held the entire arbitration
[8] Statutes provision was unenforceable under the agreement. The
fact that the Federal Arbitration Act pre-empted that
California law did not change the result, the court said,

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because the parties were free to refer in the contract to other federal law. Fourth, the language the court uses
California law as it would have been absent federal pre- to frame the issue focuses only on arbitration. Fifth, the
emption. The court reasoned that the phrase “law of your view that state law retains independent force after being
state” was both a specific provision that should govern authoritatively invalidated is one courts are unlikely to
more general provisions and an ambiguous provision that apply in other contexts. Sixth, none of the principles of
should be construed against the drafter. Therefore, the contract interpretation relied on by the California court
court held, the parties had in fact included California law suggests that other California courts would reach the same
as it would have been without federal pre-emption. interpretation elsewhere. The court applied the canon that
contracts are construed against the drafter, but the lack of
Held : Because the California Court of Appeal's any similar case interpreting similar language to include
interpretation is pre-empted by the Federal Arbitration invalid laws indicates that the antidrafter canon would
Act, that court must enforce the arbitration agreement. not lead California courts to reach a similar conclusion in
Pp. 467 – 471. cases not involving arbitration. Pp. 468 – 471.

(a) No one denies that lower courts must follow 225 Cal.App. 4th 338, 170 Cal.Rptr.3d 190, reversed and
Concepcion, but that elementary point of law does not remanded.
resolve the case because the parties are free to choose
the law governing an arbitration provision, including BREYER, J., delivered the opinion of the Court, in which
California law as it would have been if not pre-empted. ROBERTS, C.J., and SCALIA, KENNEDY, ALITO,
The state court interpreted the contract to mean that and KAGAN, JJ., joined. THOMAS, J., filed a dissenting
the parties did so, and the interpretation of a contract opinion. GINSBURG, J., filed a dissenting opinion, in
is ordinarily a matter of state law to which this Court which SOTOMAYOR, J., joined.
defers, Volt Information Sciences, Inc. v. Board of Trustees
of Leland Stanford Junior Univ., 489 U.S. 468, 474, 109
S.Ct. 1248, 103 L.Ed.2d 488. The issue here is not whether Attorneys and Law Firms
the court's decision is a correct statement of California
Christopher Landau, Washington, DC, for Petitioner.
law but whether it is consistent with *465 the Federal
Arbitration Act. Pp. 467 – 468. Thomas C. Goldstein, Bethesda, MD, for Respondents.

(b) The California court's interpretation does not place Melissa D. Ingalls, Robyn E. Bladow, Shaun Paisley,
arbitration contracts “on equal footing with all other Kirkland & Ellis LLP, Los Angeles, CA, Christopher
contracts,” Buckeye Check Cashing, Inc. v. Cardegna, 546 Landau, P.C. Kirkland & Ellis LLP, Washington, DC, for
U.S. 440, 443, 126 S.Ct. 1204, 163 L.Ed.2d 1038, because Petitioner.
California courts would not interpret contracts other than
F. Edie Mermelstein, Law Offices of F. Edie Mermelstein,
arbitration contracts the same way. Several considerations
Huntington Beach, CA, Paul D. Stevens, Milstein
lead to this conclusion.
Adelman, LLP, Santa Monica, CA, Ingrid Maria
Evans, Evans Law Firm, Inc., San Francisco, CA,
First, the phrase “law of your state” is not ambiguous
Thomas C. Goldstein, Counsel of Record, Goldstein &
and takes its ordinary meaning: valid state law.
Russell, P.C., Bethesda, MD, Harvey Rosenfield, Pamela
Second, California case law—that under “general contract
Pressley, Consumer Watchdog, Santa Monica, CA, for
principles,” references to California law incorporate
Respondents.
the California Legislature's power to change the law
retroactively, Doe v. Harris, 57 Cal.4th 64, 69–70, 158 Opinion
Cal.Rptr.3d 290, 302 P.3d 598, 601–602—clarifies any
doubt about how to interpret it. Third, because the court Justice BREYER delivered the opinion of the Court.
nowhere suggests that California courts would reach the
same interpretation in any other context, its conclusion The Federal Arbitration Act states that a “written
appears to reflect the subject matter, rather than a general provision” in a contract providing for “settle[ment] by
principle that would include state statutes invalidated by arbitration” of “a controversy ... arising out of” that

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“contract ... shall be valid, irrevocable, and enforceable, Cal.Rptr.3d 76, 113 P.3d 1100, 1110, that a “waiver” of
save upon such grounds as exist at law or in equity for class arbitration in a “consumer contract of adhesion”
the revocation *466 of any contract.” 9 U.S.C. § 2. that “predictably involve[s] small amounts of damages”
We here consider a California court's refusal to enforce and meets certain other criteria not contested here is
an arbitration provision in a contract. In our view, that “unconscionable under California law and should not be
decision does not rest “upon such grounds as exist ... for enforced.” See Cohen v. DirecTV, Inc., 142 Cal.App.4th
the revocation of any contract,” and we consequently set 1442, 1446–1447, 48 Cal.Rptr.3d 813, 815–816 (2006)
that judgment aside. (holding a class-action waiver similar to the one at issue
here unenforceable pursuant to Discover Bank ); see also
Consumers Legal Remedies Act, Cal. Civ.Code Ann.
§§ 1751, 1781(a) (West 2009) (invalidating class-action
I
waivers for claims brought under that statute). But in
DIRECTV, Inc., the petitioner, entered into a service 2011, this Court held that California's Discover Bank
agreement with its customers, including respondents Amy rule “ ‘stands as an obstacle to the accomplishment and
Imburgia and Kathy Greiner. Section 9 of that contract execution of the full purposes and objectives of Congress' ”
provides that “any Claim either of us asserts will be embodied in the Federal Arbitration Act. AT & T Mobility
resolved only by binding arbitration.” App. 128. It LLC v. Concepcion, 563 U.S. 333, 352, 131 S.Ct. 1740, 179
then sets forth a waiver of class arbitration, stating L.Ed.2d 742 (2011) (quoting Hines v. Davidowitz, 312 U.S.
that “[n]either you nor we shall be entitled to join or 52, 67, 61 S.Ct. 399, 85 L.Ed. 581 (1941)); see Sanchez v.
consolidate claims in arbitration.” Id., at 128–129. It Valencia Holding Co., LLC, 61 Cal.4th 899, 923–924, 190
adds that if the “law of your state” makes the waiver of Cal.Rptr.3d 812, 353 P.3d 741, 757 (2015) (holding that
class arbitration unenforceable, then the entire arbitration Concepcion applies to the Consumers Legal Remedies Act
provision “is unenforceable.” Id., at 129. Section 10 of the to the extent that it would have the same effect as Discover
contract states that § 9, the arbitration provision, “shall be Bank ). The Federal Arbitration Act therefore pre-empts
governed by the Federal Arbitration Act.” Ibid. and invalidates that rule. 563 U.S., at 352, 131 S.Ct. 1740;
see U.S. Const., Art. VI, cl. 2.
In 2008, the two respondents brought this lawsuit
against DIRECTV in a California state court. They *467 The California Court of Appeal subsequently
seek damages for early termination fees that they believe held in this case that, despite this Court's holding
violate California law. After various proceedings not in Concepcion, “the law of California would find the
here relevant, DIRECTV, pointing to the arbitration class action waiver unenforceable.” 225 Cal.App.4th 338,
provision, asked the court to send the matter to 342, 170 Cal.Rptr.3d 190, 194 (2014). The court noted
arbitration. The state trial court denied that request, and that Discover Bank had held agreements to dispense
DIRECTV appealed. with class-arbitration procedures unenforceable under
circumstances such as these. 225 Cal.App.4th, at 341,
The California Court of Appeal thought that the critical 170 Cal.Rptr.3d, at 194. It conceded that this Court in
legal question concerned the meaning of the contractual Concepcion had held that the Federal Arbitration Act
phrase “law of your state,” in this case the law of invalidated California's rule. 225 Cal.App.4th, at 341, 170
California. Does the law of California make the contract's Cal.Rptr.3d, at 194. But it then concluded that this latter
class-arbitration waiver unenforceable? If so, as the circumstance did not change the result—that the “class
contract provides, the entire arbitration provision is action waiver is unenforceable under California law.” Id.,
unenforceable. Or does California law permit the parties at 347, 170 Cal.Rptr.3d, at 198.
to agree to waive the right to proceed as a class in
arbitration? If so, the arbitration provision is enforceable. In reaching that conclusion, the Court of Appeal referred
to two sections of California's Consumers Legal Remedies
At one point, the law of California would have made Act, §§ 1751, 1781(a), rather than Discover Bank itself.
the contract's class-arbitration waiver unenforceable. In See 225 Cal.App.4th, at 344, 170 Cal.Rptr.3d, at 195.
2005, the California Supreme Court held in Discover Section 1751 renders invalid any waiver of the right
Bank v. Superior Court, 36 Cal.4th 148, 162–163, 30 under § 1781(a) to bring a class action for violations of

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that Act. The Court of Appeal thought that applying Circuit had reached the opposite *468 conclusion on
“state law alone” (that is, those two sections) would precisely the same interpretive question decided by the
render unenforceable the class-arbitration waiver in § 9 California Court of Appeal. Murphy v. DirecTV, Inc., 724
of the contract. Id., at 344, 170 Cal.Rptr.3d, at 195. But F.3d 1218, 1226–1228 (2013). We granted the petition.
it nonetheless recognized that if it applied federal law
“then the class action waiver is enforceable and any state
law to the contrary is preempted.” Ibid. As far as those
II
sections apply to class-arbitration waivers, they embody
the Discover Bank rule. The California Supreme Court has [1] [2] No one denies that lower courts must follow this
recognized as much, see Sanchez, supra, at 923–924, 190 Court's holding in Concepcion. The fact that Concepcion
Cal.Rptr.3d 812, 353 P.3d, at 757, and no party argues was a closely divided case, resulting in a decision from
to the contrary. See Supp. Brief for Respondents 2 (“The which four Justices dissented, has no bearing on that
ruling in Sanchez tracks respondents' position precisely”). undisputed obligation. Lower court judges are certainly
We shall consequently refer to the here-relevant rule as the free to note their disagreement with a decision of this
Discover Bank rule. Court. But the “Supremacy Clause forbids state courts
to dissociate themselves from federal law because of
The court reasoned that just as the parties were free in their disagreement with its content or a refusal to recognize the
contract to refer to the laws of different States or different superior authority of its source.” Howlett v. Rose, 496 U.S.
nations, so too were they free to refer to California law as it 356, 371, 110 S.Ct. 2430, 110 L.Ed.2d 332 (1990); cf. Khan
would have been without this Court's holding invalidating v. State Oil Co., 93 F.3d 1358, 1363–1364 (C.A.7 1996),
the Discover Bank rule. The court thought that the parties vacated, 522 U.S. 3, 118 S.Ct. 275, 139 L.Ed.2d 199 (1997).
in their contract had done just that. And it set forth two The Federal Arbitration Act is a law of the United States,
reasons for believing so. and Concepcion is an authoritative interpretation of that
Act. Consequently, the judges of every State must follow
First, § 10 of the contract, stating that the Federal it. U.S. Const., Art. VI, cl. 2 (“[T]he Judges in every State
Arbitration Act governs § 9 (the arbitration provision), is shall be bound” by “the Laws of the United States”).
a general provision. But the provision voiding arbitration
if the “law of your state” would find the class-arbitration [3] [4] While all accept this elementary point of law, that
waiver unenforceable is a specific provision. The court point does not resolve the issue in this case. As the Court of
believed that the specific provision “ ‘is paramount to’ ” Appeal noted, the Federal Arbitration Act allows parties
and must govern the general. 225 Cal.App.4th, at 344, 170 to an arbitration contract considerable latitude to choose
Cal.Rptr.3d, at 195 (quoting Prouty v. Gores Technology what law governs some or all of its provisions, including
Group, 121 Cal.App.4th 1225, 1235, 18 Cal.Rptr.3d 178, the law governing enforceability of a class-arbitration
185–186 (2004); brackets omitted). waiver. 225 Cal.App.4th, at 342–343, 170 Cal.Rptr.3d,
at 194. In principle, they might choose to have portions
Second, the court said that “ ‘a court should construe of their contract governed by the law of Tibet, the law
ambiguous language against the interest of the party that of pre-revolutionary Russia, or (as is relevant here) the
drafted it.’ ” 225 Cal.App.4th, at 345, 170 Cal.Rptr.3d, law of California including the Discover Bank rule and
at 196 (quoting Mastrobuono v. Shearson Lehman Hutton, irrespective of that rule's invalidation in Concepcion. The
Inc., 514 U.S. 52, 62, 115 S.Ct. 1212, 131 L.Ed.2d Court of Appeal decided that, as a matter of contract law,
76 (1995)). DIRECTV had drafted the language; to the parties did mean the phrase “law of your state” to
void the arbitration provision was against its interest. refer to this last possibility. Since the interpretation of a
Hence the arbitration provision was void. The Court of contract is ordinarily a matter of state law to which we
Appeal consequently affirmed the trial court's denial of defer, Volt Information Sciences, Inc. v. Board of Trustees
DIRECTV's motion to enforce the arbitration provision. of Leland Stanford Junior Univ., 489 U.S. 468, 474, 109
S.Ct. 1248, 103 L.Ed.2d 488 (1989), we must decide not
The California Supreme Court denied discretionary whether its decision is a correct statement of California
review. App. to Pet. for Cert. 1a. DIRECTV then filed law but whether (assuming it is) that state law is consistent
a petition for a writ of certiorari, noting that the Ninth with the Federal Arbitration Act.

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Indeed, neither the parties nor the dissent refer us to any
contract case from California or from any other State
that interprets similar language to refer to state laws
III
authoritatively held to be invalid. While we recognize that
[5] [6] Although we may doubt that the Court of Appeal the dissent believes this phrase to be “ambiguous,” post,
has correctly interpreted California law, we recognize at 474 – 475, 475 – 476, or “anomalous,” post, at 476, we
that California courts are the ultimate authority on that cannot agree with that characterization.
law. While recognizing this, we must decide whether
the decision of the California court places arbitration [7] [8] Second, California case law itself clarifies any
contracts “on equal footing with all other contracts.” doubt about how to interpret the language. The California
Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, Supreme Court has held that under “general contract
443, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006). And in principles,” references to California law incorporate
doing so, we must examine whether the Court of Appeal's the California Legislature's power to change the law
decision in fact rests upon “grounds as exist at law or in retroactively. See Doe v. Harris, 57 Cal.4th 64, 69–70, 158
equity for the revocation of any contract.” 9 U.S.C. § 2. Cal.Rptr.3d 290, 302 P.3d 598, 601–602 (2013) (holding
That is to say, we look not to grounds that the California that plea agreements, which are governed by general
court might have offered but rather to those it did in fact contract principles, are “ ‘ “deemed to incorporate and
offer. Neither this approach nor our result “steps beyond contemplate not only the existing law but the reserve
Concepcion ” or any other aspect of federal arbitration power of the state to amend the law or enact additional
law. See post, at 475 – 476 (GINSBURG, J., dissenting) laws” ’ ” (quoting People v. Gipson, 117 Cal.App.4th
(hereinafter the dissent). 1065, 1070, 12 Cal.Rptr.3d 478, 481 (2004))). And judicial
construction of a statute ordinarily applies retroactively.
We recognize, as the dissent points out, post, at 473, that Rivers v. Roadway Express, Inc., 511 U.S. 298, 312–313,
when DIRECTV drafted the contract, the parties likely 114 S.Ct. 1510, 128 L.Ed.2d 274 (1994). As far as we
believed *469 that the words “law of your state” included are aware, the principle of California law announced in
California law that then made class-arbitration waivers Harris, not the Court of Appeal's decision here, would
unenforceable. But that does not answer the legal question ordinarily govern the scope of phrases such as “law of your
before us. That is because this Court subsequently held in state.”
Concepcion that the Discover Bank rule was invalid. Thus
the underlying question of contract law at the time the Third, nothing in the Court of Appeal's reasoning
Court of Appeal made its decision was whether the “law of suggests that a California court would reach the same
your state” included invalid California law. We must now interpretation of “law of your state” in any context other
decide whether answering that question in the affirmative than arbitration. The Court of Appeal did not explain
is consistent with the Federal Arbitration Act. After why parties might generally intend the words “law of
examining the grounds upon which the Court of Appeal your state” to encompass “invalid law of your state.”
rested its decision, we conclude that California courts To the contrary, the contract refers to “state law” that
would not interpret contracts other than arbitration makes the waiver of class arbitration “unenforceable,”
contracts the same way. Rather, several considerations while an invalid state law would not make a contractual
lead us to conclude that the court's interpretation of this provision unenforceable. Assuming—as we must—that
arbitration contract is unique, restricted to that field. the court's reasoning is a correct statement as to the
meaning of “law of your state” in this arbitration
First, we do not believe that the relevant contract language provision, we can find nothing in that opinion (nor
is ambiguous. The contract says that “[i]f ... the law in any other California case) suggesting that California
of your state would find this agreement to dispense would generally interpret words such as “law of your
with class arbitration procedures unenforceable, then this state” to include state laws held invalid because they
entire Section 9 [the arbitration section] is unenforceable.” conflict with, say, federal labor statutes, federal pension
App. 129. Absent any indication in the contract that statutes, federal antidiscrimination *470 laws, the Equal
this language is meant to refer to invalid state law, it Protection Clause, or the like. Even given our assumption
presumably takes its ordinary meaning: valid state law. that the Court of Appeal's conclusion is correct, its

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conclusion appears to reflect the subject matter at issue only “when a general and a particular provision are
here (arbitration), rather than a general principle that inconsistent”).
would apply to contracts using similar language but
involving state statutes invalidated by other federal law. [9] The court added that it would interpret “ ‘ambiguous
language against the interest of the party that drafted
Fourth, the language used by the Court of Appeal focused it,’ ” namely DIRECTV. 225 Cal.App.4th, at 345, 170
only on arbitration. The court asked whether “law of your Cal.Rptr.3d, at 196 (quoting Mastrobuono, 514 U.S., at
state” “mean[s] ‘the law of your state to the extent it is not 62, 115 S.Ct. 1212). The dissent adopts a similar argument.
preempted by the [Federal Arbitration Act],’ or ‘the law See post, at 474 – 476. But, as we have pointed out,
of your state without considering the preemptive effect, if supra, at 469 – 470, were the phrase “law of your state”
any of the [Federal Arbitration Act].’ ” 225 Cal.App.4th, ambiguous, surely some court would have construed that
at 344, 170 Cal.Rptr.3d, at 195. Framing the question term to incorporate state laws invalidated by, for example,
in such terms, rather than in generally applicable terms, federal labor law, federal pension law, or federal civil
suggests that the Court of Appeal could well have meant rights law. Yet, we have found no such case. Moreover, the
that its holding was limited to the specific subject matter reach of the canon construing contract language against
of this contract—arbitration. the drafter must have limits, no matter who the drafter
was. The fact that we can find no similar case interpreting
Fifth, the Court of Appeal reasoned that invalid the words “law of your state” to include invalid state laws
state arbitration law, namely the Discover Bank rule, indicates, at the least, that the antidrafter canon would not
maintained legal force despite this Court's holding in lead California courts to *471 reach a similar conclusion
Concepcion. The court stated that “[i]f we apply state in similar cases that do not involve arbitration.
law alone ... to the class action waiver, then the
waiver is unenforceable.” 225 Cal.App.4th, at 344, 170 ***
Cal.Rptr.3d, at 195. And at the end of its opinion it
reiterated that “[t]he class action waiver is unenforceable Taking these considerations together, we reach a
under California law, so the entire arbitration agreement conclusion that, in our view, falls well within the confines
is unenforceable.” Id., at 347, 170 Cal.Rptr.3d, at 198. of (and goes no further than) present well-established
But those statements do not describe California law. See law. California's interpretation of the phrase “law of your
Concepcion, 563 U.S., at 344, 352, 131 S.Ct. 1740; Sanchez, state” does not place arbitration contracts “on equal
61 Cal.4th, at 923–924, 190 Cal.Rptr.3d 812, 353 P.3d, at footing with all other contracts,” Buckeye Check Cashing,
757. The view that state law retains independent force even Inc., 546 U.S., at 443, 126 S.Ct. 1204. For that reason, it
after it has been authoritatively invalidated by this Court does not give “due regard ... to the federal policy favoring
is one courts are unlikely to accept as a general matter and arbitration.” Volt Information Sciences, 489 U.S., at 476,
to apply in other contexts. 109 S.Ct. 1248. Thus, the Court of Appeal's interpretation
is pre-empted by the Federal Arbitration Act. See Perry
Sixth, there is no other principle invoked by the Court v. Thomas, 482 U.S. 483, 493, n. 9, 107 S.Ct. 2520, 96
of Appeal that suggests that California courts would L.Ed.2d 426 (1987) (noting that the Federal Arbitration
reach the same interpretation of the words “law of Act pre-empts decisions that take their “meaning precisely
your state” in other contexts. The court said that the from the fact that a contract to arbitrate is at issue”).
phrase “law of your state” constitutes “ ‘a specific Hence, the California Court of Appeal must “enforc[e]”
exception ’ ” to the agreement's “ ‘general adoption of the arbitration agreement. 9 U.S.C. § 2.
the [Federal Arbitration Act].’ ” 225 Cal.App.4th, at
344, 170 Cal.Rptr.3d, at 195. But that tells us nothing The judgment of the California Court of Appeal is
about how to interpret the words “law of your state” reversed, and the case is remanded for further proceedings
elsewhere. It does not answer the relevant question: not inconsistent with this opinion.
whether those words encompass laws that have been
authoritatively held invalid. Cf. Prouty, 121 Cal.App.4th, It is so ordered.
at 1235, 18 Cal.Rptr.3d, at 185–186 (specific words govern

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DIRECTV's *472 service agreement applicable in this
case (the 2007 version) requires consumers to arbitrate all
Justice THOMAS, dissenting.
disputes and to forgo class arbitration. Id., at 128–129.
I remain of the view that the Federal Arbitration Act
If the relevant provision stopped there, the Court's recent
(FAA), 9 U.S.C. § 1 et seq., does not apply to proceedings
precedent, see American Express Co. v. Italian Colors
in state courts. See Allied–Bruce Terminix Cos. v. Dobson,
Restaurant, 570 U.S. ––––, 133 S.Ct. 2304, 186 L.Ed.2d
513 U.S. 265, 285–297, 115 S.Ct. 834, 130 L.Ed.2d 753
417 (2013); AT & T Mobility LLC v. Concepcion, 563
(1995) (dissenting opinion); see also Preston v. Ferrer, 552
U.S. 333, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011), would
U.S. 346, 363, 128 S.Ct. 978, 169 L.Ed.2d 917 (2008)
control, and DIRECTV could have resisted the lawsuit.
(same); Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S.
But DIRECTV's form contract continued: The entire
440, 449, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006) (same);
arbitration clause is unenforceable “[i]f ... the law of your
Green Tree Financial Corp. v. Bazzle, 539 U.S. 444, 460,
state would find” unenforceable the agreement's class-
123 S.Ct. 2402, 156 L.Ed.2d 414 (2003) (same); Doctor's
arbitration prohibition. App. 129. At the time plaintiff-
Associates, Inc. v. Casarotto, 517 U.S. 681, 689, 116 S.Ct.
respondents Imburgia and Greiner commenced their court
1652, 134 L.Ed.2d 902 (1996) (same). Thus, the FAA does
action, class-arbitration bars like the one in DIRECTV's
not require state courts to order arbitration. Accordingly,
agreement were per se unenforceable as unconscionable
I would affirm the judgment of the California Court of
under the law of California. See Discover Bank v. Superior
Appeal.
Court, 36 Cal.4th 148, 162–163, 30 Cal.Rptr.3d 76, 113
P.3d 1100, 1110 (2005).
Justice GINSBURG, with whom Justice SOTOMAYOR
joins, dissenting. Nearly three years into the litigation, this Court held
It has become routine, in a large part due to this Court's in Concepcion, 563 U.S., at 338–351, 131 S.Ct. 1740,
decisions, for powerful economic enterprises to write into that the Federal Arbitration Act (FAA), 9 U.S.C. § 1
their form contracts with consumers and employees no- et seq., preempts state rules that render class-arbitration
class-action arbitration clauses. The form contract in this bans unenforceable. DIRECTV then moved to halt the
case contains a Delphic provision stating that “if the long-pending lawsuit and compel bilateral arbitration.
law of your state” does not permit agreements barring App. to Pet. for Cert. 4a. The California Superior Court
class arbitration, then the entire agreement to arbitrate denied DIRECTV's motion, No. BC398295 (Super. Ct.
becomes unenforceable, freeing the aggrieved customer to Los Angeles Cty., Cal., Jan. 26, 2012), App. to Pet.
commence class-based litigation in court. This Court reads for Cert. 17a–20a, and the California Court of Appeal
that provision in a manner most protective of the drafting affirmed. The Court of Appeal first observed that, under
enterprise. I would read it, as the California court did, to the California law DIRECTV confronted when it drafted
give the customer, not the drafter, the benefit of the doubt. the clause in question, provisions relinquishing the right
Acknowledging the precedent so far set by the Court, I to proceed under the CLRA on behalf of a class would not
would take no further step to disarm consumers, leaving be enforced. 225 Cal.App.4th 338, 342, 170 Cal.Rptr.3d
them without effective access to justice. 190, 194 (2014). The question dispositive of DIRECTV's
motion, the California court explained, trains on the
meaning of the atypical contractual phrase “the law of
your state”: “does it mean ‘the law of your state to the
I extent it is not preempted by the FAA,’ or ‘the law of your
state without considering the preemptive effect, if any, of
This case began as a putative class action in state
the FAA’?” Id., at 344, 170 Cal.Rptr.3d, at 195.
court claiming that DIRECTV, by imposing hefty early-
termination fees, violated California consumer-protective
In resolving this question, the California court emphasized
legislation, including the Consumers Legal Remedies
that DIRECTV drafted the service agreement, giving its
Act (CLRA), Cal. Civ.Code Ann. § 1750 et seq. (West
customers no say in the matter, and reserving to itself the
2015). App. 58. DIRECTV did not initially seek to
right to modify the agreement unilaterally at any time.
stop the lawsuit and compel bilateral arbitration. See
Id., at 345, 170 Cal.Rptr.3d, at 196. See also Brief for
id., at 52–53. The reason for DIRECTV's failure to
Respondents 1–2. DIRECTV used the same take-it-or-
oppose the litigation is no mystery. The version of

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leave-it contract everywhere it did business. Ibid. “[T]o reversed a state-court decision on the ground that the state
protect the party who did not choose the language from an court misapplied state contract law when it determined the
unintended or unfair result,” the California court applied meaning of a term in a particular arbitration agreement.
“the common-law rule of contract interpretation that a Today's decision is a dangerous first.
court should construe ambiguous language against the
interest of the party that drafted it.” 225 Cal.App.4th, Beyond genuine debate, DIRECTV originally meant the
at 345, 170 Cal.Rptr.3d, at 196 (quoting Mastrobuono “law of your state” clause to refer to its customer's home
v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 62–63, state law untouched by federal preemption. As DIRECTV
115 S.Ct. 1212, 131 L.Ed.2d 76 (1995)). That rule was explained in a state-court filing, the clause prevented
particularly appropriate in this case, the court reasoned, enforcement of the arbitration agreement in those States,
for, “as a practical matter, it seems unlikely that plaintiffs California among them, where the class-arbitration
anticipated in 2007 that the Supreme Court would hold in proscription was unenforceable as a matter of state
2011 that the FAA preempts” state-law protection against law, while requiring bilateral arbitration in States that
compelled class-arbitration waivers. 225 Cal.App.4th, at did not outlaw purported waivers of class proceedings.
345, 170 Cal.Rptr.3d, at 196 (internal quotation marks App. 52 (“The Customer Agreement between DIRECTV
omitted). and its customers provides that the customer's home
state laws will govern the relationship, and that any
disputes will be resolved in individual arbitration if the
customer's home state laws enforce the parties' arbitration
II
agreement.” (emphasis added)).
The Court today holds that the California Court of
Appeal interpreted the language in DIRECTV's service According to DIRECTV, because the class-arbitration
agreement so unreasonably as to suggest discrimination ban, post-Concepcion, is enforceable in all States, this case
against arbitration in violation of the *473 FAA. Ante, at must now be resolved, if at all, in bilateral arbitration. The
469 – 470. As I see it, the California court's interpretation Court agrees. After Concepcion, the Court maintains, it
of the “law of your state” provision is not only reasonable, no longer matters whether DIRECTV meant California's
it is entirely right. “home state laws” when it drafted the 2007 version of
its service agreement. But Concepcion held only that a
Arbitration is a matter of “consent, not coercion.” Stolt– State cannot compel a party to engage in class arbitration
Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662, when the controlling agreement unconditionally prohibits
681, 130 S.Ct. 1758, 176 L.Ed.2d 605 (2010) (internal class procedures. See 563 U.S., at 351, 131 S.Ct. 1740
quotation marks omitted). The FAA “requires courts to (“Arbitration is a matter of contract, and the FAA
enforce privately negotiated agreements to arbitrate, like requires courts to honor parties' expectations,” so parties
other contracts, in accordance with their terms.” Volt may consent to class procedures even though such
Information Sciences, Inc. v. Board of Trustees of Leland procedures “may not be required by state law.”). Just
Stanford Junior Univ., 489 U.S. 468, 478, 109 S.Ct. 1248, as a contract itself may provide for class arbitration, so
103 L.Ed.2d 488 (1989). “[T]he interpretation of private the parties may choose to be bound by a particular state
contracts is ordinarily a question of state law, which law, in this case, the CLRA, even if the FAA would
this Court does not sit to review.” Id., at 474, 109 S.Ct. otherwise displace that state law. Hall Street Associates,
1248. See also First Options of Chicago, Inc. v. Kaplan, L.L.C. v. Mattel, Inc., 552 U.S. 576, 586, 128 S.Ct. 1396,
514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 170 L.Ed.2d 254 (2008) (“[T]he FAA lets parties tailor
(1995) (when interpreting arbitration agreements, courts some, even many, features of arbitration by contract,
“should apply ordinary state-law principles that govern including ... procedure and choice of substantive law.”). 1
the formation of contracts”). Historically, this Court “In principle,” the Court acknowledges, *474 parties
has respected state-court interpretations of arbitration “might choose to have portions of their contract governed
agreements. See Mastrobuono, 514 U.S., at 60, n. 4, 115 by the law of Tibet, [or] the law of pre-revolutionary
S.Ct. 1212; Volt Information Sciences, 489 U.S., at 484, 109 Russia.” Ante, at 468; see Brief for Petitioner 20 (observing
S.Ct. 1248. Indeed, in the more than 25 years between Volt that the FAA would allow parties “to bind themselves by
Information Sciences and this case, not once has this Court reference to the rules of a board game”). Pre-revolutionary

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Russian law, but not California's “home state laws” exclude the application of California legislation, it surely
operative and unquestionably valid in 2007? Makes little chose a bizarre way to accomplish that result.
sense to me.
As earlier noted, see supra, at 472 – 473, and
Nothing in Concepcion or the FAA nullifies provisions as the California court appreciated, courts generally
of the CLRA. They hold sway when parties elect judicial construe ambiguous contractual terms against the drafter.
resolution of their disputes, and should similarly control See Mastrobuono, 514 U.S., at 63, 115 S.Ct. 1212
when parties choose that consumer-protective law to (“Respondents drafted an ambiguous document, and
govern their arbitration agreements. See Volt Information they cannot now claim the benefit of the doubt.”). This
Sciences, 489 U.S., at 475, 109 S.Ct. 1248 (where parties “common-law rule of contract interpretation,” id., at 62,
had “incorporat[ed] ... California rules of arbitration into 115 S.Ct. 1212, reflects the principle that a party should
their agreement,” they had “no FAA-guaranteed right not be permitted to write an ambiguous term, lock another
to compel arbitration” on terms inconsistent with those party into agreeing to that term, and then reap the benefit
California rules). 2 Thus, even after Concepcion, one could of the ambiguity once a dispute emerges. The rule has
properly refer to the CLRA's class-waiver proscription particular force where, as here, a court is interpreting
as “California law.” To repeat, the dispositive question a “standardized contrac[t]” that was not the product of
in this case is whether the parties intended the “law of bilateral bargaining. Restatement (Second) of Contracts §
your state” provision to mean state law as preempted by 206, Comment a (1979).
federal law, as the Court today reads the provision, or
home state law as framed by the California Legislature, Allowing DIRECTV to reap the benefit of an ambiguity
without considering the preemptive effect of federal law, it could have avoided would ignore not just the hugely
as the California court read it. unequal bargaining power of the parties, but also their
reasonable expectations at the time the contract was
The latter reading is the better one. DIRECTV had no formed. See Mastrobuono, 514 U.S., at 63, 115 S.Ct.
occasion to refer to “the law of [its customer's] state” 1212 (it is particularly appropriate to construe terms
had it meant to incorporate state law as preempted by against the drafter where the other party had no reason
the FAA. That is, DIRECTV, like virtually every other to anticipate or intend the drafter's preferred result). See
company with a similar service agreement, could have also Trans World Airlines, Inc. v. Franklin Mint Corp.,
employed a clause directly conditioning enforceability 466 U.S. 243, 262, 104 S.Ct. 1776, 80 L.Ed.2d 273 (1984)
of the arbitration agreement on the exclusion of class (“[C]ontract[s] ... are to be read in the light of the
arbitration. Indeed, DIRECTV has done just that in conditions and circumstances existing at the time they
service agreements both before and after 2007. App. 121 were entered into, with a view to effecting the objects and
(the 2004 version provides that “[a] Court may sever any purposes of the [parties] thereby contracting.” (quoting
portion of [the arbitration agreement] that it finds to Rocca v. Thompson, 223 U.S. 317, 331–332, 32 S.Ct.
be unenforceable, except for the prohibition on class or 207, 56 L.Ed. 453 (1912); ellipsis in original)). At
representative arbitration”); Brief for Respondents 35– the time DIRECTV imposed this agreement on its
36 (stating that the June 2015 version of DIRECTV's customers, it assumed that the arbitration clause would
agreement provides that “[a] court may sever any be unenforceable in California. App. 52 (explaining in
portion of [the arbitration agreement] that it finds state-court filing that, “[b]ecause California law would
to be unenforceable, except for the prohibition on not enforce the arbitration agreement ..., DIRECTV
[class arbitration]” (internal quotation marks omitted)). has not sought and will not seek to arbitrate disputes
Had DIRECTV followed this pattern in its 2007 form with California customers”). Likewise, any California
contract, the arbitration agreement, post-Concepcion, customer who read the agreement would scarcely have
unquestionably would have been enforceable in all States. understood that she had submitted to bilateral arbitration
In the 2007 version, however, DIRECTV *475 chose of any and all disputes with DIRECTV. She certainly
a different formulation, one referring to the “law of [its would have had no reason to anticipate the Court's
customer's] state.” I would not translate that term to be decision in Concepcion, rendered four years later, or to
synonymous with “federal law.” If DIRECTV meant to consider whether “law of your state” is a chameleon

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term meaning California legislation when she received her Household Int'l, Inc., 376 F.3d 656, 661 (C.A.7 2004)
service contract, but preemptive federal law later on. (“The realistic alternative to a class action is not 17
million individual suits, but zero individual suits, as
DIRECTV primarily responds that the FAA requires only a lunatic or a fanatic sues for $30.”), cert. denied,
construction of all terms in arbitration agreements in 543 U.S. 1051, 125 S.Ct. 877, 160 L.Ed.2d 772 (2005).
favor of arbitrability. True, this Court has found in Nonetheless, the Court held that the FAA mandated
the FAA a “federal policy favoring arbitration.” Ante, enforcement of the entire arbitration agreement, including
at 471 (quoting Volt Information Sciences, 489 U.S., at the class-arbitration ban. Concepcion, 563 U.S., at 343,
476, 109 S.Ct. 1248). But the Court has also cautioned 131 S.Ct. 1740. Two years later, in Italian Colors, 570
that an arbitration-favoring presumption applies “only U.S., at ––––, 133 S.Ct., at 2310, the Court reaffirmed
where it reflects, and derives its legitimacy from, a judicial that class-arbitration prohibitions are enforceable even
conclusion that arbitration of a particular dispute is what where claimants “have no economic incentive to pursue
the parties intended because their express agreement to their ... claims individually in arbitration.” Today, the
arbitrate was validly formed[, is] legally enforceable[,] and Court holds that consumers lack not only protection
[is] best construed to encompass the dispute.” Granite against unambiguous class-arbitration bans in adhesion
Rock Co. v. Teamsters, 561 U.S. 287, 303, 130 S.Ct. contracts. They lack even the benefit of the doubt when
2847, 177 L.Ed.2d 567 (2010). DIRECTV acknowledges anomalous terms in such contracts reasonably could be
that “[t]his case ... involves a threshold dispute over the construed to protect their rights. 3
enforceability of the parties' arbitration agreement” in its
entirety. Reply Brief 7. Like the California court, I would *477 These decisions have predictably resulted in
resolve that dispute by employing *476 traditional rules the deprivation of consumers' rights to seek redress
of contract interpretation sans any arbitration-favoring for losses, and, turning the coin, they have insulated
presumption, including the rule that ambiguous language powerful economic interests from liability for violations of
should be construed against the drafter. See supra, at 472 consumer-protection laws. See N.Y. Times, Nov. 1, 2015,
– 473, 474 – 475. p. A1, col. 5 (“By inserting individual arbitration clauses
into a soaring number of consumer and employment
contracts, companies [have] devised a way to circumvent
III the courts and bar people from joining together in class-
action lawsuits, realistically the only tool citizens have
Today's decision steps beyond Concepcion and Italian to fight illegal or deceitful business practices.”). Studies
Colors. There, as here, the Court misread the FAA to confirm that hardly any consumers take advantage
deprive consumers of effective relief against powerful of bilateral arbitration to pursue small-dollar claims.
economic entities that write no-class-action arbitration Resnik, Diffusing Disputes: The Public in the Private of
clauses into their form contracts. In Concepcion, 563 Arbitration, the Private in Courts, and the Erasure of
U.S., at 336, 131 S.Ct. 1740, customers brought a class Rights, 124 Yale L.J. 2804, 2900–2910 (2015) (Resnik,
action claiming that AT & T Mobility had improperly Diffusing Disputes). Because consumers lack bargaining
charged $30.22 in sales tax while advertising cellular power to change the terms of consumer adhesion
telephones as free. AT & T Mobility's form consumer contracts ex ante, “[t]he providers [have] won the power
contract contained a mandatory arbitration clause and a to impose a mandatory, no-opt-out system in their
class-arbitration proscription. Because consumers lacked own private ‘courts' designed to preclude aggregate
input into the contractual terms, and because few rational litigation.” Resnik, Fairness in Numbers: A Comment
consumers would go through the hassle of pursuing on AT & T v. Concepcion, Wal–Mart v. Dukes, and
a $30.22 claim in bilateral arbitration, the California Turner v. Rogers, 125 Harv. L. Rev. 78, 133 (2011).
courts deemed the arbitration agreement unenforceable as See also Miller, Simplified Pleading, Meaningful Days
unconscionable. See id., at 365, 131 S.Ct. 1740 (BREYER, in Court, and Trials on the Merits: Reflections on
J., dissenting) (“ ‘[T]he maximum gain to a customer the Deformation of Federal Procedure, 88 N.Y.U. L.
for the hassle of arbitrating a $30.22 dispute is still Rev. 286, 323 (2013) (“[P]owerful economic entities
just $30.22.’ ” (quoting Laster v. AT & T Mobility can impose no-class-action-arbitration clauses on people
LLC, 584 F.3d 849, 856 (C.A.9 2009))); Carnegie v. with little or no bargaining position—through adhesion

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contracts involving securities accounts, credit cards, edifice of its own creation.” Allied–Bruce Terminix Cos.
mobile phones, car rentals, and many other social v. Dobson, 513 U.S. 265, 283, 115 S.Ct. 834, 130 L.Ed.2d
amenities and necessities.”). 4 The proliferation of take-it- 753 (1995) (concurring opinion). See also Miller, supra,
or-leave-it agreements mandating arbitration and banning at 324 (“[O]ver the years the Act has been transformed
class procedures, and this Court's readiness to enforce by the Supreme Court through constant expansion into
such one-sided agreements, have disabled consumers an expression of a ‘federal policy’ favoring arbitration,
from “shop[ping] to avoid arbitration mandates.” Resnik, whether it involves a bilateral business dispute or not.”).
Diffusing Disputes 2839. See also id., at 2872 (“[T]he
numbers of clauses mandating arbitration are soaring The Court's ever-larger expansion of the FAA's scope
across many sectors.”). contrasts sharply with how other countries treat
mandatory arbitration clauses in consumer contracts of
The Court has suggested that these anticonsumer adhesion. A 1993 European Union Directive forbids
outcomes flow inexorably from the text and purpose of the binding consumers to unfair contractual terms, defined
FAA. But Congress passed the FAA in 1925 as a response as those “not ... individually negotiated” that “caus[e]
to the reluctance of some judges to enforce commercial a significant imbalance in the parties' rights and
arbitration agreements between merchants with relatively obligations ... to the detriment of the consumer.”
equal bargaining power. Moses, Arbitration Law: Who's Coun. Directive 93/13, Art. 3, 1993 O.J. (L. 95) 31.
in Charge? 40 Seton Hall L. Rev. 147, 170–171 (2010). A subsequent EU Recommendation interpreted this
See also id., at 170 (contract disputes between merchants Directive to bar enforcement of one-party-dictated
have been a proper subject of arbitration since the 1600's). mandatory consumer arbitration agreements. Comm'n
The FAA's purpose was to “make the contracting party Recommendation 98/257, 1998 O.J. (L. 115) 34 (“The
live up to his agreement.” H.R.Rep. No. 68–96, at 1 consumer's recourse to the out-of-court procedure may
(1924). See also Moses, supra, at 147 (Congress sought not be the result of a commitment prior to the
to “provide federal courts with procedural law that materialisation of the dispute, where such commitment
would permit the enforcement of arbitration agreements has the effect of depriving the consumer of his
between merchants in diversity cases.”). Congress in 1925 right to bring an action before the courts for the
could not have anticipated that the Court would apply settlement of the dispute.”). As a result of this Directive
the FAA to render consumer adhesion *478 contracts and Recommendation, disputes between providers and
invulnerable to attack by parties who never meaningfully consumers in the EU are arbitrated only when the parties
agreed to arbitration in the first place. See Resnik, mutually agree to arbitration on a “post-dispute basis.”
Diffusing Disputes 2860 (“The merchants and lawyers Sternlight, Is the U.S. Out on a Limb? Comparing the U.S.
who forged the public law of arbitration in the United Approach to Mandatory Consumer and Employment
States sought federal legislation to enforce consensual Arbitration to That of the Rest of the World, 56 U.
agreements.” (emphasis added)). Miami L. Rev. 831, 847–848 (2002) (emphasis deleted); see
id., at 852 (enforcement of mandatory arbitration clauses
Nor does the text of the FAA compel this result. in consumer contracts of adhesion “is quite rare, if not
Section 2, on which the Court relied in Concepcion, nonexistent,” outside the United States).
Italian Colors, and this case, prescribes simply that
arbitration provisions are to be treated the same as other ***
contractual terms: “[a] written provision in ... a contract
evidencing a transaction involving commerce to settle by The California Court of Appeal appropriately applied
arbitration a controversy ... shall be valid, irrevocable, traditional tools of state contract law to interpret
and enforceable, save upon such grounds as exist at DIRECTV's reference to the home state laws of its
law or in equity for the revocation of any contract.” customers. Demeaning that court's judgment through
9 U.S.C. § 2. As Justice O'Connor observed when the harsh construction, this Court has again expanded
Court was just beginning to transform the FAA into what the scope of the FAA, further degrading the rights
it has become, “the Court has abandoned all pretense of consumers and further insulating already powerful
of ascertaining congressional intent with respect to the economic entities from liability for unlawful acts. I resist
Federal Arbitration Act, building instead, case by case, an

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the Court's bent, and would affirm the judgment of the All Citations
California Court of Appeal.
136 S.Ct. 463, 193 L.Ed.2d 365, 84 USLW 4018, 166
Lab.Cas. P 61,659, 15 Cal. Daily Op. Serv. 13,165, 2015
Daily Journal D.A.R. 13,261, 63 Communications Reg.
(P&F) 1442, 25 Fla. L. Weekly Fed. S 567

Footnotes
* The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the
convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U.S. 321, 337, 26 S.Ct. 282, 50
L.Ed. 499.
1 FAA preemption is distinct from federal preemption in other contexts. Unlike “state laws invalidated by, for example,
federal labor law, federal pension law, or federal civil rights law,” ante, at 470, state laws are preempted by the FAA only
to the extent that they conflict with the contracting parties' intent. See Mastrobuono v. Shearson Lehman Hutton, Inc., 514
U.S. 52, 59, 115 S.Ct. 1212, 131 L.Ed.2d 76 (1995) (“[I]n the absence of contractual intent to the contrary, the FAA would
pre-empt” a particular state law. (emphasis added)); Brief for Law Professors as Amicus Curiae 10 (“FAA preemption
cannot occur without reference to a particular agreement of the parties....”).
2 The Court refers to the relevant California law as the “Discover Bank rule” and suggests that, “under ‘general contract
principles,’ references to California law incorporate the California Legislature's power to change the law retroactively.”
Ante, at 469. But despite this Court's rejection of the Discover Bank rule in Concepcion, the California Legislature has
not capitulated; it has retained without change the CLRA's class-waiver prohibition. The Discover Bank rule relied on
an interpretation of the FAA, see 36 Cal.4th 148, 162–173, 30 Cal.Rptr.3d 76, 113 P.3d 1100, 1100–1117 (2005); in
contrast, the CLRA's class-waiver proscription reflects California's legislative policy judgment.
3 It has not always been this way. In Wilko v. Swan, 346 U.S. 427, 435, 438, 74 S.Ct. 182, 98 L.Ed. 168 (1953), the
Court unanimously held that an arbitration clause in a brokerage agreement was unenforceable. The Court noted that
the Securities Act was “drafted with an eye to the disadvantages under which buyers labor” when negotiating brokerage
agreements, id., at 435, 74 S.Ct. 182, and described arbitration as less protective of the rights of stock buyers than
litigation, id., at 435–437, 74 S.Ct. 182. The Court later overruled Wilko, rejecting what it described as Wilko 's “suspicion
of arbitration as a method of weakening the protections afforded in the substantive law.” Rodriguez de Quijas v. Shearson/
American Express, Inc., 490 U.S. 477, 481, 109 S.Ct. 1917, 104 L.Ed.2d 526 (1989). See also Gilmer v. Interstate/
Johnson Lane Corp., 500 U.S. 20, 33, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991) (relying on Rodriguez de Quijas to
conclude that “[m]ere inequality in bargaining power ... is not a sufficient reason to hold that arbitration agreements
are never enforceable in the employment context”). Similarly, before Italian Colors, the Court had suggested that “the
existence of large arbitration costs could preclude a litigant ... from effectively vindicating her federal statutory rights in the
arbitral forum,” and when that is so, an arbitration agreement may be unenforceable. Green Tree Financial Corp.–Ala. v.
Randolph, 531 U.S. 79, 90, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000). Although the Court in Italian Colors did not expressly
reject this “effective vindication” principle, the Court's refusal to apply the principle in that case suggests that the principle
will no longer apply in any case. See 570 U.S., at ––––, 133 S.Ct., at 2320 (KAGAN, J., dissenting); CompuCredit Corp.
v. Greenwood, 565 U.S. ––––, –––– – ––––, 132 S.Ct. 665, 676, 181 L.Ed.2d 586 (2012) (GINSBURG, J., dissenting)
(criticizing the Court for ignoring a federal statutory “right to sue” and for holding “that credit repair organizations can
escape suit by providing in their take-it-or-leave-it contracts that arbitration will serve as the parties' sole dispute-resolution
mechanism”).
4 The Consumer Financial Protection Bureau recently published a study documenting the proliferation of mandatory
arbitration clauses containing class-arbitration waivers in consumer financial-services contracts, as well as the vanishingly
small number of claims brought by financial-services consumers in bilateral arbitration. See Consumer Financial
Protection Bureau, Arbitration Study § 1, pp. 9–13 (2015).

End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 13
Garcia v. Huerta, 340 S.W.3d 864 (2011)

[1] interlocutory order amending prior order compelling
arbitration of borrowers' claims against real estate agent
KeyCite Yellow Flag - Negative Treatment were subject to review for abuse of discretion, and
Distinguished by Hogg v. Lynch, Chappell & Alsup, P.C., Tex.App.-El 
Paso, November 10, 2015
[2] lender's waiver of right to enforce arbitration
340 S.W.3d 864
agreement could not be imputed to real estate agent.
Court of Appeals of Texas,
San Antonio.
Reversed and remanded.
Albert GARCIA, Appellant,
v.
Edward HUERTA and Margarita A.
Huerta, Individually and as Next Friends West Headnotes (12)
of Heather L. Huerta, Edward Timothy
Huerta and Danara L. Huerta, Appellees. [1] Alternative Dispute Resolution
Scope and standards of review
No. 04–10–00688–CV.
Interlocutory order that granted borrowers'
|
motion to amend order compelling arbitration
March 30, 2011.
by not requiring arbitration of claim
|
against lender's real estate agent that
Rehearing Overruled May 9, 2011.
evicted borrowers from home in process of
Synopsis foreclosure, and which permitted borrowers'
Background: Borrowers who defaulted on home equity litigation of claims against agent to proceed,
loan filed suit against secured lender, lender's real estate was subject to appellate review for abuse
agent that assisted lender in evicting borrowers from of discretion, pursuant to which appellate
property during foreclosure, and others, with claims court would defer to trial court's factual
against real estate agent for violations of Texas Debt determinations, and would review questions
Collection Act and for trespass, theft, burglary and of law de novo. V.T.C.A., Civil Practice &
conversion, and invasion of privacy. Defendants filed Remedies Code § 51.016.
motions to compel arbitration. The 229th Judicial District
Court, Duval County, Alex William Gabert, J., denied 2 Cases that cite this headnote
motions. Defendants filed petition for writ of mandamus
to compel District Court to vacate order and to compel [2] Alternative Dispute Resolution
arbitration. The Court of Appeals, 300 S.W.3d 818, Scope and standards of review
conditionally granted writ. The Judicial District Court On appeals of orders denying arbitration
ordered parties to submit to arbitration. Borrowers under the Texas Arbitration Act (TAA),
subsequently settled with lender and other defendants, the appellate court will apply a no-
and pursuant to agreement, lender waived arbitration and evidence standard to the trial court's factual
assigned its claims against real estate agent to borrowers. determinations and a de novo standard to
The District Court granted borrowers' motion to amend legal determinations. V.T.C.A., Civil Practice
arbitration order and ordered that litigation against agent & Remedies Code § 51.016.
could proceed. Real estate agent appealed.
4 Cases that cite this headnote

Holdings: The Court of Appeals, Phylis J. Speedlin, J., [3] Appeal and Error
held that: Cases Triable in Appellate Court
Appeal and Error

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 1
Garcia v. Huerta, 340 S.W.3d 864 (2011)

Allowance of remedy and matters of enforcing arbitration. 9 U.S.C.A. § 1 et seq.;
procedure in general V.T.C.A., Civil Practice & Remedies Code §
When a matter involving both factual 171.001 et seq.
determinations and legal conclusions is
4 Cases that cite this headnote
decided by the trial court, the appellate
court will generally employ the abuse of
discretion standard, in which it defers to [8] Alternative Dispute Resolution
the trial court's factual determinations while Waiver or Estoppel
determining questions of law de novo. Secured lender's waiver of its right to compel
arbitration pursuant to arbitration agreement
4 Cases that cite this headnote
provision of home equity loan agreement
was not imputed to real estate agent
[4] Alternative Dispute Resolution that assisted lender in evicting borrowers
Scope and standards of review during foreclosure proceedings, and therefore,
Whether there is a valid and enforceable real estate agent did not waive right to
agreement to arbitrate is a legal question compel arbitration; agent never acted in any
subject to de novo review. way to indicate that he was repudiating
right to enforce arbitration agreement, or
7 Cases that cite this headnote otherwise acted inconsistently with intent
to rely on arbitration agreement, but in
fact consistently invoked right to enforce
[5] Alternative Dispute Resolution
arbitration agreement throughout course of
Evidence
borrower's litigation of tort claims against
There is a strong presumption favoring
agent.
arbitration, which arises only after the party
seeking to compel arbitration proves a valid 2 Cases that cite this headnote
arbitration agreement exists.

6 Cases that cite this headnote [9] Alternative Dispute Resolution
Scope and standards of review
Whether a party has waived his right to
[6] Alternative Dispute Resolution
arbitration is a question of law that the
Validity
appellate court reviews de novo, giving no
Under both the Federal Arbitration Act and
deference to the trial court's ruling.
the Texas Arbitration Act, the court will
apply ordinary state contract law principles 1 Cases that cite this headnote
in order to decide whether a valid arbitration
agreement exists. 9 U.S.C.A. § 1 et seq.;
[10] Estoppel
V.T.C.A., Civil Practice & Remedies Code §
Nature and elements of waiver
171.001 et seq.
Estoppel
2 Cases that cite this headnote Implied waiver and conduct constituting
waiver
[7] Alternative Dispute Resolution “Waiver” is an intentional relinquishment
Evidence of a known right or intentional conduct
inconsistent with claiming that right.
Once a valid agreement to arbitrate has been
established, a presumption attaches favoring 1 Cases that cite this headnote
arbitration and the burden shifts to the party
resisting arbitration to establish a defense to
[11] Estoppel

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 2
Garcia v. Huerta, 340 S.W.3d 864 (2011)

Implied waiver and conduct constituting allegations that Wells Fargo Bank, N.A., America's
waiver Servicing Company, Premiere Asset Services, Langley &
There can be no waiver of a right if the person Banack, Inc., Robert Carl Jones (an attorney employed
sought to be charged with waiver says or does by the law firm of Langley & Banack), and Albert
nothing inconsistent with an intent to rely Garcia wrongfully foreclosed on Edward and Margarita
upon such right. Huerta's (“the Huertas”) property. The Huertas obtained
a home equity loan from Wells Fargo. In connection
1 Cases that cite this headnote with this loan, the Huertas and Wells Fargo entered
into an arbitration agreement. The arbitration agreement
provided that:
[12] Alternative Dispute Resolution
Evidence Any party to this Agreement or to any Loan Document
There is a strong presumption against waiver may require that any Dispute be resolved by binding
of an arbitration agreement under the Federal arbitration in accordance with the terms of this
Arbitration Act, and any doubts regarding Arbitration Program, administered by the American
waiver are resolved in favor of arbitration. 9 Arbitration Association (the “AAA”) ... and the
U.S.C.A. § 1 et seq. Federal Arbitration Act....

3 Cases that cite this headnote A ‘Dispute’ shall include any dispute, claim or
controversy of any kind, whether in contract or in
tort, legal or equitable, now existing or hereafter
arising, relating in any way to this Note or Loan
Attorneys and Law Firms Documents or any related agreement incorporating
this Arbitration Program (the “Documents”), or any
*866 Wade C. Crosnoe, Thompson, Coe, Cousins & past, present, or future loans, transactions, contracts,
Irons, L.L.P., Austin, TX, for Appellant. agreements, relationships, incidents, or injuries of any
kind whatsoever relating to or involving consumer
Andrew M. Greenwell, Harris & Greenwell, Corpus
lending, business banking, community banking, Private
Christi, TX, for Appellee.
Client Services, or any successor group or department
Sitting: PHYLIS J. SPEEDLIN, Justice, REBECCA of Lender.... Arbitration may be demanded at any time,
SIMMONS, Justice, and MARIALYN BARNARD, and may be compelled by summary proceedings in
Justice. Court.

Subsequently, the Huertas defaulted on the home equity
loan; they eventually filed for bankruptcy and the loan was
OPINION discharged.
Opinion by: PHYLIS J. SPEEDLIN, Justice.
Thereafter, Wells Fargo, through its counsel Langley &
Albert Garcia challenges the trial court's rendition of an Banack, sought a non-judicial foreclosure of the home
amended order denying him arbitration. We reverse the equity loan. The property was purchased by Wells Fargo
judgment of the trial court, and remand the cause to the at the foreclosure sale. Wells Fargo and its wholly-
trial court for further proceedings. owned subsidiary, *867 Premier Asset Services, then
hired Garcia, a real estate agent, to evict the Huertas and
to remove their belongings from their home. Premiere
asked Garcia to use his best efforts to sell the property,
BACKGROUND
and specifically directed him to clean up and repair
The facts underlying this case are summarized in this the property. Following the eviction, the Huertas filed
court's earlier opinion in In re Wells Fargo Bank, N.A., 300 suit against Wells Fargo, America's Servicing Company,
S.W.3d 818, 821–23 (Tex.App.-San Antonio 2009, orig. Langley & Banack, Jones, Premiere, and Garcia. As to
proceeding), as follows. The underlying dispute involves Garcia, the Huertas asserted claims under the Texas Debt

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 3
Garcia v. Huerta, 340 S.W.3d 864 (2011)

Collection Act and alleged that he committed trespass, accomplish the intent and purpose of this Agreement,
theft, burglary and conversion, and invasion of privacy. including papers: (1) to assign any and all claims that
Wells Fargo and/or its Affiliates might have against
Thereafter, all defendants, including Garcia, moved to Albert Garcia, First Texas Realty, Blue Star Services
compel arbitration. In response to the motions to compel and/or their Affiliates related to or arising from the
arbitration, the Huertas asserted there was not a valid events made the basis of this Lawsuit; (2) to waive
and binding arbitration agreement because, among other any rights to enforce any arbitration agreement as it
reasons, the agreement was only between “Wells Fargo may relate to any claims asserted against Garcia, First
Bank Texas, N.A.” and the Huertas, not any of the actual Texas Realty, and Blue Star Services, as agents for
parties to the lawsuit. The trial court denied all of the Wells Fargo, whether brought as a result of assignment
motions to compel arbitration. *868 from Wells Fargo or brought independently from
such assignment; ... (4) to vacate the order compelling
Wells Fargo, America's Servicing Company, Premiere, arbitration; ...
Langley & Banack, Jones, and Garcia then filed a petition
for writ of mandamus in this court, seeking to compel A month after the Settlement Agreement was executed,
the trial court to vacate the order denying their motions the Huertas filed their “Motion to Amend the Amended
to compel arbitration. We held that Wells Fargo had Order on Motions to Compel Arbitration, Motion for
the right to enforce the arbitration agreement. 1 Id. Leave to File Fifth Amended Petition and Motion to
at 824. We further held that although the remaining Set Case on Trial Docket and Enter Docket Control
defendants, including Garcia, were nonsignatories to the Order” (“Motion to Amend”). The Motion to Amend
arbitration agreement, they acted as agents of Wells asked the trial court to amend its prior amended order
Fargo and their allegedly wrongful acts related to their compelling arbitration, and to deny arbitration as to
behavior as agents of Wells Fargo; therefore, they were the Huertas' claims against Garcia. In support of the
also entitled to enforce the arbitration agreement. Id. motion, the Huertas introduced portions of the Settlement
at 825. Finally, we held that none of the defendants Agreement and argued that Wells Fargo's express waiver
had waived their right to compel arbitration based on of its right to arbitrate under the arbitration agreement
invocation of the judicial process. Id. at 830–31. We operated as a waiver of Garcia's right to arbitrate
conditionally granted mandamus and directed the trial under the same agreement. After a hearing, the trial
court to withdraw its order denying the defendants' court granted the Motion to Amend, and amended the
motions to compel arbitration. Id. at 832. The trial court order compelling arbitration “so as to deny arbitration
complied, and signed an “Amended Order on Motion as to Albert Garcia and his assumed names and
to Compel Arbitration” which granted the defendants' related companies based on the additional evidence of
motions to compel arbitration and stayed the district express waiver of the arbitration agreement by the Wells
court litigation pending the outcome of the arbitration Fargo Parties.” Garcia now appeals. See TEX. CIV.
proceedings. PRAC. & REM.CODE ANN. § 51.016 (West Supp.2010)
(permitting interlocutory appeal of order denying motion
Thereafter, the Huertas negotiated a settlement with Wells to compel arbitration under the Federal Arbitration Act).
Fargo and the remaining defendants, except for Garcia.
The Settlement Agreement provides for the assignment of On appeal, Garcia contends the trial court erred in
Wells Fargo's claims against Garcia to the Huertas and granting the Motion to Amend because (1) it conflicts with
contains a provision requiring the settling defendants to our prior mandamus opinion ordering the trial court to
execute (1) an assignment of their claims against Garcia compel arbitration and (2) Wells Fargo was not entitled to
to the Huertas and (2) a waiver of the defendants' rights waive arbitration on Garcia's behalf. Garcia alternatively
to enforce the arbitration agreement with respect to any argues he is entitled to enforce the arbitration agreement
claim against Garcia: under the doctrine of equitable estoppel.

17. Cooperation. The Parties agree to cooperate with
one another to execute and file or deliver such other
STANDARD OF REVIEW AND APPLICABLE LAW
documentation as may be necessary or appropriate to

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 4
Garcia v. Huerta, 340 S.W.3d 864 (2011)

[1] Until recently, orders denying motions to compel proves a valid arbitration agreement exists. Webster, 128
arbitration in matters subject to the Federal Arbitration S.W.3d at 227. Under both the FAA and the TAA, we
Act (FAA) were not subject to interlocutory appeal; apply ordinary state contract law principles in order to
instead, they were reviewed in mandamus proceedings decide whether a valid arbitration agreement exists. See In
using an abuse of discretion standard. See Jack B. Anglin re D. Wilson Const. Co., 196 S.W.3d 774, 781 (Tex.2006)
Co. v. Tipps, 842 S.W.2d 266, 272–73 (Tex.1992). Under (citing First Options of Chicago, Inc. v. Kaplan, 514 U.S.
that standard, “we defer to the trial court's factual 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995)). Once
determinations if they are supported by evidence, but a valid agreement to arbitrate has been established, a
we review the trial court's legal determinations de novo.” presumption attaches favoring arbitration and the burden
In re Labatt Food Service, L.P., 279 S.W.3d 640, 643 shifts to the party resisting arbitration to establish a
(Tex.2009). defense to enforcing arbitration. See In re AdvancePCS
Health L.P., 172 S.W.3d 603, 607 (Tex.2005) (per curiam);
[2] [3] Section 51.016 now permits courts to review such In re Hartigan, 107 S.W.3d 684, 687–88 (Tex.App.-San
orders by appeal. See TEX. CIV. PRAC. & REM.CODE Antonio 2003, orig. proceeding [mand. denied] ).
ANN. § 51.016; In re 24R, Inc., 324 S.W.3d 564, 566 n. 1
(Tex.2010). This court has not addressed the standard of
review applicable to such appeals. However, on appeals
DISCUSSION
of orders denying arbitration under the Texas Arbitration
Act (TAA), we apply a no-evidence standard to the trial We first address Garcia's contention that Wells Fargo's
court's factual determinations and a de novo standard waiver of arbitration contained in the Settlement
to legal determinations. See MacIvor v. Zuehl Airport Agreement did not extend to waive Garcia's right to
Flying Cmty. Owners Assoc., No. 04–10–00053–CV, 2010 arbitration. In our prior opinion, we noted that Garcia
WL 2298906, at *2 (Tex.App.-San Antonio June 9, was an agent of Wells Fargo, and that the Huertas'
2010, no pet.) (mem. op) (applying de novo review to claims against Garcia related to his behavior as Wells
interlocutory appeal of order denying motion to compel Fargo's agent. Wells Fargo, 300 S.W.3d at 825; see also
arbitration under TAA when order turns on a legal In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 739
determination); Pony Exp. Courier Corp. v. Morris, 921 (Tex.2005) (nonsignatory may be bound to arbitration
S.W.2d 817, 820 (Tex.App.-San Antonio 1996, no writ) agreement by agency law). We thus held that Garcia was
(noting that “no evidence” is the appropriate standard entitled to enforce the arbitration agreement as an agent of
when reviewing factual questions concerning an order Wells Fargo. Wells Fargo, 300 S.W.3d at 825; see also In re
denying arbitration). When a matter involving both Merrill Lynch Trust Co., 123 S.W.3d 549, 556 (Tex.App.-
factual determinations and legal conclusions is decided San Antonio 2003, orig. proceeding), mand. granted, 235
by the trial court, we generally employ the abuse of S.W.3d 217 (Tex.2007) (orig. proceeding) (per curiam)
discretion standard, in which we defer to the trial court's (“The scope of an arbitration agreement may be extended
factual determinations while determining questions of law to claims against agents of the principal when all the
de *869 novo. Morris, 921 S.W.2d at 820. Accordingly, agents' allegedly wrongful acts relate to their behavior
we will apply the abuse of discretion standard of review as agents of the principal signatory company, and those
to interlocutory appeals under section 51.016. See Sidley acts were within the scope of the claims covered by the
Austin Brown & Wood, LLP v. J.A. Green Dev. Corp., arbitration provisions for which the principal would be
327 S.W.3d 859, 862–63 (Tex.App.-Dallas 2010, no liable.”).
pet.) (applying abuse of discretion standard in reviewing
interlocutory appeal under section 51.016). [8] [9] Having already established that Garcia is
entitled to enforce the arbitration agreement, we must
[4] [5] [6] [7] Whether there is a valid and enforceablenow determine whether Wells Fargo's express waiver of
agreement to arbitrate is a legal question subject to de novo its own right to arbitrate contained in the Settlement
review. In re Labatt Food Service, 279 S.W.3d at 643; J.M. Agreement operated to deny Garcia his right to enforce
Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex.2003). the arbitration agreement. Whether a party has waived
There is a strong presumption favoring arbitration, which his right to arbitration is a question of law that we
arises only after the party seeking to compel arbitration review de novo, giving no deference to the trial court's

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 5
Garcia v. Huerta, 340 S.W.3d 864 (2011)

ruling. Wells Fargo, 300 S.W.3d at 830 (citing Perry agreement during the entire course of this proceeding,
both before and after this Court issued its opinion in In re
Homes v. Cull, 258 S.W.3d 580, 598 (Tex.2008)). In the
Wells Fargo. The mere fact that Wells Fargo subsequently
arbitration context, the majority of cases alleging waiver
waived “any rights to enforce the arbitration agreement
involve the invocation of the legal process to one party's
as it ... relate[s] to any claims asserted against Garcia”
detriment. See, e.g., In re Citigroup Global Mkts., Inc.,
does not mean that Garcia—who relied upon this Court's
258 S.W.3d 623, 625 (Tex.2008) (orig. proceeding); Perry,
holding that he had the right to enforce the agreement—
258 S.W.3d at 589–90. The Huertas did not allege waiver
also waived his right to enforce the arbitration agreement.
based on invocation of the judicial process; rather, they
asserted that Wells Fargo's express waiver contained in the
[12] Further, there is a strong presumption against
Settlement Agreement must be imputed to *870 Garcia
waiver under the FAA, In re D. Wilson, 196 S.W.3d
because he acted as an agent of Wells Fargo, and his right
at 783, and any doubts regarding waiver are resolved
to arbitration was therefore derivative of Wells Fargo's.
in favor of arbitration. In re Bruce Terminix Co., 988
The Huertas cite no authority for this proposition, and
S.W.2d 702, 705 (Tex.1998). In light of this presumption,
we cannot agree that one party's waiver of the right to
and acknowledging the lack of evidence of waiver by
arbitration can be imputed to another.
Garcia, we cannot conclude that Wells Fargo's waiver of
[10] [11] Waiver is “an intentional relinquishment of arbitration was imputed to Garcia. Accordingly, we hold
the trial court erred in denying arbitration to Garcia on
a known right or intentional conduct inconsistent with
the basis of express waiver by Wells Fargo. We reverse
claiming that right.” Jernigan v. Langley, 111 S.W.3d 153,
the judgment of the trial court, and remand the cause
156 (Tex.2003). “There can be no waiver of a right if the
to the trial court with instructions to enter an order
person sought to be charged with waiver says or does
compelling arbitration as to Garcia and staying all other
nothing inconsistent with an intent to rely upon such
proceedings pending the outcome of arbitration. Based
right.” Id. Here, the Huertas did not allege that Garcia
on our resolution, we need not reach Garcia's arguments
himself acted in such a way so as to repudiate his right
relative to the law of the case or equitable estoppel.
to enforce the arbitration agreement, and there is no
evidence in the record of a knowing or intentional waiver
by Garcia. Additionally, the Huertas have not alleged that All Citations
Garcia did anything inconsistent with an intent to rely
on the arbitration process. To the contrary, Garcia has 340 S.W.3d 864
consistently invoked his right to enforce the arbitration

Footnotes
1 We specifically held that Wells Fargo Bank, N.A. established that Wells Fargo Bank Texas, N.A. was consolidated and
resulted in Wells Fargo Bank, N.A., which had the right to enforce the arbitration agreement. Id. at 824.

End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 6
Gatlin v. Criscione, Not Reported in F.Supp.2d (2008)
2008 WL 2745956

Before the court is the motion of Ogden Chrysler
Plymouth, Inc., the corporate name of Bill Kay, to stay
2008 WL 2745956
and compel arbitration of the claims against it pursuant
Only the Westlaw citation is currently available.
to an arbitration agreement between Gatlin and Bill Kay.
United States District Court,
For the reasons set forth below, the motion [# 12] will
N.D. Illinois,
be granted; however, the arbitration will be stayed until
Eastern Division.
Gatlin's nonarbitrable claims have been resovled by the
George GATLIN, Plaintiff, court. 1
v.
P.O. A. CRISCIONE, Star # 16195, P.O. S.
I. Background
Mulkerrin, Star # 17071, and Anthony Caputo,
On May 2, 2007, Gatlin signed an agreement to purchase a
Individually, and the City of Chicago, Illinois
used vehicle from Bill Kay (“the purchase agreement”). 2
Solution Group, and Bill Kay Chrysler, Defendants.
The purchase agreement provided that, while Gatlin was
No. 1:07-cv-7212. permitted to take the vehicle home that day, completion of
| the sale was contingent on Bill Kay's securing third party
July 11, 2008. financing for the sale. Gatlin was required to cooperate
in Bill Kay's efforts to secure financing, including filling
Attorneys and Law Firms out an accurate credit application as well as providing any
necessary documentation. The purchase agreement also
Edward M. Fox, Leslie C. Mccoy, Ed Fox & Associates,
stated that if Bill Kay was unable to secure financing,
Chicago, IL, for Plaintiff.
Gatlin would be required to return the vehicle within 24
Tiffany Yvette Harris, City of Chicago Law Department, hours. Should Gatlin fail to do so, he authorized Bill Kay
Stuart David Gordon, James Hjalmar Whalen, John to repossess the vehicle, “with or without legal process.”
C. Eggert, Gordon & Karr LLP, Chicago, IL, for
Defendants. Greater Suburban Acceptance Corporation (“GSAC”)
subsequently agreed to provide financing for Gatlin if it
was able to confirm the information provided in his credit
application. When GSAC was unable to confirm Gatlin's
MEMORANDUM OPINION AND ORDER
stated residence, employer, or income, it determined that it
JOAN HUMPHREY LEFKOW, District Judge. would not fund Gatlin's purchase. Bill Kay then requested
that Gatlin return the vehicle, and when he failed to do so,
*1 Plaintiff George Gatlin filed a seven count complaint Bill Kay hired ISG, a repossession company, to secure its
in this case. He alleges the following: (1) false arrest return. Anthony Caputo was ISG's employee.
under 42 U.S.C. § 1983 against Chicago Police Officer
defendants Criscione and Mulkerrin; (2) false arrest under At some time before 3:00 on the afternoon of June
42 U.S.C. § 1983 against defendant Anthony Caputo; 4, 2007, Caputo falsely informed officers Criscione and
(3) excessive force under 42 U.S.C. § 1983 against Mulkerrin that Gatlin was in possession of a weapon
defendants Criscione and Mulkerrin; (4) failure to provide while driving on Chicago Avenue near Pine Avenue in
medical care under 42 U.S.C. § 1983 against defendants Chicago. Caputo arranged with the officers that they be
Criscione and Mulkerrin; (5) false arrest under Illinois present “when Caputo caused Plaintiff's vehicle to be
law against defendants Criscione, Mulkerrin, Caputo, stopped.” When stopped, the officers searched Gatlin and
Illinois Solution Group (“ISG”), and Bill Kay Chrysler his vehicle without lawful cause, arrested him without
(“Bill Kay”); (6) an Illinois law claim of willful and probable cause, and used excessive force against him.
wanton conduct for failure to provide medical care against Also on June 4, Caputo on behalf of Bill Kay filed a
defendants Criscione, Mulkerrin, and the City of Chicago; police report alleging that Gatlin had submitted false
and (7) malicious prosecution under Illinois law against information in his credit application in violation of Illinois
defendants Caputo, ISG, and Bill Kay. law. Gatlin was criminally charged with defrauding a

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 1
Gatlin v. Criscione, Not Reported in F.Supp.2d (2008)
2008 WL 2745956

financial institution. On July 11, 2007, that charge was “[W]hen a contract contains an arbitration clause, a strong
terminated in Gatlin's favor. presumption in favor of arbitration exists and courts have
no choice but to order arbitration unless it may be said
*2 As relevant to the pending motion, Gatlin alleges with positive assurance that the arbitration clause is not
arrest without probable cause in violation of the Fourth susceptible of an interpretation that covers the asserted
Amendment against Caputo individually on the basis that dispute.” CK Witco Corp. v. Paper Allied Indus., Chem.
he willfully acted in concert with the officers in causing the & Energy Workers Int'l Union, 272 F.3d 419, 421-22
unlawful arrest (Count II), as well as Illinois common law (7th Cir.2001) (internal citations and quotations omitted).
false arrest and malicious prosecution. He alleges that ISG “To compel arbitration, a party need only show: (1) an
and Bill Kay are liable for Caputo's state law torts based agreement to arbitrate, (2) a dispute within the scope of the
on the doctrine of respondeat superior (Count VII). Gatlin arbitration agreement, and (3) a refusal by the opposing
seeks compensatory and punitive damages against all the party to proceed to arbitration.” Zurich American Ins. Co.
defendants. v. Watts Indus., Inc., 466 F.3d 577, 580 (7th Cir.2006)
(citations omitted). “[A]ny doubts concerning the scope of
Bill Kay maintains that Gatlin's claims of false arrest arbitrable issues should be resolved in favor of arbitration,
and malicious prosecution fall within the scope of an whether the problem at hand is the construction of the
arbitration agreement signed by the parties in conjunction contract language itself or an allegation of waiver, delay,
with the vehicle purchase agreement. That arbitration or a like defense to arbitrability.” Mastrobouno, 514 U.S.
agreement provides, in relevant part, that it at 62 n. 8 (quoting Moses H. Cone Memorial Hospital v.
Mercury Construction Corp., 460 U.S. 1, 24-25, 103 S.Ct.
[s]hall apply to any dispute, issue, 927, 74 L.Ed.2d 765 (1983)). To further this policy in favor
controversy or claim arising from of arbitration, Section 3 of the FAA provides, in relevant
any events which occurred prior to, part:
on or subsequent to the execution
of this Arbitration Agreement. A
‘dispute’ includes any controversy *3 If any suit or proceeding be brought in any of the
or claim arising from or relating courts of the United States upon any issue referable
to the vehicle you have purchased to arbitration under an agreement in writing for such
or leased on the date shown arbitration, the court in which such suit or proceeding is
above. The term “dispute” also pending, upon being satisfied that the issue involved in
includes, but is not limited to, claims such suit or proceeding is referable to arbitration ... shall
relating to the negotiation of the on application of one of the parties stay the trial of the
purchase or lease of the vehicle, action until such arbitration has been had in accordance
and any dispute relating to any with the terms of the agreement, providing the applicant
vehicle service contract purchased or for the stay is not in default in proceeding with such
provided at the time the vehicle was arbitration.
purchased or leased, or thereafter. In 9 U.S.C. § 3. 4
addition, the term ‘dispute’ includes “[The opponent of arbitration] bears the burden of
any question regarding whether a establishing that the arbitration clause is unenforceable.”
matter is subject to arbitration under Stewart v. Molded Plastic's Research of Ill., Inc., 2001 WL
this Arbitration Agreement. 1607464, at * 1 (N.D.Ill.Dec.17, 2001) (citing Shearson/
Am. Express, Inc. v. McMahon, 482 U.S. 220, 226-27,
107 S.Ct. 2332, 96 L.Ed.2d 185 (1987) (“The burden
II. Legal Standard is on the party opposing arbitration, however, to show
The central purpose of the Federal Arbitration Act that Congress intended to preclude a waiver of judicial
(“FAA”) is to “ensure that private agreements to arbitrate remedies for the statutory rights at issue.”)).
are enforced according to their terms.” Mastrobouno v.
Shearson Lehman Hutton, Inc., 514 U.S. 52, 53-54, 115
S.Ct. 1212, 131 L.Ed.2d 76 (1995) (citations omitted). 3 III. DISCUSSION

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 2
Gatlin v. Criscione, Not Reported in F.Supp.2d (2008)
2008 WL 2745956

has not responded to this argument in his response
A. Bill Kay Did Not Waive its Right to Arbitration brief. The arbitration agreement at issue clearly stipulates
Gatlin first contends that because Caputo, acting on that questions of arbitrability will be submitted to
behalf of Bill Kay, initiated criminal proceedings against arbitration. The court must therefore submit the question
Gatlin, Bill Kay waived its right to arbitration. Choosing of arbitrability to the arbitrator.
to submit issues which are arbitrable under a contract to
a court for decision is a presumptive waiver of the right
to arbitrate. Cabinetree of Wisconsin, Inc. v. Kraftmaid C. Arbitration will be Stayed
Cabinetry, Inc., 50 F.3d 388, 390 (7th Cir.1995); Kennedy Until the Conclusion of this Case
v. Commercial Carriers, Inc., 630 N.E.2d 1059, 1062, 258 Gatlin's final contention is that his claims against those
Ill.App.3d 939, 943, 196 Ill.Dec. 894, 897 (Ill.App.Ct. defendants who were not signatories of the arbitration
1st Dist.1994). This is an unusual fact pattern. At least, agreement are intertwined with the claims against Bill Kay
neither party has cited any case authority specifically and it would therefore be prejudicial to pursue these claims
addressing the issue whether initiation of a criminal case separately. His argument overlooks the fact that “the
in court to resolve a contractual dispute amounts to Federal Arbitration Act ‘requires piecemeal resolution
submitting arbitrable issues to a court for decision. Here, when necessary to give effect to an arbitration agreement’
as the facts are presented, Bill Kay through its agent and mandates enforcement of an arbitration agreement
was not seeking resolution of a dispute contemplated ‘notwithstanding the presence of other persons who are
by the arbitration clause; it was attempting to effect parties to the underlying dispute but not to the arbitration
its contractual right to take possession of the vehicle. agreement.’ ” Board of Managers of the Courtyards at
Certainly, Bill Kay would not have had a justiciable claim the Woodlands Condominium Ass'n v. IKO Chicago, Inc.,
at that point. It follows that Bill Kay has not waived its 697 N.E.2d 727, 732, 183 Ill.2d 66, 75, 231 Ill.Dec. 942,
right to arbitration. 947 (1998) (citing Moses H. Cone Memorial Hospital, 460
U.S. at 20)). Immediate submission of Gatlin's claims
against Bill Kay, however, would undermine the court's
B. The Arbitrability of Gatlin's Claims against Bill jurisdiction over Gatlin's nonarbitrable claims against the
Kay is an Issue to be Determined by the Arbitrator other defendants in this case. Because Bill Kay's liability
Gatlin next contends that these claims do not fall within is premised on respondeat superior, it will depend on the
the scope of the arbitration agreement because false arrest liability of Caputo and Illinois Solutions Group and on
and malicious prosecution claims are too attenuated to findings of fact regarding their actions. The arbitrator
have been reasonably considered by the plaintiff at the could not determine Bill Kay's liability without deciding
time he signed the arbitration agreement. One of Bill whether Caputo and ISG are liable, and if it decides
Kay's points in support of its motion, however, is that those issues before the court could do so, its decision
the parties agreed to submit the question of arbitrability could potentially have a res judicata effect on the claims
itself to an arbitrator. As quoted above, the arbitration against those parties in this case. When a similar situation
agreement provides that “ ‘dispute’ includes any question arose in Dickinson v. Heinold Securities, Inc., 661 F.2d
regarding whether a matter is subject to arbitration under 638, 644 (7th Cir.1981), the Seventh Circuit said that the
this Arbitration Agreement.” district court did not have discretion to force the parties
to litigate otherwise arbitrable claims in order to preserve
*4 Under both federal and Illinois law, “courts have its jurisdiction over nonarbitrable claims, but noted that
recognized that parties are free to agree to submit the it did have discretion to stay the arbitration of those
question of arbitrability itself to arbitration.” Bahuriak claims until the nonarbitrable claims had been decided by
v. Bill Kay Chrysler Plymouth, Inc., 786 N.E.2d 1045, the court. Because that course of action would preserve
1050, 337 Ill.App.3d 714, 719, 272 Ill.Dec. 211 (2003) the court's jurisdiction over Gatlin's nonarbitrable claims
(citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. and would also promote efficiency, arbitration of Gatlin's
938, 943-45, 115 S.Ct. 1920, 1923-25, 131 L.Ed.2d 985, claims against Bill Kay will be stayed until the conclusion
992-94 (1995)); Int'l Bhd. of Elec. Workers, Local 21 of this case. If the arbitrator determines that those claims
v. Ill. Bell Tel. Co., 491 F.3d 685, 687 (7th Cir.2007) are not arbitrable, they will return to the court, and their
(Issues of arbitrability are to be decided by the court resolution will be likely to have been simplified by the
unless the parties have clearly provide otherwise). Gatlin proceedings in the interim.

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 3
Gatlin v. Criscione, Not Reported in F.Supp.2d (2008)
2008 WL 2745956

arbitration is stayed until Gatlin's nonarbitrable claims
have been resolved by the court.
IV. Conclusion and Order
*5 For the foregoing reasons, Bill Kay's motion to stay
and to compel arbitration [# 12] is granted; however, the All Citations

Not Reported in F.Supp.2d, 2008 WL 2745956

Footnotes
1 The court has jurisdiction over this case pursuant to 28 U.S.C. §§ 1331, 1343, and 1367.
2 The court has taken the facts concerning the purchase agreement and related events, which are not materially disputed,
from the Complaint and from Bill Kay's Reply in Support of its Motion. The facts concerning Caputo and the defendant
officers are derived from the complaint and are disputed by the defendants but will be presumed true for the purpose of
this motion. Safranek v. Copart, Inc., 379 F.Supp.2d 927, 928 (N.D.Ill.2005)
3 Professor Margaret Moses argues forcefully, however, that judges have misinterpreted the FAA, granting it far greater
breadth than Congress contemplated when it passed the law:
“... [The Federal Arbitration Act]-which has been construed to preempt state law, eliminate the
requirement of consent to arbitration, permit arbitration of statutory rights, and remove the jury
trial right from citizens without their knowledge or consent-is a statute that would not likely have
commanded a single vote in the 1925 Congress.”
Margaret L. Moses, Statutory Misconstruction: How the Supreme Court Created a Federal Arbitration Law Never
Enacted by Congress, 34 FLA. ST. U.L.REV. 99 (2006).
4 Bill Kay argues that Illinois law also supports his motion, but the plaintiff responds only within the context of the FAA.

End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 4
Griffin v. Burlington Volkswagen, Inc., 411 N.J.Super. 515 (2010)
988 A.2d 101

malicious prosecution against automobile
dealership and dealership employee arose
KeyCite Yellow Flag - Negative Treatment out of and related to his purchase of
Distinguished by Barr v. Bishop Rosen & Co., Inc., N.J.Super.A.D., 
automobile, and thus were subject to the
October 26, 2015
arbitration clause in the retail order form
411 N.J.Super. 515
signed by purchaser; purchaser's claims
Superior Court of New Jersey,
related to the actions dealership took after
Appellate Division.
purchaser retained possession of the car, even
Joseph GRIFFIN, Plaintiff-Appellant, though financing for the transaction was not
v. obtained, including its actions in attempting
to repossess the car by reporting to the police
BURLINGTON VOLKSWAGEN, INC., and
department that the car had been stolen.
Augustine Staino, Defendants-Respondents.
4 Cases that cite this headnote
Submitted Oct. 27, 2009.
|
Decided Feb. 8, 2010. [2] Alternative Dispute Resolution
Liberal or strict construction
Synopsis
Alternative Dispute Resolution
Background: Purchaser of automobile filed a complaint
Construction in favor of arbitration
alleging claims for false arrest, false imprisonment,
An agreement to arbitrate should be read
malicious prosecution, abuse of process, invasion of
liberally in favor of arbitration.
privacy, and intentional infliction of emotional distress
and a statutory claim under the New Jersey Civil Rights 20 Cases that cite this headnote
Act against car dealership and dealership employee
after defendants reported the vehicle dealership had sold
to purchaser as stolen, resulting in purchaser's arrest. [3] Alternative Dispute Resolution
Dealership filed a motion to compel arbitration. The Evidence
Superior Court, Law Division, Burlington County, No. Courts operate under a presumption of
L-2756-08, granted the motion, Purchaser appealed. arbitrability in the sense that an order to
arbitrate the particular grievance should not
be denied unless it may be said with positive
assurance that the arbitration clause is not
[Holding:] The Superior Court, Appellate Division,
susceptible of an interpretation that covers the
Skillman, P.J.A.D., held that purchaser's claims against
asserted dispute.
automobile dealership and dealership employee arose out
of and related to his purchase of automobile, and thus 6 Cases that cite this headnote
were subject to the arbitration clause in the retail order
form signed by purchaser.

Affirmed. Attorneys and Law Firms

**101 J. Craig Currie (J. Craig Currie & Associates),
attorney for appellant.
West Headnotes (3)
Wardell, Craig, Annin & Baxter, attorneys for
respondents (Jeffrey S. Craig and Domenic B. Sanginiti,
[1] Alternative Dispute Resolution Jr., Haddonfield, on the brief).
Sales contracts disputes
Before Judges SKILLMAN, GILROY and
Automobile purchaser's claims for false arrest,
SIMONELLI.
false imprisonment, abuse of process, and

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 1
Griffin v. Burlington Volkswagen, Inc., 411 N.J.Super. 515 (2010)
988 A.2d 101

Griffin subsequently brought this damages action
Opinion against Burlington Volkswagen and Staino in the Law
The opinion of the court was delivered by Division, asserting common law claims for false arrest,
false imprisonment, malicious prosecution, abuse of
process, invasion of privacy, and intentional infliction of
SKILLMAN, P.J.A.D.
emotional distress and a statutory claim under the New
*516 In August 2006, plaintiff Joseph Griffin purchased Jersey Civil Rights Act of 2004, N.J.S.A. 10:6-1 to -2.
a car from defendant Burlington Volkswagen. This
purchase required Griffin to obtain financing. According Before filing an answer, Burlington Volkswagen moved
to Griffin, he was assured at the time of the sale by to dismiss Griffin's complaint on the ground that he
defendant Augustine Staino, an employee of Burlington was required to arbitrate his claims under an arbitration
Volkswagen, that he had already been approved **102 provision contained in the *518 retail order form. The
for such financing. After paying a $1,000 deposit and trial court granted this motion. Griffin appeals.
signing a retail order form, Griffin obtained possession
of the car and thereafter received what he described as a [1] The arbitration provision that the trial court
“certificate of ownership.” Griffin subsequently drove the concluded requires Griffin to arbitrate his claims against
car to Texas where he was enrolled in college. Burlington Volkswagen states in pertinent part:

The parties to this agreement agree
*517 Approximately a month after entering into
to arbitrate any claim, dispute, or
this transaction, Griffin was informed by Burlington
controversy, including all statutory
Volkswagen that the third-party lender it had expected
claims and any state or federal
to provide financing for Griffin's purchase of the car had
claims, that may arise out of or
changed its mind and was unwilling to provide financing.
relating to the purchase or lease
Moreover, Burlington Volkswagen declined to finance the
identified in this Motor Vehicle
purchase itself and instead undertook efforts to repossess
Retail Order and the financing
the car from Griffin. According to Griffin, these efforts
thereof. By agreeing to arbitration,
consisted of harassing telephone calls to Griffin and his
the parties understand and agree
employer at Griffin's place of employment and to Griffin
that they are waiving their rights to
and his girlfriend at their residence.
maintain other available resolution
processes, such as a court action
According to Griffin, Burlington Volkswagen also
or administrative proceeding, to
reported to the Burlington Police Department that Griffin
settle their disputes. New Jersey
had stolen the car by forcibly removing it from their
Consumer Fraud Act, Used Car
premises. As a result of this report, a warrant was
Lemon Law, and Truth-in-Lending
issued for Griffin's arrest. Based on this warrant, Griffin
claims are just three examples of the
was arrested while driving the car in Mississippi and
various types of claims subject to
incarcerated overnight. Griffin had to retain local counsel,
arbitration under this agreement....
post a bond, and remain in Mississippi until he provided
There are no limitations on the type
an explanation for his possession of the car sufficient
of claims that must be arbitrated,
for Mississippi law enforcement authorities to allow his
except for New Car Lemon Law
release. Griffin also alleges that the Mississippi police
and Magnuson-Moss Warranty Act
seized the car and that he has not seen the car since.
claims which are excluded from
arbitration under this agreement.
Thereafter, Griffin had to return to New Jersey to respond
to the criminal charges brought against him as a result of
Burlington Volkswagen's report of his theft of the car. On [2] [3] It is firmly established in this State that “[b]ecause
May 7, 2007, those charges were dismissed. of the favored status **103 afforded to arbitration, ‘[a]n
agreement to arbitrate should be read liberally in favor
of arbitration.’ ” Garfinkel v. Morristown Obstetrics &

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 2
Griffin v. Burlington Volkswagen, Inc., 411 N.J.Super. 515 (2010)
988 A.2d 101

Gynecology Assocs., 168 N.J. 124, 132, 773 A.2d 665 after Griffin retained possession of the car even though
(2001) (quoting Marchak v. Claridge Commons, Inc., 134 financing for this transaction was not obtained and
N.J. 275, 282, 633 A.2d 531 (1993)). Therefore, “courts Griffin made no payments beyond his initial $1,000
operate under a ‘presumption of arbitrability in the deposit. Specifically, Griffin alleges that Burlington
sense that an order to arbitrate the particular grievance Volkswagen attempted to repossess the car by wrongfully
should not be denied unless it may be said with positive reporting to the Burlington Police Department that he
assurance that the arbitration clause is not susceptible had stolen it, as a result of which he was arrested and
of an interpretation that covers the asserted dispute.’ incarcerated in Mississippi and had to defend himself
” EPIX Holdings Corp. v. Marsh & McLennan Cos., against criminal charges. Griffin's claims of false arrest,
410 N.J.Super. 453, 471, 982 A.2d 1194 (App.Div.2009) false imprisonment, abuse of process, and malicious
(quoting Caldwell v. KFC Corp., 958 F.Supp. 962, 973 prosecution based on Burlington Volkswagen's actions
(D.N.J.1997)). will depend, at least in part, on a determination of
the parties' respective interests in the car under the
Courts have generally read the terms “arising out of” or Motor Vehicle Retail Order in light of the failure to
“relating to” a contract as indicative of an “extremely obtain financing for Griffin's *520 purchase. Therefore,
broad” agreement to arbitrate any dispute relating in Griffin's claims “arise out of” and “relate to” this
any way to the contract. Angrisani v. Financial Tech. consumer transaction and are thus subject to the
Ventures, L.P., 402 N.J.Super. 138, 149, 952 A.2d arbitration clause contained in the retail order form. See
1140 (App.Div.2008); accord EPIX Holdings, supra, 410 Dan Wachtel Ford, Lincoln, Mercury, Inc. v. Modas, 891
N.J.Super. at 472, 982 A.2d 1194 (quoting with approval So.2d 287 (Ala.2004) (holding that plaintiff's claims of
the court's “expansive interpretation” in *519 Sweet “malicious prosecution ... and abuse of process [arose] out
Dreams Unlimited, Inc. v. Dial-A-Mattress Int'l, Inc., 1 of **104 actions taken by [defendant upon plaintiff's]
F.3d 639, 642 (7th Cir.1993), of “an arbitration clause refusal to return” a car after defendant was unable to
applying to disputes ‘arising out of the agreement’ as find financing). But see Mannix v. Hosier, 249 A.D.2d
including ‘any dispute between the contracting parties that 966, 672 N.Y.S.2d 574, 575 (App.Div.1998) (holding that
is in any way connected with their contract.’ ”). plaintiff's claim of malicious prosecution that resulted
from harassment charges brought by plaintiff's broker
Arbitration provisions using such expansive language “only collaterally related to the financial relationship
are construed to require arbitration of statutory claims between the parties”).
such as alleged civil rights violations and common law
torts. See, e.g., EPIX Holdings, supra, 410 N.J.Super. Griffin analogizes Burlington Volkswagen's action in
at 461, 468-75, 982 A.2d 1194 (tort claims including reporting that the car had been stolen to the police to
breach of fiduciary duty, negligent misrepresentation, and a Burlington Volkswagen employee assaulting him in
fraud); Alfano v. BDO Seidman, LLP., 393 N.J.Super. order to regain possession of the car. However, a tort
560, 575-77, 925 A.2d 22 (App.Div.2007) (tort claims claim based on such an assault would not require a
including fraud and civil conspiracy); Gras v. Assocs. First determination of the parties' respective rights in the car
Capital Corp., 346 N.J.Super. 42, 54-57, 786 A.2d 886 under the Motor Vehicle Retail Order. A Missouri court
(App.Div.2001) (Consumer Fraud Act claim); Young v. has concluded that
Prudential Ins. Co., 297 N.J.Super. 605, 608, 614-21, 688
A.2d 1069 (App.Div.1997) (Law Against Discrimination for a tort claim to be subject to arbitration under a
and Conscientious Employee Protection Act claims). broad arbitration clause, it must raise some issue the
resolution of which requires reference to or construction
The retail order form signed by Griffin included an of some portion of the parties' contract. Where,
expansive form of arbitration clause under which he however, a tort claim is independent of the contract
agreed “to arbitrate any claim, dispute, or controversy ... terms and does not require reference to the underlying
that may arise out of or relating to the purchase ... contract, arbitration is not compelled.
identified in the Motor Vehicle Retail Order and the
[Estate of Athon v. Conseco Finance Servicing Corp., 88
financing thereof.” Griffin's claims “arise out of” and
S.W.3d 26, 30 (Mo.Ct.App.2002) (citations omitted).]
“relate to” the actions that Burlington Volkswagen took

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 3
Griffin v. Burlington Volkswagen, Inc., 411 N.J.Super. 515 (2010)
988 A.2d 101

See also EPIX Holdings, supra, 410 N.J.Super. at 475, As alternative grounds for reversal of the judgment
dismissing his complaint, Griffin also argues that
982 A.2d 1194 (requiring arbitration under expansive
Burlington Volkswagen should be foreclosed from relying
arbitration clause because plaintiff could not “maintain
upon the arbitration clause because its invocation of
its claim for damages without reference to, and reliance
the criminal process to regain possession of the car
upon, the underlying contract”). Under this approach
constituted a waiver or equitably estopped Burlington
to determining arbitrability under the broad form of
Volkswagen from seeking arbitration of Griffin's claims.
arbitration clause involved in this case, a tort claim based
These arguments are clearly without merit. R. 2:11-3(e)(1)
on an assault upon Griffin to regain possession of the car
(E).
would not be subject to arbitration because it would not
require “reference to the underlying contract.” However,
Affirmed.
Griffin's tort claims against Burlington Volkswagen are
subject to arbitration because they *521 depend in part
on an interpretation of the parties' rights under the Motor All Citations
Vehicle Retail Order.
411 N.J.Super. 515, 988 A.2d 101

End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 4
G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502 (2015)
58 Tex. Sup. Ct. J. 532

[3] question of whether a contractual deadline for
initiating arbitration operated to bar general contractor's
KeyCite Yellow Flag - Negative Treatment demand for arbitration was one for arbitrators to decide;
Declined to Extend by In Interest of C.C., Tex.App.-Amarillo, 
September 1, 2015
[4] brokers, subcontractors, and engineers did not have
458 S.W.3d 502
a legal right to enforce the arbitration provisions in the
Supreme Court of Texas.
general contract;
G.T. Leach Builders, LLC, et al., Petitioners,
v. [5] direct benefit estoppel did not apply to allow brokers,
subcontractors, and engineers to compel developer to
Sapphire V.P., LP, Respondent
arbitrate its claims against them pursuant to the general
NO. 13–0497 contract; and
|
Argued November 5, 2014 [6] contracts between general contractor and
| subcontractor did not require developer to arbitrate its
Opinion delivered: March 20, 2015. claims against subcontractors.

Synopsis
Background: Property developer sued insurance brokers Affirmed in part, reversed in part, and remanded.
for negligence and breach of contract after a hurricane
caused extensive damages to a development project,
alleging that brokers allowed a builder's risk insurance
West Headnotes (39)
policy to expire and be replaced by a permanent insurance
policy even though construction of the project was
not complete. Brokers designated general contractor, [1] Courts
subcontractors, and engineers as responsible third parties. Review by or certificate to Supreme
Developer amended its petition to name those parties Court by Court of Civil Appeals of questions
as defendants. Subsequently, general contractor and the where its decision conflicts with or overrules
other defendants filed motions to compel arbitration. that of another Court of Civil Appeals or
The 404th District Court, Cameron County, Elia Cornejo that of the Supreme Court
Lopez, J., denied the motions. The defendants pursued Supreme Court had jurisdiction to review
an interlocutory appeal. The Corpus Christi - Edinburg a judgment of the court of appeals in an
Court of Appeals, 2013 WL 2298447, affirmed. The interlocutory appeal from trial court's denial
defendants filed petitions for review, which the Supreme of motions to compel arbitration in a dispute
Court granted. between property developer and various
defendants, including general contractor, over
responsibility for an expiration of a builder's
Holdings: The Supreme Court, Boyd, J., held that: risk insurance policy; the holding of the
court of appeals created an inconsistency
[1] general contractor's acts of requesting a continuance with prior precedent regarding the issue of
and then agreeing to a new trial did not constitute an whether courts or arbitrators should decide
express waiver of its arbitration rights as set forth in a whether a contractual deadline barred a
contract between general contractor and developer; demand for arbitration, and clarification of
the inconsistency would remove unnecessary
[2] general contractor did not impliedly waive its certainty in the law and unfairness to litigants.
arbitration rights; Tex. Gov't Code Ann. § 22.225(c, e).

1 Cases that cite this headnote

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 1
G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502 (2015)
58 Tex. Sup. Ct. J. 532

Suing or participating in suit
[2] Estoppel
A party asserting implied waiver as a defense
Nature and elements of waiver
to arbitration has the burden to prove
Estoppel that (1) the other party has “substantially
Implied waiver and conduct constituting invoked the judicial process,” which is
waiver conduct inconsistent with a claimed right to
“Waiver,” which is the intentional compel arbitration, and (2) the inconsistent
relinquishment of a known right, can occur conduct has caused it to suffer detriment
either expressly, through a clear repudiation or prejudice; because the law favors and
of the right, or impliedly, through conduct encourages arbitration, this hurdle is a high
inconsistent with a claim to the right. one.

5 Cases that cite this headnote 3 Cases that cite this headnote

[3] Alternative Dispute Resolution [7] Alternative Dispute Resolution
Trial or hearing Suing or participating in suit
When the relevant facts are undisputed, When a party asserts implied waiver as a
whether a party waived its right to arbitrate is defense to arbitration, which requires the
a question of law. party to prove, inter alia, that the other
party has substantially invoked the judicial
4 Cases that cite this headnote process, courts consider a wide variety of
factors in determining the invocation issue,
[4] Alternative Dispute Resolution including how long the party moving to
Suing or participating in suit compel arbitration waited to do so, the
General contractor's acts of requesting a reasons for the movant's delay, whether and
continuance and then agreeing to a new when the movant knew of the arbitration
trial date in an insurance-related dispute agreement during the period of delay, how
with property developer did not constitute much discovery the movant conducted before
an express waiver of general contractor's moving to compel arbitration and whether
arbitration rights as set forth in a contract that discovery related to the merits, whether
between the parties. the movant requested the court to dispose
of claims on the merits, whether the movant
Cases that cite this headnote asserted affirmative claims for relief in court,
the extent of the movant's engagement in
pretrial matters related to the merits as
[5] Alternative Dispute Resolution
opposed to matters related to arbitrability or
Suing or participating in suit
jurisdiction, the amount of time and expense
General contractor, in an insurance-related the parties have committed to the litigation,
dispute with property developer, did not whether the discovery conducted would be
impliedly waive its arbitration rights as set unavailable or useful in arbitration, whether
forth in a contract between the parties, absent activity in court would be duplicated in
proof by developer that general contractor arbitration, and when the case was to be tried.
substantially invoked the judicial process or
that developer was prejudiced by general 7 Cases that cite this headnote
contractor's litigation conduct.

Cases that cite this headnote [8] Alternative Dispute Resolution
Suing or participating in suit

[6] Alternative Dispute Resolution

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 2
G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502 (2015)
58 Tex. Sup. Ct. J. 532

General contractor did not substantially
invoke the litigation process in contravention [11] Alternative Dispute Resolution
of its arbitration rights as set forth in its Suing or participating in suit
contract with property developer, so as to Responding to discovery and simply being
support a conclusion that general contractor named in a lawsuit while discovery is ongoing
did not impliedly waive its arbitration rights do not amount to waiver of an arbitration
in an insurance-related dispute, even though right.
general contractor filed certain motions and
participated in pretrial discovery, and general Cases that cite this headnote
contractor could have been more prompt in
seeking arbitration; general contractor was in [12] Alternative Dispute Resolution
the lawsuit because it was sued by developer, Suing or participating in suit
general contractor's motions were defensive Property developer did not prove that it
in nature, general contractor's participation suffered unfair prejudice as a result of
in discovery was because developer engaged general contractor's litigation conduct in an
it in discovery, and a delay of two or insurance-related dispute, so as to support
three months between trial court's denial of a conclusion that general contractor did not
general contractor's motion to transfer venue impliedly waive its arbitration rights as set
and general contractor's motion to compel forth in a contract between the parties, even
arbitration was not a substantial delay relative though general contractor might have had
to the timeline of the case as a whole. access to more information as a result of the
litigation than if the dispute had originated in
Cases that cite this headnote
arbitration; developer, not general contractor,
chose to initiate proceedings in the courts
[9] Alternative Dispute Resolution rather than in arbitration, and general
Suing or participating in suit contractor did not serve any request for
Merely taking part in litigation is not production, interrogatory, or deposition
enough to show that a party substantially notice in the case.
invoked the judicial process, for the purpose
of determining whether the party impliedly Cases that cite this headnote
waived an arbitration right; rather, the
litigation conduct must demonstrate that the [13] Alternative Dispute Resolution
party has substantially invoked the judicial Suing or participating in suit
process to its opponent's detriment. Detriment or prejudice from a party's
litigation conduct, for the purpose of
5 Cases that cite this headnote
determining whether the party impliedly
waived an arbitration right, refers to an
[10] Alternative Dispute Resolution inherent unfairness caused by a party's
Suing or participating in suit attempt to have it both ways by switching
A party's litigation conduct aimed at between litigation and arbitration to its own
defending itself and minimizing its litigation advantage.
expenses, rather than at taking advantage
of the judicial forum, does not amount to 1 Cases that cite this headnote
substantial invocation of the judicial process,
for the purpose of determining whether the [14] Alternative Dispute Resolution
party impliedly waived an arbitration right. Suing or participating in suit
Prejudice may result when a party seeking
1 Cases that cite this headnote
arbitration first sought to use the judicial

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 3
G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502 (2015)
58 Tex. Sup. Ct. J. 532

process to gain access to information that arbitration regardless of whether general
would not have been available in arbitration, contractor waived any right to arbitration.
but propounding discovery will not, in and
of itself, result in waiver of a right to compel 1 Cases that cite this headnote
arbitration.
[18] Appeal and Error
6 Cases that cite this headnote
Necessity of presentation in general
Appeal and Error
[15] Alternative Dispute Resolution Incorporation of assignment of errors
Suing or participating in suit
An issue presented in a petition for review to
Although a delay may be a factor both in the Supreme Court must have been preserved
terms of whether a party moving to compel for appellate review in the trial court and
arbitration has substantially invoked the assigned as error in the court of appeals, but
judicial process and whether the nonmovant only if the matter complained of originated in
has suffered prejudice, mere delay is not the trial court. Tex. R. App. P. 53.2(f).
ordinarily enough to result in a waiver of
a right to compel arbitration, even if it is 1 Cases that cite this headnote
substantial.

2 Cases that cite this headnote [19] Appeal and Error
Nature of remedy by dismissal
Disposing of appeals for harmless procedural
[16] Alternative Dispute Resolution
defects is disfavored.
Waiver or Estoppel
Waiver of an arbitration right can be implied Cases that cite this headnote
from a party's unequivocal conduct, but not
by inaction.
[20] Appeal and Error
5 Cases that cite this headnote Defects, objections, and amendments
Appellate briefs are to be construed
reasonably, yet liberally, so that the right to
[17] Alternative Dispute Resolution
appellate review is not lost by waiver.
Presentation and reservation of grounds
for review Cases that cite this headnote
General contractor did not waive its argument
in the Supreme Court that arbitrators,
[21] Appeal and Error
not the courts, had to decide whether a
Scope of Inquiry in General
contractual deadline for initiating arbitration
When an error asserted in a petition for
of disputes with property developer barred
review in the Supreme Court first arose from
general contractor's demand for arbitration,
the judgment of the court of appeals, the
even though general contractor raised the
Supreme Court is not required to address and
argument for the first time in its petition
resolve the petitioner's related argument; in
for review in the Supreme Court; the alleged
the exercise of its discretionary jurisdiction,
error of which general contractor complained
the Supreme Court may elect to address the
did not originate in trial court but instead
issue, or not. Tex. R. App. P. 53.2(f).
first arose from the judgment of the court of
appeals, which, in response to an argument Cases that cite this headnote
raised for the first time by property developer
on appeal, held that the deadline precluded
[22] Appeal and Error

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 4
G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502 (2015)
58 Tex. Sup. Ct. J. 532

Scope of Inquiry in General agreement requires that they refer those
Supreme Court's decision on whether to disputes to arbitration. Tex. Civ. Prac. &
address and resolve an argument by a Rem. Code Ann. § 171.021(a).
petitioner for review related to an asserted
Cases that cite this headnote
error that first arose from the judgment
of the court of appeals involves important
prudential considerations, such as the need to [25] Alternative Dispute Resolution
conserve judicial resources, whether allowing Disputes and Matters Arbitrable Under
lower courts to first consider and rule on Agreement
the issue will further the goal of accuracy Whether disputing parties made a valid and
in judicial decision-making, and the Supreme presently enforceable agreement to arbitrate
Court's duty to promote fairness among and, if so, whether the present disputes
litigants. Tex. R. App. P. 53.2(f). fall within the scope of that agreement
are sometimes referred to as “questions of
Cases that cite this headnote
arbitrability.” Tex. Civ. Prac. & Rem. Code
Ann. § 171.021(b).
[23] Alternative Dispute Resolution
Arbitrability of dispute 6 Cases that cite this headnote

Alternative Dispute Resolution
Conditions precedent to arbitration; [26] Alternative Dispute Resolution
procedural arbitrability Construction
Question of whether a deadline in a contract In deciding questions of arbitrability, i.e.,
between property developer and general for whether disputing parties made a valid and
initiating arbitration operated to bar general presently enforceable agreement to arbitrate
contractor's demand for arbitration of an and, if so, whether the present disputes fall
insurance-related dispute with developer was within the scope of that agreement, courts
a question of procedural arbitrability for apply the common principles of general
arbitrators to decide, as opposed to a question contract law to determine the parties' intent.
of substantive arbitrability for the courts to Tex. Civ. Prac. & Rem. Code Ann. §
decide; the deadline did not determine the 171.021(b).
present existence, enforceability, or scope of
the agreement to arbitrate the parties' disputes 6 Cases that cite this headnote
but instead imposed a procedural limit on
the parties' rights under that agreement, [27] Alternative Dispute Resolution
given that developer conceded the existence Suing or participating in suit
of an enforceable arbitration agreement
Question of whether a party has waived its
that applied to its claims against general
right to arbitration by its conduct in litigation
contractor. Tex. Civ. Prac. & Rem. Code Ann. is another way of asking the first question of
§ 171.021(b). arbitrability, i.e., whether there is a presently
enforceable arbitration agreement; if a party's
5 Cases that cite this headnote
conduct in litigation equates to a waiver of
its rights under the arbitration agreement,
[24] Alternative Dispute Resolution there is no presently enforceable agreement to
Right to Enforcement and Defenses in arbitrate. Tex. Civ. Prac. & Rem. Code Ann.
General § 171.021(b).
When parties have contractually agreed to
arbitrate their future disputes, the courts' 9 Cases that cite this headnote
obligation to honor and enforce that

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G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502 (2015)
58 Tex. Sup. Ct. J. 532

to allow nonparties, which were insurance
[28] Alternative Dispute Resolution brokers, subcontractors, and engineers, to
Persons affected or bound compel developer to arbitrate its claims
Nonparties may be bound to an arbitration against them pursuant to the general contract;
clause when the rules of law or equity would developer did not sue nonparties for breach
bind them to the contract generally. of obligations under the general contract but,
instead, alleged that they each breached duties
Cases that cite this headnote that each contractually agreed to perform
and failed to perform them as a reasonable
[29] Alternative Dispute Resolution professional would have performed them, the
Persons entitled to enforce allegations referred to other contracts, not the
Nonparties to a contract between property general contract, and even if developer's tort
developer and general contractor did not claims sounded in contract, they did not arise
have a legal right to enforce the contract's solely out of or otherwise seek direct benefits
arbitration provisions in an insurance- under the general contract.
related dispute with developer, even though
1 Cases that cite this headnote
nonparties, which were insurance brokers,
subcontractor, and engineers, pointed to the
contract's joinder provision and definition of [32] Alternative Dispute Resolution
“contractor”; the joinder provision permitted Waiver or Estoppel
the parties to the contract to consent to the Under principles of equitable estoppel, a
joinder of additional parties in the arbitration litigant who sues based on a contract with an
but did not require them to do so, and the arbitration provision cannot, on the one hand,
contract expressly provided that the contract seek to hold a nonsignatory liable pursuant
documents were not to be construed to create to duties imposed by the contract but, on the
a contractual relationship between any person other hand, deny arbitration's applicability
or entities other than developer and general because the defendant is a nonsignatory.
contractor. Tex. Civ. Prac. & Rem. Code Ann.
§ 171.021(a). 1 Cases that cite this headnote

Cases that cite this headnote
[33] Alternative Dispute Resolution
Waiver or Estoppel
[30] Alternative Dispute Resolution Equitable principle that a claimant cannot
Persons entitled to enforce both seek to hold a nonsignatory liable
As a general rule, an arbitration clause cannot pursuant to duties imposed by a contract
be invoked by a nonparty to the arbitration containing an arbitration provision and
contract. deny arbitration's applicability because the
defendant is a nonsignatory applies when
4 Cases that cite this headnote a claimant seeks direct benefits under the
contract.
[31] Alternative Dispute Resolution
Cases that cite this headnote
Waiver or Estoppel
Property developer's claims against
nonparties to a contract between developer [34] Alternative Dispute Resolution
and general contractor for negligence and Waiver or Estoppel
breach of contract did not seek a direct Whether a claim seeks a direct benefit from
benefit under the general contract, and a contract containing an arbitration clause
thus direct benefit estoppel did not apply turns on the substance of the claim, not

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G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502 (2015)
58 Tex. Sup. Ct. J. 532

artful pleading, for the purpose of determining to hold a nonsignatory liable pursuant
the applicability of “direct benefits estoppel,” to duties imposed by the contract and
which bars a claimant from both seeking to denying arbitration's applicability because
hold a nonsignatory liable pursuant to duties the defendant is a nonsignatory, the alleged
imposed by contract and denying arbitration's liability must arise solely from the contract or
applicability because the defendant is a must be determined by reference to it.
nonsignatory.
2 Cases that cite this headnote
4 Cases that cite this headnote

[38] Alternative Dispute Resolution
[35] Alternative Dispute Resolution Waiver or Estoppel
Waiver or Estoppel When the substance of a claim arises from
For direct benefits estoppel to apply to general obligations imposed by state law,
bar a claimant from both seeking to including statutes, torts, and other common
hold a nonsignatory liable pursuant to law duties, or federal law, rather than from a
duties imposed by a contract containing contract containing an arbitration provision,
an arbitration provision and denying direct benefits estoppel does not apply, even if
arbitration's applicability because the the claim refers to or relates to the contract.
defendant is a nonsignatory, it is not enough
that a party's claim relates to the contract; 4 Cases that cite this headnote
instead, the party must seek to derive a “direct
benefit,” that is, a benefit that stems directly, [39] Alternative Dispute Resolution
from that contract. Operation and Effect

1 Cases that cite this headnote Contracts between general contractor and
subcontractors did not require property
developer to arbitrate its claims against
[36] Alternative Dispute Resolution subcontractors for negligence and breach
Waiver or Estoppel of contractual duties, even assuming that
For a claim to seek a direct benefit from a the subcontracts were binding on developer,
contract containing an arbitration provision, and even though the subcontracts contained
as required for direct benefit estoppel to arbitration provisions; another provision in
apply to bar a claimant from both seeking each subcontract stated that subcontractor
to hold a nonsignatory liable pursuant expressly agreed, notwithstanding any
to duties imposed by the contract and provision to the contrary in the
denying arbitration's applicability because the contract documents, that the subcontract
defendant is a nonsignatory, the claim must did not contain a provision for the
depend on the existence of the contract and mandatory arbitration of disputes, and
be unable to stand independently without the even though the arbitration provisions and
contract. the notwithstanding provision conflicted,
the notwithstanding provision specifically
4 Cases that cite this headnote provided that in the event of any conflict, the
notwithstanding provision would prevail.
[37] Alternative Dispute Resolution
4 Cases that cite this headnote
Waiver or Estoppel
For a claim to seek a direct benefit from a
contract containing an arbitration provision,
as required for direct benefit estoppel to
apply to bar a claimant from both seeking

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or if they are equitably estopped *509 from denying
*508 ON PETITION FOR REVIEW FROM THE their assent to such an agreement, courts must honor
COURT OF APPEALS FOR THE THIRTEENTH the agreement by referring the disputes to arbitration
DISTRICT OF TEXAS unless the party demanding arbitration has waived that
right by substantially participating in the litigation. We
Attorneys and Law Firms
apply these principles in this case to determine whether
Calvin Burgess, John B. Wallace, Timothy Leo Nebel, a property developer must arbitrate its claims against
Hartline Dacus Barger Dreyer LLP, Houston, for several defendants involved in a construction project.
Petitioner ZCA Residential, LLC. The trial court denied all of the defendants' motions to
compel arbitration, and the court of appeals affirmed. We
Charles Clayton Conrad, Edward S. Hubbard, Coats, hold that (1) the developer agreed to arbitrate its claims
Rose, Yale, Ryman & Lee, PC, Gilberto Hinojosa, against the general contractor and the general contractor
Law Offices of Gilberto Hinojosa & Associates, P.C., did not waive its right to demand arbitration; (2) the
Brownsville, Lawrence J. West, Stephen Douglas Pritchett developer's argument that a contractual deadline bars
Jr., Johnson, Trent, West & Taylor, L.L.P., Houston, for the general contractor's demand for arbitration is itself a
Petitioner G.T. Leach Builders, L.L.C. claim that must be arbitrated; (3) the developer did not
agree in the general contract to arbitrate its claims against
Aaron Tilley, Cozen O'Connor, Dallas, Joseph the other defendants; (4) the developer is not equitably
A. Ziemianski, Stephen Bender Edmundson, Cozen
estopped from denying any such agreement; and (5) the
O'Connor, Houston, for Petitioner CHP and Associates, subcontracts do not contain an enforceable arbitration
Consulting Engineers, Inc. agreement. In short, we hold that the developer must
arbitrate its claims against the general contractor but not
Brian Christopher Lopez, Engvall & Lopez, L.L.P.,
its claims against the other defendants.
Jennifer Bruch Hogan, Richard P. Hogan Jr., Hogan &
Hogan, Houston, for Petitioner Comfort Systems USA–
South Central.
I.
Andrew T. McKinney IV, Daniel W. Burrows, Litchfield
Cavo, LLP, Houston, for Petitioner Power Design, Inc.
Background
Ethan Dennis Carlyle, James M. Cleary Jr., Martin
Disiere Jefferson & Wisdom LLP, Houston, for Petitioner In July 2008, Hurricane Dolly caused extensive damage
Adams Insurance Service, Inc. to a luxury condominium project that Sapphire V.P., L.P.
was in the process of developing on South Padre Island.
Jeremy J. Gaston, Walter J. Cicack, Hawash, Meade, Sapphire filed suit against Adams Insurance Services,
Gaston, Neese & Cicack LLP, Houston, for Petitioner Inc., Arthur J. Gallagher Risk Management, and Tracy
Arthur J. Gallagher Risk Management Services, Inc. Williams (collectively, the Insurance Brokers), asserting
claims for negligence and breach of contract. Sapphire
Frank Costilla, Law Offices of Frank Costilla, L.P., alleged that, eight days before the hurricane hit, the
Brownsville, Jonathan Daniel Simon, Simon Law Firm, Insurance Brokers allowed a builder's risk insurance
Richard D. Daly, Daly & Black, P.C., Houston, Melissa policy to expire and be replaced by a permanent insurance
Waden Wray, Daly & Black, P.C., Waco, for Respondent policy even though construction of the project was not yet
Sapphire VP, LP. complete. Sapphire sought to recover millions of dollars
for water damage, increased construction costs, delay
Opinion
costs, lost revenue, and other losses that the builder's risk
Justice Boyd delivered the opinion of the Court. policy allegedly covered or should have covered but the
permanent policy did not.
Texas law encourages parties to resolve disputes through
arbitration, 1 but it will not force them to arbitrate unless More than two-and-a-half years after the hurricane
they have agreed to that alternative. 2
If they have, struck, the Insurance Brokers designated several others
as responsible third parties: (1) the project's general

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contractor, G.T. Leach Builders, L.L.C.; (2) two of arbitration agreement and that it applies to Sapphire's
G.T. Leach's subcontractors, Power Design, Inc. and claims against G.T. Leach, but contends that G.T. Leach
Atlas Comfort Systems USA, LLC 3 (collectively, the expressly and impliedly waived its right to demand
Subcontractors); and (3) an engineering contractor, CHP arbitration. Alternatively, Sapphire argues that G.T.
& Associates Consulting Engineers, Inc., and its employee Leach failed to demand arbitration prior to a deadline
that the contract expressly imposes. The court of appeals
Mark Janneck (collectively, the Engineers). 4 Sapphire,
agreed with Sapphire's second argument and did not
in turn, promptly amended its petition to name these
reach its first. We conclude that (1) G.T. Leach did not
parties as defendants, alleging that their negligence and
waive its arbitration rights, and (2) the issue of whether
contractual breaches resulted in construction defects that
the contractual deadline bars G.T. Leach's demand for
caused the condominium project to sustain the water
arbitration is one that the arbitrators—not the courts—
damage that resulted in the uncovered losses. Although
must decide. Because the waiver argument challenges G.T.
Sapphire asserted these claims within the four-year statute
Leach's ability to rely on the arbitration agreement at all,
of limitations applicable to claims *510 for breach of
we address it first.
contract, the two-year statute of limitations on negligence
claims had already expired. At that time, however, Texas
law allowed a claimant to assert claims against a party A. Waiver of Right to Arbitration
designated as a responsible third party even though the [2] [3] Sapphire asserts that G.T. Leach has waived
statute of limitations barred the claim. 5 its right to enforce their arbitration agreement. Waiver
—the “intentional relinquishment of a known right”—
[1] After pursuing pretrial motions and participating can occur either expressly, through a clear repudiation
in discovery, G.T. Leach—the general contractor— of the right, or impliedly, through conduct inconsistent
moved to compel arbitration and stay the litigation, with a claim to the right. Perry Homes, 258 S.W.3d at
relying on an arbitration agreement contained in its 590–91, 594; Moayedi v. Interstate 35/Chisam Rd., L.P.,
general contract with Sapphire. The Insurance Brokers, 438 S.W.3d 1, 6 (Tex.2014). Sapphire argues that G.T.
Subcontractors, and Engineers (collectively, the Other Leach both expressly and impliedly waived its right to
Defendants) subsequently filed similar motions, also compel arbitration in this case. The trial court agreed
relying on the arbitration agreement in the general and denied G.T. Leach's motion to compel arbitration,
contract, even though they never signed that contract. but the court of appeals did not reach the issue. Both
The Subcontractors relied, in addition, on language in parties have fully briefed the issue and urge us to decide
their subcontracts with G.T. Leach, even though Sapphire it here. When, as here, the relevant facts are undisputed,
never signed the subcontracts. The trial court denied whether a party waived its right to arbitrate is a question of
all of the motions without explaining its reasons. The law. Kennedy Hodges, L.L.P. v. Gobellan, 433 S.W.3d 542,
defendants pursued an interlocutory appeal, the court 545 (Tex.2014) (per curiam); Perry Homes, 258 S.W.3d at
of appeals affirmed, 6 and we granted the defendants' 598 & n.102. At the parties' mutual request, we reach the
issue here to avoid unnecessary delay. See, e.g., Placencio
petitions for review. 7
v. Allied Indus. Int'l, Inc., 724 S.W.2d 20, 22 (Tex.1987)
(reaching, rather than remanding, issue of law not reached
by court of appeals “[t]o avoid unnecessary delay”). Based
II. on the undisputed facts, we conclude that G.T. Leach has
not waived its right to arbitration.
G.T. Leach
1. Express Waiver
We first consider whether G.T. Leach can compel
[4] Sapphire first argues that G.T. Leach expressly waived
arbitration. In the general contract, G.T. Leach and
its arbitration rights by seeking a continuance and
Sapphire agreed that “[a]ny Claim arising out of or
agreeing to a new trial date. Specifically, Sapphire notes
related to the Contract ... shall ... be subject to agreed
that G.T. Leach filed (jointly with the other defendants) a
private arbitration” and “shall be decided by binding
motion for continuance stating that “there is insufficient
arbitration.” 8 Sapphire *511 concedes that this is a valid time for the parties to prepare this case with the current

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trial setting” and discovery “cannot be completed prior
to the current trial setting.” When the parties agreed • how much discovery the movant conducted before
to postpone the trial setting, G.T. Leach then signed moving to compel arbitration, and whether that
a Rule 11 agreement in which all parties agreed to a discovery related to the merits;
scheduling order and a new trial date. We do not agree that
• whether the movant requested the court to dispose of
the statements contained in these documents expressly
claims on the merits;
relinquish and repudiate a right to arbitration. As we
explained when addressing nearly identical statements in • whether the movant asserted affirmative claims for
In re Fleetwood Homes of Texas, L.P., “[n]othing in [these relief in court;
statements] expressly waives arbitration or revokes [an]
arbitration demand.” 257 S.W.3d 692, 694 (Tex.2008); see • the extent of the movant's engagement in pretrial
also In re Bank One, N.A., 216 S.W.3d 825, 827 (Tex.2007) matters related to the merits (as opposed to matters
(per curiam) (holding that filing of motion to set aside related to arbitrability or jurisdiction);
default judgment and set new trial date does not expressly
• the amount of time and expense the parties have
waive arbitration rights). Although the acts of requesting
committed to the litigation;
and then agreeing to a new trial date could be inconsistent
with an intent to exercise the right to arbitrate, they do not • whether the discovery conducted would be unavailable
constitute an express waiver of that right. or useful in arbitration;

• whether activity in court would be duplicated in
2. Implied Waiver arbitration;
[5] [6] A party asserting implied waiver as a defense
to arbitration has the burden *512 to prove that • when the case was to be tried.
(1) the other party has “substantially invoked the
judicial process,” which is conduct inconsistent with Perry Homes, 258 S.W.3d at 590–91.
a claimed right to compel arbitration, and (2) the
inconsistent conduct has caused it to suffer detriment [8] [9] Sapphire first initiated this lawsuit against the
or prejudice. Perry Homes, 258 S.W.3d at 593–94; see Insurance Brokers in 2009. In the summer of 2010, it
also Gobellan, 433 S.W.3d at 545. Because the law favors filed a separate lawsuit in Harris County, Texas, against
and encourages arbitration, “this hurdle is a high one.” the architects who designed the condominium project,
Richmont Holdings, Inc. v. Superior Recharge Sys., L.L.C., seeking to recover essentially the same damages arising
455 S.W.3d 573, 575 (Tex.2014) (per curiam) (quoting from Hurricane Dolly. Six months later, Sapphire added
Perry Homes, 258 S.W.3d at 589–90). We conclude that G.T. Leach to the Harris County lawsuit, and four
Sapphire has not cleared the hurdle in this case. months after that, Sapphire named G.T. Leach as a
defendant in this lawsuit. G.T. Leach moved to compel
arbitration the following November. Sapphire asserts that
G.T. Leach's actions in this case between May 2011
a. Litigation Conduct and November 2012 amount to waiver of any right it
has to arbitrate Sapphire's claims. Sapphire contends
[7] Whether a party has substantially invoked the judicial
that G.T. Leach waived its arbitration rights through its
process depends on the totality of the circumstances. Perry
actions between May 2011 and November 2012, primarily
Homes, 258 S.W.3d at 589–90. Courts consider a “wide
by filing counterclaims, filing motions for relief, and
variety” of factors, including:
participating in pretrial discovery. “Merely taking part
• how long the party moving to compel arbitration in litigation,” however, “is not enough.” In re D. Wilson
waited to do so; Constr. Co., 196 S.W.3d 774, 783 (Tex. 2006) (citations
omitted). Rather, that conduct must demonstrate that the
• the reasons for the movant's delay; party “has substantially invoked the judicial process to
[its] opponent's detriment.” Id. (citing In re Vesta Ins. Grp.,
• whether and when the movant knew of the arbitration
Inc., 192 S.W.3d 759, 762 (Tex. 2006) (per curiam)).
agreement during the period of delay;

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In considering the relevant factors, we note first that G.T.
Leach did not elect to resolve its disputes with Sapphire [10] In addition to its venue challenge, G.T. Leach
in court; rather, it is in this lawsuit because Sapphire filed motions to designate responsible third parties, for
sued it. See Perry Homes, 258 S.W.3d at 591 (noting that continuance, and to quash depositions. These motions,
one factor is whether party seeking arbitration was *513 however, were defensive, rather than offensive, in nature.
plaintiff who chose to file suit or defendant responding A party's litigation conduct aimed at defending itself
to suit filed against it). Although G.T. Leach asserted a and minimizing its litigation expenses, rather than at
counterclaim against Sapphire in the Harris County suit, taking advantage of the judicial forum, does not amount
it did not assert counterclaims seeking affirmative relief in to substantial invocation of the judicial process. See
this lawsuit. The counterclaim G.T. Leach filed in Harris Richmont Holdings, ––– S.W.3d at ––––; see also Keytrade
County was defensive in nature, and our rules required USA, Inc. v. Ain Temouchent M/V, 404 F.3d 891, 897
G.T. Leach to file it or risk losing it altogether. See TEX. (5th Cir.2005) (declining to find waiver where movant
R. CIV. P. 97(a) (defining compulsory counterclaims). sought summary judgment “from a defensive posture”);
We have held that “[m]erely filing suit does not waive Rodriguez v. Transnave Inc., 8 F.3d 284, 288 (5th Cir.1993)
arbitration,” Richmont Holdings, 455 S.W.3d at 576, (declining to find waiver where movant voluntarily
and we have declined to find waiver of the right to appeared in suit and sought removal because it was
arbitrate when a movant filed cross-actions in litigation, “purely defensive action to preserve its right of removal
see D. Wilson Constr., 196 S.W.3d at 783. Moreover, and to avoid any possibility of a default judgment”).
G.T. Leach never sought disposition of its Harris County
counterclaim on the merits; instead it merely took the [11] Finally, G.T. Leach participated in pretrial
action necessary to preserve that claim once Sapphire discovery, but it did so because Sapphire engaged it in
initiated a lawsuit arising out of the same subject matter. discovery. Sapphire complains that because the parties
Nor did G.T. Leach ever seek summary judgment or agreed to conduct discovery jointly for both cases, all
dismissal of Sapphire's claims on the merits. See Richmont discovery propounded by any party was available to
Holdings, 455 S.W.3d at 575 (observing that whether all parties, such that G.T. Leach has received copies of
movant sought “disposition on the merits” is key factor in documents produced by other parties and transcripts of
deciding waiver); see also Perry Homes, 258 S.W.3d at 592 depositions taken by other *514 parties. Sapphire asserts
(observing that “whether the movant sought judgment on that G.T. Leach acted inconsistently with its right to
the merits” is a factor). arbitrate both when it responded to discovery requests
and when it resisted discovery by seeking to quash a
Instead, G.T. Leach first and primarily sought to transfer deposition notice. Responding to discovery and simply
venue of this case to Harris County, or alternatively to being named in the lawsuit while discovery is ongoing do
abate this case while the Harris County case was resolved. not amount to waiver. To the contrary, we have declined
Rather than driving up litigation costs—another factor to find waiver even when the movant itself propounded
courts consider for waiver—G.T. Leach endeavored to written discovery. See, e.g., Fleetwood Homes, 257 S.W.3d
create efficiency by defending Sapphire's claims in a at 694; In re Bruce Terminix, Co., 988 S.W.2d 702, 703–
single venue. Perry Homes, 258 S.W.3d at 591. We 04 (Tex.1998); EZ Pawn Corp. v. Mancias, 934 S.W.2d
have rejected arguments relying on venue challenges to 87, 88–89 (Tex.1996). Nor does G.T. Leach's motion to
establish waiver because such challenges do not relate quash, in which it objected to the time and place of a
to the merits of the case. See Richmont Holdings, 455 deposition notice served on it by Sapphire, amount to an
S.W.3d at 576 (also noting that under rules of procedure, affirmative invocation of the judicial forum.
“objections to improper venue must be made at the outset
of the case”); In re Serv. Corp. Int'l, 85 S.W.3d 171, The only discovery that G.T. Leach actually propounded
175 (Tex.2002) (holding that parties did not waive right was a form request for disclosure that G.T. Leach included
to arbitrate by seeking to move litigation from state to in its answer in the case. See TEX. R. CIV. P. 194.1
federal court); In re ADM Investor Servs., Inc., 304 S.W.3d (providing required form for requests for disclosure). Such
371, 374 (Tex.2010) (applying Perry Homes test in context requests seek basic information about a lawsuit: who are
of forum-selection clauses and holding that motion to the parties and witnesses, what are the theories, and how
transfer venue did not waive contractual right). much is at stake? A defendant needs this information to

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make intelligent decisions about how to defend the suit, rights by initiating lawsuit, invoking forum-selection
and as we have stated, a party may protect its existing clause, moving to transfer venue, propounding request for
litigation rights from forfeiture without waiving its right to disclosure, and waiting nineteen months after being sued
arbitration. We have declined to find waiver of the right to to move for arbitration); Fleetwood Homes, 257 S.W.3d
arbitrate in other cases where the movant made a request at 694 (holding that movant did not waive arbitration
for disclosure. See Richmont Holdings, 455 S.W.3d at 575; rights by noticing deposition, serving written discovery,
Vesta Ins., 192 S.W.3d at 763. and waiting eight months to move for arbitration); Bruce
Terminix, 988 S.W.2d at 703–04 (holding that movant did
G.T. Leach also designated experts and responsible third not waive arbitration rights by propounding requests for
parties, but these actions were also defensive in nature production and interrogatories and waiting six months
and necessary to preserve G.T. Leach's rights. If G.T. to seek arbitration); Mancias, 934 S.W.2d at 88–89
Leach had failed to timely designate experts, it would have (holding that movant did not waive arbitration rights
forfeited the right to present expert witnesses if the suits by propounding written discovery, noticing deposition,
went to trial. See TEX. R. CIV. P. 193.6(a). Likewise, agreeing to reset trial date, and waiting nearly a year to
G.T. Leach had to designate responsible third parties by move for arbitration).
the deadline imposed in the scheduling order. G.T. Leach
did not create the need to timely designate experts and
responsible third parties by agreeing to a scheduling order:
b. Prejudice
the rules of civil procedure impose a default deadline for
expert designations when the court has not set one, and [12] [13] [14] [15] [16] Nor has Sapphire proven
the Civil Practice and Remedies Code imposes a deadline that it suffered unfair prejudice as a result of G.T.
for designating responsible third parties. TEX. R. CIV. P. Leach's litigation conduct. Detriment or prejudice, in
195.2; TEX. CIV. PRAC. & REM. CODE § 33.004(a). this context, refers to an “inherent unfairness caused by
a ‘party's attempt to have it both ways by switching
While we agree that G.T. Leach could have been more between litigation and arbitration to its own advantage.’
prompt in seeking arbitration, most of the delay of ” In re Citigroup Global Mkts., Inc., 258 S.W.3d 623,
which Sapphire complains occurred either during the 625 (Tex.2008) (per curiam) (quoting Perry Homes, 258
eighteen months before Sapphire added G.T. Leach to this S.W.3d at 597). Prejudice may result when a party seeking
case or during the four-plus months during which G.T. arbitration first sought to use the judicial process to gain
Leach sought to transfer venue. See TEX. R. CIV. P. access to information that would not have been available
86 (governing order of pleadings for motion to transfer in arbitration, but propounding discovery will not, in and
venue). The delay between the trial court's denial of the of itself, result in waiver of a right to compel arbitration.
motion to transfer venue and G.T. Leach's motion to Bruce Terminix, 988 S.W.2d at 704. Similarly, while delay
compel arbitration was between two and three months. may be a factor both in terms of whether the movant
We conclude that three months is not a substantial delay has substantially invoked the judicial process and whether
relative to the timeline of this case as a whole. Cf. the nonmovant has suffered prejudice, mere delay is not
Fleetwood Homes, 257 S.W.3d at 694 (no waiver despite ordinarily enough, even if it is substantial. Richmont
eight-month delay); Vesta Ins., 192 S.W.3d at 763 (no Holdings, 455 S.W.3d at 576; see also Fleetwood Homes,
waiver despite two-year delay). 257 S.W.3d at 694 (eight-month delay); Vesta Ins., 192
S.W.3d at 763 (two-year delay). “Waiver can be implied
Considering the totality of the circumstances, we hold that from a party's unequivocal conduct, but not by inaction.”
G.T. Leach has not substantially invoked the litigation ADM Investor, 304 S.W.3d at 374 (citing Perry Homes,
process in contravention of its contractual right to 258 S.W.3d at 593).
arbitration. See Perry Homes, 258 S.W.3d at 589–90
(adopting totality-of-the-circumstances test). As in several G.T. Leach may have had access to more information as a
cases involving similar or greater participation in litigation result of this litigation than if Sapphire's dispute with G.T.
than occurred here, we decline to find waiver under these Leach had originated in arbitration. But Sapphire, not
circumstances. See Richmont Holdings, 455 S.W.3d at 576 G.T. Leach, chose to initiate this suit in the courts rather
*515 (holding that movant did not waive arbitration than arbitration, and G.T. Leach did not serve a single

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request for production, interrogatory, or deposition notice must defer to the arbitrators to determine the meaning and
in the case. Sapphire's contention (discussed below) that it effect of the contractual deadline.
has been prejudiced by the delay because the contractual
deadline for initiating arbitration expired before G.T.
Leach moved to compel arbitration is unavailing because 1. Waiver
that deadline expired before Sapphire even named G.T. [17] [18] Sapphire contends that G.T. Leach waived its
Leach a party to this suit. argument that only the arbitrators can decide Sapphire's
contractual-deadline defense because G.T. Leach failed
In summary, although we agree that G.T. Leach could to raise the argument in the trial court or in the court
have demanded waiver more promptly than it did, we hold of appeals. In support, Sapphire relies on our well-
that the totality of the circumstances do not establish that established error-preservation rules, which preclude a
G.T. Leach substantially invoked the judicial process to party from seeking appellate review of an issue that the
the extent required to demonstrate a waiver of its right party did not properly raise in the trial court. See TEX.
to arbitration, and its participation in the litigation has R. APP. P. 33.1(a)(1) (“As a prerequisite to presenting
not caused Sapphire the kind of prejudice necessary to a complaint for appellate review, the record must show
clear the “high hurdle” of waiver. We thus conclude that that ... the complaint was made to the trial court ....”); see
G.T. Leach has not impliedly waived its right to demand also In re B.L.D., 113 S.W.3d 340, 350 (Tex.2003) (listing
arbitration in this case. cases for proposition that “error [must be] preserved in the
trial court”). 10 These rules do not apply here, however,
because Sapphire first raised its contractual-deadline
B. Contractual Deadline defense in the court of appeals, not in the trial court.
We now turn to Sapphire's contention that a contractual Under our rules, an issue *517 presented in a petition
deadline bars G.T. Leach's arbitration demand. The for review to this Court must have “been preserved for
deadline at issue provides that any appellate review in the trial court and assigned as error in
the court of appeals,” but only “[i]f the matter complained
*516 demand for arbitration shall
of originated in the trial court.” TEX. R. APP. P. 53.2(f).
be made within ... a reasonable time
after the Claim has arisen, and in no
In the trial court, Sapphire argued only that G.T.
event shall it be made after the date
Leach waived its right to arbitration by participating in
when institution of legal or equitable
the litigation. The only time Sapphire referred to the
proceedings based on such Claim
contractual deadline in the trial court was to support
would be barred by the applicable
its waiver-by-litigation defense and, in particular, its
statute of limitations as determined
contention that G.T. Leach's participation in the litigation
pursuant to Section 13.7.
was prejudicial to Sapphire. 11 Sapphire never asserted in
The court of appeals agreed with Sapphire that this the trial court that the contractual deadline independently
deadline bars G.T. Leach's demand for arbitration bars G.T. Leach's arbitration demand. G.T. Leach thus
because the statute of limitations had run on Sapphire's had no reason to argue in the trial court that the
claims by the time G.T. Leach made its demand. 9 G.T. arbitrators, rather than the court, must resolve that
Leach argues that the court should not have addressed the assertion. On this point, there was no error for G.T. Leach
contractual deadline at all, because Sapphire's contention to preserve in the trial court.
that the deadline bars G.T. Leach's arbitration demand
is itself an issue that Sapphire agreed to resolve through [19] [20] Sapphire first relied on the contractual deadline
arbitration. In other words, G.T. Leach argues that only as an independent bar to G.T. Leach's arbitration demand
the arbitrators—and not the courts—can decide whether in its appellee's brief in the court of appeals, and the
the contractual deadline bars G.T. Leach's demand for error that G.T. Leach now complains of (i.e., that the
arbitration. In response, Sapphire asserts that G.T. Leach court of appeals should not have decided that issue) first
waived this argument by failing to raise it in the trial court arose from the court of appeals' judgment. Although G.T.
or the court of appeals. We conclude that G.T. Leach Leach could have made this argument in its reply brief
did not waive the argument, and we agree that the courts or in a motion for rehearing in the court of appeals, 12

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our rules do not require petitioners to have made in the
court of appeals all arguments that are responsive to Here, when Sapphire argued for the first time in the court
arguments that a respondent raised for the first time in of appeals that the contractual deadline is an independent
that court. See Key Operating & Equip., Inc. v. Hegar, bar to G.T. Leach's arbitration demand, G.T. Leach
435 S.W.3d 794, 797 (Tex.2014) (“An issue raised in this neither conceded nor disputed that the court of appeals
Court must have been assigned as error in the court could decide that issue, and instead argued only that the
of appeals if it originated in the trial court.”) (emphasis bar did not apply. After the court of appeals held, for the
added). Instead, we have held that when the petitioner's first time in this case, that the bar applied and precluded
argument or complaint first arises “from the court of arbitration regardless of whether G.T. Leach waived any
appeals' judgment,” it “may be raised either in a motion right to arbitration, G.T. Leach asserted in its petition for
for rehearing in the court of appeals or in a petition for review in this Court both that the court could not decide
review in this Court.” Bunton v. Bentley, 153 S.W.3d 50, that issue and, if it could, the bar does not apply. Because
53 (Tex.2004) (holding that petitioner's *518 “complaint the error of which G.T. Leach complains did not originate
that the exemplary damages were unconstitutionally in the *519 trial court and first arose from the court of
excessive arose from the court of appeals' judgment and appeals' judgment, G.T. Leach did not waive its complaint
may therefore be raised in this Court for the first time”) by raising it for the first time in its petition for review in
(citing Larsen v. FDIC/Manager Fund, 835 S.W.2d 66, 74 this Court.
n.12 (Tex.1992)).
[21] [22] That is not to say that we must address and
Our decision in Gilbert Texas Construction, L.P. v. resolve an argument that the petitioner failed to raise
Underwriters at Lloyd's London illustrates this point. 327 in the court of appeals whenever the asserted error
S.W.3d 118, 125 (Tex.2010). In that case, Gilbert sued arose from that court's judgment. In the exercise of its
Underwriters for breach of contract after Underwriters discretionary jurisdiction, a court may elect to address
denied coverage of Gilbert's insurance claim. On cross- the issue, or not. See, e.g., United States v. Williams,
motions for summary judgment, the trial court agreed 504 U.S. 36, 41, 44–45, 112 S.Ct. 1735, 118 L.Ed.2d 352
with Gilbert, and having won on the issue of coverage, (1992) (finding it “a permissible exercise of our discretion”
Gilbert had no obligation to preserve any error in the trial to address an issue that was not “pressed or passed
court's judgment. Id. Underwriters appealed, however, upon” in the appellate court in the case presently before
and argued in the court of appeals that an exclusion the Court). The decision involves “[i]mportant prudential
to the policy's coverage applied. In that court, Gilbert considerations,” such as the need to conserve judicial
did not dispute that the exclusion applied, but instead resources, whether allowing lower courts to first consider
argued that an exception to the exclusion also applied, and rule on the issue will “further the goal of accuracy
thus resulting in coverage. The court of appeals reversed in judicial decision-making,” and our duty to “promote
and rendered judgment for Underwriters, finding that the fairness among litigants.” In re B.L.D., 113 S.W.3d at 350.
exclusion applied and the exception did not. Id. In its We conclude that G.T. Leach did not waive its right to
petition for review in this Court, Gilbert argued both that argue that the arbitrators, rather than the courts, must
the exclusion did not apply and, if it did, the exception to decide the effect of the contractual-deadline issues, and we
the exclusion applied as well. Pet. for Review at ix, Gilbert elect to exercise our discretionary jurisdiction to resolve
Tex. Constr., 327 S.W.3d 118, 2008 WL 2195918, at *6, that argument now.
*12. Underwriters then asserted that Gilbert had waived
its argument that the exclusion did not apply by failing to
raise it in the court of appeals, but we disagreed. Gilbert 2. Arbitrability of the Deadline
Tex. Constr., 327 S.W.3d at 125. “While ordinarily a party [23] [24] We now turn to the question of who should
waives a complaint not raised in the court of appeals,” we decide whether the contractual deadline bars G.T. Leach's
explained, “a complaint arising from the court of appeals' demand for arbitration in this case. Ultimately, this is a
judgment may be raised either in a motion for rehearing question of the parties' intent as expressed in their written
in that court or in a petition for review in this Court.” Id. agreement. When parties have contractually agreed to
(citing TEX. R. APP. P. 53.2(f); Bunton, 153 S.W.3d at arbitrate their future disputes, the courts' obligation to
honor and enforce that agreement requires that they
53). 13
refer those disputes to arbitration. The Texas Arbitration

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Act (TAA) 14 thus provides that courts “shall order the party's conduct in litigation equates to a waiver of its rights
parties to arbitrate on application of a party showing: (1) under the arbitration agreement, there is no presently
an agreement to arbitrate; and (2) the opposing party's enforceable agreement to arbitrate.
refusal to arbitrate.” TEX. CIV. PRAC. & REM. CODE §
171.021(a) (emphasis added); In re FirstMerit Bank, N.A., In this regard, the United States Supreme Court has
52 S.W.3d 749, 753–54 (Tex.2001) (“Once the trial court recognized a distinction between questions of “substantive
concludes that the arbitration agreement encompasses the arbitrability”—which courts decide—and “procedural
claims, and that the party opposing arbitration has failed arbitrability”—which courts must refer to the arbitrators
to prove its defenses, the trial court has no discretion but to decide. See BG Group, PLC v. Republic of Arg., –––U.S.
to compel arbitration and stay its own proceedings.”) ––––, 134 S.Ct. 1198, 1206–07, 188 L.Ed.2d 220 (2014);
Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 81,
[25] [26] The courts' role, then, is first to decide 123 S.Ct. 588, 154 L.Ed.2d 491 (2002). In Howsam, a
whether the parties made a valid and presently enforceable brokerage firm argued that its client could not initiate
agreement to arbitrate. TEX. CIV. PRAC. & REM. an arbitration because the client failed to do so within
CODE § 171.021(b) (“If a party opposing an application a six-year deadline that the parties had contractually
[for arbitration] denies the existence of the agreement, the adopted as part of their arbitration agreement. 537 U.S.
court shall summarily determine that issue.”). If they did, at 81, 123 S.Ct. 588. The Court held that this was not a
then the court must decide whether the present disputes question of arbitrability for the courts to decide. Id. at
fall within the scope of that agreement. See id.; In re 83, 123 S.Ct. 588. Although the Court acknowledged that,
Hous. Pipe Line Co., 311 S.W.3d 449, 451 (Tex.2009); “[l]inguistically speaking, one might call any potentially
J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 dispositive gateway question a ‘question of arbitrability,’
(Tex.2003). These questions that courts must resolve are ” it explained that “the phrase ‘question of arbitrability’
sometimes referred to as questions of “arbitrability.” has a far more limited scope” and does not encompass “
*520 See, e.g., Hous. Pipe Line, 311 S.W.3d at 451–52; ‘procedural’ questions which grow out of the dispute and
bear on its final disposition” or “allegation[s] of waiver,
Perry Homes, 258 S.W.3d at 587–92. 15 If, by answering
delay, or a like defense.” Id. at 84, 123 S.Ct. 588 (citation
these questions, the court determines that the present
omitted). Quoting the Revised Uniform Arbitration Act
disputes are in fact arbitrable under the parties' agreement,
of 2000, the Court explained that, “in the absence
the court must complete its role by ordering the parties
of an agreement to the contrary, issues of substantive
to arbitration and leaving it to the arbitrators to resolve
arbitrability ... are for a court to decide and issues of
those disputes. See TEX. CIV. PRAC. & REM. CODE
procedural arbitrability, i.e., whether prerequisites such as
§ 171.021; Venture Cotton Co-op. v. Freeman, 435 S.W.3d
time limits, notice, laches, estoppel, and other conditions
222, 232 (Tex.2014).
precedent to an obligation to arbitrate have been met,
are for the arbitrators to decide.” Id. at 81, 123 S.Ct. 588
[27] We have also recognized that the question of whether
(emphasis and citation omitted, ellipsis in Howsam ).
a party has waived its right to arbitration through its
litigation conduct is a question of arbitrability for the
The Supreme Court reiterated this distinction in
courts to decide. Perry Homes, 258 S.W.3d at 588.
BG Group, further clarifying the difference between
We concluded that this is a question of arbitrability,
substantive arbitrability questions addressing the
rather than a question to be arbitrated, because (1)
existence, enforceability, and scope of an agreement
“[c]ontracting parties would expect the court to decide
*521 to arbitrate (which courts decide), and procedural
whether one party's conduct before the court waived the
arbitrability questions addressing the construction and
right to arbitrate,” (2) it is a “gateway” matter regarding
application of limits on that agreement (which only
“whether the parties have submitted a particular dispute
arbitrators can decide):
to arbitration,” and (3) “courts decide defenses relating
solely to the arbitration clause.” Id. at 588–89. In essence, On the one hand, courts presume that the parties intend
the question of whether a party has waived its right to courts, not arbitrators, to decide what we have called
arbitration by its conduct in litigation is just another disputes about “arbitrability.” These include questions
way of asking the first question of arbitrability: whether such as “whether the parties are bound by a given
there is a presently enforceable arbitration agreement. If a arbitration clause,” or “whether an arbitration clause

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in a concededly binding contract applies to a particular can award Sapphire a remedy on its negligence claims
type of controversy.” in light of Sapphire's more than two-year delay in
asserting them. More pointedly, it involves an alleged
On the other hand, courts presume that the parties “delay beyond a limitations deadline.” Perry Homes, 258
intend arbitrators, not courts, to decide disputes S.W.3d at 589; see also id. at 588 (noting that “federal
about the meaning and application of particular courts ... consistently [defer to arbitrators] when waiver
procedural preconditions for the use of arbitration. concerns limitations periods” *522 ). We explained in
These procedural matters include claims of “waiver, Perry Homes that, absent express contractual agreement
delay, or a like defense to arbitrability.” And they to the contrary, issues of this nature must be resolved by
include the satisfaction of “prerequisites such as time arbitrators rather than courts. See id. at 588–89; see also
limits, notice, laches, estoppel, and other conditions BG Grp., 134 S.Ct. at 1207 (observing that “satisfaction
precedent to an obligation to arbitrate.” of ‘prerequisites such as time limits' ” are questions of
procedural arbitrability for the arbitrator to decide).
134 S.Ct. at 1206–07 (citations omitted).

Stated another way, the parties' dispute over the meaning
We applied these distinctions when we decided in Perry
and effect of the contractual deadline does not touch
Homes that waiver by litigation conduct presents a
upon the issue of whether an enforceable agreement to
question of substantive arbitrability that courts must
arbitrate Sapphire's claims exists. Neither party disputes
decide. 258 S.W.3d at 588–89. We held that, although
that such an agreement does exist. Instead, they dispute
Howsam referenced “waiver” and “delay” as “procedural
whether, in light of the contractual deadline, the existing,
matters” for arbitrators to decide, it did not mean that
enforceable agreement limits G.T. Leach's rights under the
the issue of waiver by litigation conduct was one for
agreement itself. Sapphire's contention that it does and
arbitrators, rather than courts. Id. Instead, we held that
G.T. Leach's contention that it does not are themselves
courts should defer to arbitrators to resolve the issue
“Claim[s] arising out of or related to the Contract,”
of waiver when “waiver concerns limitations periods or
waiver of particular claims or defenses,” but courts should which the parties expressly agreed to arbitrate. 17 See In
decide issues of waiver by litigation conduct. Id. at 588. re Wood, 140 S.W.3d 367, 369 (Tex.2004) (holding that
We stated that “parties generally intend arbitrators to dispute over whether contract prohibited class arbitration
decide matters that ‘grow out of the dispute and bear on its was a contract construction issue, which was a “dispute
final disposition,’ ” such as “waiver of a substantive claim arising out of” the contract that the parties had committed
or delay beyond a limitations deadline.” Id. at 589. Our to the arbitrator) (citing Green Tree Fin. Co. v. Bazzle,
explanation in Perry Homes is consistent with our prior 539 U.S. 444, 123 S.Ct. 2402, 156 L.Ed.2d 414 (2003),
recognition that, once the party seeking arbitration proves for the proposition that whether contract prohibited class
the existence of an enforceable agreement to arbitrate, arbitration was a “dispute about what the arbitration
Texas and federal law recognize a strong presumption contract [meant,]” which was “a dispute ‘relating to this
“in favor of arbitration such that myriad doubts— contract’ ” that the parties had agreed “an arbitrator, not
as to waiver, scope, and other issues not relating to a judge, would answer”).
enforceability—must be resolved in favor of arbitration.”
We do not hold that disputes over a contractual deadline
Poly–Am., 262 S.W.3d at 348. 16
in an arbitration agreement will always present questions
of procedural arbitrability that arbitrators must decide. If
In this case, the contractual deadline in the general
a party contends, for example, that a contractual deadline
contract falls squarely within the category of “matters that
renders the agreement to arbitrate unconscionable or that
‘grow out of the dispute and bear on [the arbitrators']
the deadline operates to limit the scope of the claims
final disposition’ ” of the claims. See Perry Homes,
the parties agreed to arbitrate, those contentions might
258 S.W.3d at 588. The deadline does not determine
raise issues of substantive arbitrability for the courts to
the present existence, enforceability, or scope of the
decide. Cf. Quilloin v. Tenet HealthSystem Phila., Inc.,
agreement to arbitrate the parties' disputes, but instead
673 F.3d 221, 234 (3d Cir.2012) (considering argument
imposes a procedural limit on the parties' rights under that
that time limit in arbitration agreement was substantively
agreement. It bears on the arbitrators' final disposition
unconscionable); but see Kristian v. Comcast Corp., 446
of Sapphire's claims—specifically, whether the arbitrators

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58 Tex. Sup. Ct. J. 532

F.3d 25, 43–44 (1st Cir.2006) (holding that arbitrator or equity would bind them to the contract generally.” In
should decide whether contract's one-year limitations re Weekley Homes, L.P., 180 S.W.3d 127, 129 (Tex.2005).
provision conflicted with Clayton Act's four-year statute We conclude here, however, that neither law nor equity
of limitations for antitrust claims). But Sapphire asserts requires Sapphire to arbitrate these claims.
no such contentions in this case. Instead, it concedes the
existence of an enforceable arbitration agreement that
applies to its claims against G.T. Leach, and argues only A. Arbitration Under the General Contract
that the terms of that agreement limit G.T. Leach's rights We begin with the Other Defendants' reliance on the
under the agreement itself. Consistent with the decisions general contract as support for their arbitration demands.
We conclude that Sapphire did not agree in the *524
of numerous federal courts, 18 we *523 conclude that
general contract to arbitrate its claims against the Other
Sapphire's argument presents questions of procedural
Defendants and is not equitably estopped from refusing
arbitrability that only the arbitrators can decide, and the
to do so.
court of appeals thus erred by deciding the issue.

In summary, with respect to Sapphire's claims against 1. No Agreement to Arbitrate
G.T. Leach, we hold that G.T. Leach did not expressly As we have explained, a party seeking to compel
or impliedly waive its right to arbitration, and the courts arbitration must establish that a valid arbitration
must defer to the arbitrators to decide whether and how agreement exists and that the claims at issue fall within
the contractual deadline affects that right. We therefore the scope of that agreement. TEX. CIV. PRAC. & REM.
reverse the court of appeals' judgment with respect to CODE § 171.021(a); FirstMerit Bank, 52 S.W.3d at 753.
the trial court's denial of G.T. Leach's motion to compel Sapphire concedes that the general contract contains a
arbitration. valid arbitration agreement, but contends that the Other
Defendants cannot enforce that agreement because they
are not signatories or parties to the general contract. See
III. In re Rubiola, 334 S.W.3d 220, 224 (Tex.2011) (holding
that, generally, “parties must sign arbitration agreements
before being bound by them”). We have recognized,
The Other Defendants however, that in some circumstances a non-signatory can
be bound to, or permitted to enforce, an arbitration
[28] We now turn to the arbitrability of Sapphire's claims
agreement. See, e.g., In re Kellogg Brown & Root, Inc.,
against the Other Defendants, which include (1) the
166 S.W.3d 732, 739 (Tex.2005) (listing “(1) incorporation
Insurance Brokers and Engineers, who each allegedly
by reference; (2) assumption; (3) agency; (4) alter ego; (5)
contracted directly with Sapphire in agreements that
equitable estoppel, and (6) third-party beneficiary”).
undisputedly did not include an enforceable arbitration
agreement, and (2) the Subcontractors, who contracted
[29] [30] With regard to the Other Defendants and the
directly with G.T. Leach in agreements that allegedly
general contract, the question in this case, as in Rubiola,
did include enforceable arbitration agreements. The
“is not whether a non-signatory may be compelled to
Other Defendants contend that Sapphire agreed to
arbitrate but rather whether a non-signatory may compel
arbitrate its claims against them in the general contract
arbitration.” 334 S.W.3d at 224. As a general rule, “an
and the subcontracts, and alternatively, that Sapphire
arbitration clause cannot be invoked by a non-party
is equitably estopped from denying its assent to the
to the arbitration contract.” Grigson v. Creative Artists
arbitration agreements in those contracts. Although the
Agency, L.L.C., 210 F.3d 524, 532 (5th Cir.2000). “[The]
Other Defendants did not sign the general contract
policy favoring arbitration is strong, but it alone cannot
and Sapphire did not sign the subcontracts, we have
authorize a non-party to invoke arbitration.” Id. Thus, the
recognized that “sometimes a person who is not a party
Other Defendants must establish that they have a valid
to the agreement can compel arbitration with one who is,
legal right to enforce the general contract's arbitration
and vice versa.” Meyer v. WMCO–GP, LLC, 211 S.W.3d
agreement even though they are not parties to that
302, 305 (Tex.2006). More specifically, “nonparties may
contract. The Other Defendants contend that Sapphire
be bound to an arbitration clause when the rules of law
agreed in the general contract that the Other Defendants

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could enforce its arbitration provisions. See Rubiola, 334 to be accorded in the arbitration. We conclude that
S.W.3d at 222 (holding that “parties to an arbitration the Other Defendants' reliance on the scope of the
agreement may grant non-signatories the right to compel agreement between Sapphire and G.T. Leach to establish
arbitration”). 19 the existence and enforceability of an agreement between
Sapphire and the Other Defendants is misplaced. As we
This contention raises questions about “the existence of have explained, a party seeking to compel arbitration
a valid arbitration clause between specific parties and is must establish both (1) the existence of a valid enforceable
therefore a gateway matter for the court to decide.” Id. agreement to arbitrate and (2) that the claims at issue fall
at 224. Ultimately, the question requires us to determine within the scope of that agreement. TEX. CIV. PRAC. &
“the intent of the parties, as expressed in the terms REM. CODE § 171.021(a); FirstMerit Bank, 52 S.W.3d
of the agreement,” so we apply “ordinary principles of at 753. The Other Defendants' argument that Sapphire
state contract law [to] determine whether there is a valid agreed that they, as non-signatories, could enforce the
agreement to arbitrate.” Id. (quoting Bridas S.A.P.I.C. v. arbitration agreement addresses the first issue, not the
Gov't of Turkm., 345 F.3d 347, 355, 358 (5th Cir.2003)); second. Although Sapphire's claims may fall within the
see also Kellogg Brown & Root, 166 S.W.3d at 738 (holding scope of the agreement, the scope of the arbitration clause
that, “[u]nder the FAA, ordinary principles of state “does not answer whether [Sapphire] must arbitrate” with
contract law determine whether there is a valid agreement the Other Defendants. Kellogg Brown & Root, 166 S.W.3d
to arbitrate”). The Other Defendants argue that several at 739–40.
provisions of the contract demonstrate Sapphire's intent
to allow them to require arbitration, but we find none of
them persuasive. b. The Joinder Provisions

The Other Defendants contend that the joinder provision
itself constitutes Sapphire's agreement that they could
a. The “Scope” of Arbitration
enforce the general contract's arbitration agreement.
First, the Other Defendants contend that Sapphire's Specifically, they contend that, through the joinder
claims against them fall *525 within the scope of provision, Sapphire agreed to allow non-parties to
the general contract's arbitration agreement because the “require” arbitration if their presence is “required” for
scope includes “[a]ny Claim arising out of or related to complete relief to be afforded in the arbitration. The
the Contract,” and Sapphire expressly agreed that the Subcontractors, in particular, note that Sapphire and G.T.
arbitration could include parties other than G.T. Leach. Leach specifically revised the AIA form to add a reference
Specifically, the Other Defendants rely on a provision to “a Subcontractor” as a party whose presence would
of the general contract in which Sapphire and G.T. be expected in the arbitration. Because Sapphire seeks to
Leach agreed that “[a]ny arbitration may include, by recover the same damages from each of the defendants and
consolidation or joinder or any other manner, parties to hold all of the defendants jointly and severally liable
other than the Owner, Contractor, a Subcontractor, a for those damages, they assert, the arbitration can only
separate contractor ... and other persons substantially provide “complete relief” if all of them are parties to it.
involved in a common question of fact or law whose We do not agree.
presence is required if complete relief is to be accorded in
arbitration.” To begin with, the joinder provision states that an
arbitration “may include” other parties, and we find no
The Other Defendants argue that, through this “joinder basis on which to conclude that the parties intended the
provision,” Sapphire agreed that the scope of the word “may” to be mandatory rather than permissive in
arbitration would include Sapphire's claims against this context. Cf. Iliff v. Iliff, 339 S.W.3d 74, 81 (Tex.2011)
the Other Defendants because those claims “arise out (stating that the word “may” is “permissive” and “imports
of or relate to” the general contract, those claims the exercise of discretion”); Dall. Cnty. Cmty. Coll. Dist.
and Sapphire's claims against G.T. Leach involve v. Bolton, 185 S.W.3d 868, 874 (Tex.2005) (“The words
common questions of law or fact, and the Other ‘may’ and ‘shall’ mean different things, and ... [t]he context
Defendants' presence is “required” for complete relief in this case does not require an interpretation of the

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permissive word ‘may’ to mean something other than make their joinder “required”; rather, it allows for their
its plain meaning.”); Wichita Cnty., Tex. v. Hart, 917 joinder, but only if their joinder is “required” to provide
S.W.2d 779, 782 (Tex.1996) (“The Legislature's use of complete relief. We conclude that the joinder provision
the permissive *526 term ‘may’ in the Whistleblower does not give the Other Defendants, who are not parties
Act's venue provision, in light of its contemporaneous to the general contract, a legal right to require Sapphire to
reorganization of the venue statute, strongly suggests arbitrate with them.
that the Act's venue provision is permissive.”). The
original AIA form provided that “[n]o arbitration shall The Other Defendants contend that, at a minimum,
include, ... parties other than the Owner, Contractor, a the joinder provision gives G.T. Leach a contractual
separate Contractor, ... and other persons substantially right to join others whose presence is “necessary to
involved in a common question of fact or law whose completely resolve the dispute,” even if it does not give
presence is required if complete relief is to be accorded those other parties the right to join themselves. In light
in arbitration.” In its original form, the provision thus of the provision's permissive language and references to
prohibited joinder of any but the listed parties (at least, the necessity of each party's “consent,” as we have just
absent written consent of all the parties), but it did not discussed, we disagree. Moreover, even if the contract gave
require joinder of the listed parties. Sapphire and G.T. G.T. Leach such a right, G.T. Leach has not requested
Leach revised this provision to state that “Any [instead of that relief in this Court. G.T. Leach asks this Court
“No”] arbitration may [instead of “shall”] include parties to “order the claims brought by Sapphire against [G.T.
other than” the listed parties, and added “Subcontractors” Leach] to arbitration,” without reference to the claims
to the list. The effect of their revisions was to remove brought by Sapphire against the Other Defendants.
the prohibition against including parties “other than”
those listed. Because they changed “shall” to “may,”
they did not require the joinder of unlisted parties, but
c. The Definition of “Contractor”
neither did they require the joinder of the listed parties.
In fact, they retained a sentence from the original form The Engineers and Insurance Brokers point out that the
providing that a party's “[c]onsent to arbitration involving general contract states that it is an agreement between
an additional person or entity ... shall not constitute “the Owner” and “the Contractor,” and that Sapphire
consent to arbitration of a claim not described therein or *527 and G.T. Leach each signed the agreement in
with a person or entity not named or described therein.” those respective capacities. They note, however, that the
contract provides that the term “Contractor” includes
The provision thus permits the parties to the general any contractor who executes a separate agreement with
contract to consent to the joinder of additional parties the owner. Since Sapphire is suing them for breach of
in the arbitration, but it does not require them to do so. separate agreements directly between each of them and
Ultimately, the Other Defendants concede as much by Sapphire, they contend that they are each a “Contractor”
repeatedly acknowledging throughout their briefs that the under the general contract and thus entitled to enforce its
joinder provision “allows inclusion or joinder,” “allow[s] arbitration agreement. The contract, however, expressly
them to be joined” so that they “could participate” in provides that the “Contract Documents shall not be
the arbitration, and “permits all parties to arbitrate” construed to create a contractual relationship of any
together. Nevertheless, they contend that, because this kind ... between [Sapphire] and a Subcontractor ... or [ ]
clause is ambiguous as to whether it is mandatory or between any persons or entities other than [Sapphire] and
permissive, we must construe it as mandatory in support
[G.T. Leach].” 20
of the law's presumption in favor of arbitration. This
presumption, however, requires that doubt “as to waiver,
In summary, we find no language in the general contract
scope, and other issues not relating to enforceability—
that gives the Other Defendants rights to enforce the
must be resolved in favor of arbitration.” Poly–Am., 262
general contract's arbitration clause against Sapphire.
S.W.3d at 348 (emphasis added). And, in any event, we
We thus conclude that Sapphire did not agree in the
do not find the language here to be ambiguous. The fact
general contract to arbitrate its claims against the Other
that the provision refers to other parties as those whose
Defendants.
presence “is required” to accord complete relief does not

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to compel arbitration under contract between contractor
2. No Equitable Estoppel and owner).
[31] As an alternative to the argument that Sapphire
expressly agreed that they can enforce the general The Other Contractors contend that Sapphire's claims
contract's arbitration provisions, the Other Defendants against them seek a “direct benefit” under the general
argue that Sapphire is equitably estopped from denying its contract, even though they are not parties to that contract,
assent to such an agreement. We do not agree. because the claims “arise from and must be determined by
reference to” the general contract. More specifically, they
[32] [33] [34] We have recognized that, under principles assert that the work that they performed was necessary
of equitable estoppel, “a litigant who sues based on a only because of the general contract, and without the
contract subjects him or herself to the contract's terms ..., general contract they would have had no duties of their
including the Arbitration Addendum.” FirstMerit Bank, own to perform. Sapphire's claims thus “relate to and
52 S.W.3d at 755–56; see Meyer, 211 S.W.3d at 305 arise out of” the general contract, they contend, because
(listing cases so holding). This is because the claimant they are claims for work performed “pursuant to” the
cannot “have it both ways”; it cannot, “on the one hand, general contract. The Subcontractors also note that the
seek to hold the non-signatory liable pursuant to duties general contract required G.T. Leach to “include terms
imposed by the agreement, which contains an arbitration in the subcontracts ... binding its subcontractors ... to the
provision, but, on the other hand, deny arbitration's applicable terms of this agreement.”
applicability because the defendant is a non-signatory.”
Meyer, 211 S.W.3d at 306. This equitable principle applies Sapphire is not suing the Other Defendants, however, for
when a claimant seeks “direct benefits” under the contract breach of obligations under the general contract. Rather,
that contains the arbitration agreement. Kellogg Brown & Sapphire alleges in its petition that the Other Defendants
Root, 166 S.W.3d at 739. “Whether a claim seeks a direct each breached duties that they each “contractually
benefit from a contract containing an arbitration clause agreed” to perform, and failed to perform them as a
turns on the substance of the claim, not artful pleading.” reasonable professional would have performed them. We
Weekley Homes, 180 S.W.3d at 131–32. agree that Sapphire is not seeking direct benefits under
the general contract. We read Sapphire's allegations to
[35] [36] [37] [38] It is not enough, however, that therefer to separate agreements in which the Engineers
party's claim “relates to” the contract that contains the agreed with Sapphire to provide engineering services,
arbitration agreement. Kellogg Brown & Root, 166 S.W.3d the Insurance Brokers agreed with Sapphire to provide
at 741. Instead, the party must seek “to derive a direct insurance services, and the Subcontractors agreed with
benefit”—that is, a benefit that “stems directly”—from
G.T. Leach to provide construction-related services. 22
that contract. Id.; In re Morgan Stanley & Co., 293 S.W.3d
182, 184 (Tex.2009). The claim must “depend *528 on the
The record and briefs in this case reflect that Sapphire
existence” of the contract, Meyer, 211 S.W.3d at 307, and
contends that the Engineers and Insurance Brokers
be unable to “stand independently” without the contract,
contracted directly with Sapphire and are what the general
Kellogg Brown & Root, 166 S.W.3d at 739–40. The alleged
contract refers to as a “separate contractor” rather than a
liability must “arise[ ] solely from the contract or must
“subcontractor.” Thus, *529 although Sapphire's breach
be determined by reference to it.” Weekley Homes, 180
of contract claims against the Engineers may “relate to”
S.W.3d at 132. But “when the substance of the claim arises
the general contract, they “arise out of” and directly
from general obligations imposed by state law, including
seek the benefits of a separate alleged agreement between
statutes, torts and other common law duties, or federal
Sapphire and the Engineers. Similarly, Sapphire alleges
law,” rather than from the contract, “direct benefits”
that the Insurance Brokers “contracted with Sapphire to
estoppel does not apply, even if the claim refers to or
procure adequate insurance to protect Sapphire while the
relates to the contract. 21 Morgan Stanley, 293 S.W.3d at Sapphire condominiums were being built” and “breached
184 n.2; see also Kellogg Brown & Root, 166 S.W.3d at 740– that agreement thereby damaging Sapphire.” These claims
41 (holding that subcontractor's quantum meruit claim depend on an alleged insurance-procurement agreement
against contractor did not justify direct benefits estoppel between Sapphire and the Insurance Brokers, not the
general contract between Sapphire and G.T. Leach.

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Finally, the Other Defendants argue that Sapphire is
And finally, Sapphire asserts that the Subcontractors equitably estopped from refusing to arbitrate its tort
breached obligations they accepted in their subcontracts claims against them because those claims assert only
with G.T. Leach, not in the general contract to which negligent performance of contractual duties, and thus seek
Sapphire was a party. While these claims may bear some only damages resulting from the breach of contractual
relationship to the general contract, the fact that the duties rather than duties imposed by law. Under these
claims would not have arisen but for the existence of circumstances, they contend, the allegedly negligent
the general contract is not enough to establish equitable breaches can “only be characterized as a breach of
estoppel. See Kellogg Brown & Root, 166 S.W.3d at contract,” and the claims thus “sound in contract, not
739–40. Sapphire's contract claims against the Other tort.” This argument raises a complex legal doctrine: the
Defendants do not, on their face, seek a “direct benefit” “economic loss” rule, sometimes referred to in this context
under the general contract; rather, the record at this stage as the law of “contorts.” See, e.g., Sw. Bell Tel. Co.
indicates that they seek direct benefits under other alleged v. DeLanney, 809 S.W.2d 493, 494–95 (Tex.1991); id. at
contracts. Under these circumstances, we cannot conclude 495 (Gonzales, J., concurring). We need not address this
that the “direct benefits” theory of equitable estoppel doctrine here, however, because even if Sapphire's tort
authorizes the Other Defendants to rely on the arbitration claims sound in contract, they do no arise solely out of or
provision in Sapphire's general contract with G.T. Leach. otherwise seek direct benefits under the general contract.
See Morgan Stanley, 293 S.W.3d at 184; Weekley Homes, See Kellogg Brown & Root, 166 S.W.3d at 740–41. While
180 S.W.3d at 133; Kellogg Brown & Root, 166 S.W.3d at they have some relationship to the general contract, the
739–40. mere fact that the claims would not have arisen but for that
contract is not enough to establish equitable estoppel. See
In addition, the Other Defendants argue that, even if id. at 739–40. We therefore hold that equitable estoppel
Sapphire is not suing them for breach of the general does not apply to enable the Other Defendants to compel
contract, it is seeking to hold them jointly and severally Sapphire to arbitrate its tort claims against them under the
liable for the damages that Sapphire alleges G.T. Leach's general contract.
breach of that contract caused. Specifically, the Insurance
Brokers contend that, “if Sapphire seeks to hold the
Insurance Defendants liable for damages arising from B. Arbitration Under the Subcontracts
G.T. Leach's alleged breach of the [general contract], [39] Finally, we turn to the Subcontractors' arguments
then Sapphire must necessarily rely on the existence of that Sapphire agreed through the subcontracts to arbitrate
its claims against the Subcontractors, or alternatively, that
the [general contract].” 23 But contrary to the Insurance
Sapphire is equitably estopped from denying its assent to
Brokers' argument, Sapphire's pleadings do not assert
the arbitration agreement in the subcontracts. While we
that the Insurance Brokers are jointly and severally liable
note that Sapphire is not a signatory to the subcontracts,
for the damages allegedly resulting from G.T. Leach's
its claims that the Subcontractors “contractually agreed”
breach of contract, 24 and the parties have not identified to perform their services and are liable to Sapphire
any doctrine that would permit Sapphire to hold them for having breached those agreements at least appear
jointly and severally liable *530 under the facts of this to be “based on” and “directly seek benefits” under
case. 25 “Texas law permits joint and several liability for the subcontracts, and thus Sapphire may be equitably
most actions based in tort, as long as ‘the percentage of estopped to deny obligations under the subcontracts. See
responsibility attributed to the defendant with respect to FirstMerit Bank, 52 S.W.3d at 755–56. We need not decide
a cause of action is greater than 50 percent.’ ” Sharyland that issue, however, because we conclude that, even if the
Water Supply Corp. v. City of Alton, 354 S.W.3d 407, 424 subcontracts are binding on Sapphire, they do not require
(Tex.2011) (quoting TEX. CIV. PRAC. & REM. CODE § the parties to arbitrate these claims.
33.013(b)(1)). But the Insurance Brokers' “direct benefits”
estoppel argument is premised on Sapphire seeking to hold *531 The Subcontractors provided their respective
them jointly and severally liable for G.T. Leach's breach services pursuant to essentially identical subcontracts
of contract, not its torts. that they entered into with G.T. Leach. Both of these
subcontracts contain three sections that pertain to the

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arbitration of disputes between the parties. First, section effect to all of the provisions with reference to the whole
11.1 states the parties' agreement to arbitrate disputes: instrument, Myers v. Gulf Coast Minerals Mgmt. Corp.,
361 S.W.2d 193, 196 (Tex.1962); and (4) we must construe
All claims, disputes and other the provisions together if we can, rather than allow one to
matters in question arising out of, cancel the other, In re U.S. Home Corp., 236 S.W.3d 761,
or relating to, this Subcontract 765 (Tex.2007).
or the breach thereof shall be
decided by arbitration in accordance We conclude that there is no way to give full effect to
with the Construction Industry both provisions, and that one must necessarily “nullify”
Arbitration Rules of the American the other at least to some extent. If we give effect to
Arbitration Association unless the the agreement to arbitrate in section 11.1, for example,
parties mutually agree otherwise. then we must necessarily conclude that the agreement
does “contain a provision for the mandatory arbitration
Section 11.3 then states that, if G.T. Leach “enter[s]
of disputes,” and thus nullify section 12.13's disclaimer.
into arbitration with [Sapphire] or others regarding
The Subcontractors argue that we can give effect to both
matters relating to this Subcontract, Subcontractor will
by construing the disclaimer to mean that arbitration
agree, if requested by [G.T. Leach] to consolidation
is “mandatory” unless all parties mutually agree not
of this arbitration with [G.T. Leach's] arbitration with
to arbitrate, in which case arbitration would not be
[Sapphire],” and in that case the Subcontractors “shall
mandatory. But parties can always mutually agree not
be bound by the result of the arbitration with [Sapphire]
to do what they previously agreed to do, and in any
to the same degree as [G.T. Leach].” Finally, however,
event, section 11.1 already provides that the parties can
section 12.13 states that the parties do not agree to
“mutually agree” not to arbitrate.
mandatory arbitration:

Notwithstanding any provision Generally, we must give the subcontracts their plain
to the contrary contained meaning and enforce them without rendering either
in the Contract Documents, provision entirely superfluous. Cf. El Paso Field Servs.,
Subcontractor expressly agrees that L.P. v. MasTec N. Am., Inc., 389 S.W.3d 802, 808
this Subcontract does not contain (Tex.2012) (prohibiting such a result); see also Moayedi,
a provision for the mandatory 438 S.W.3d at 7; Mercer v. Hardy, 444 S.W.2d 593, 595
arbitration of disputes, nor does (Tex.1969). But we cannot do *532 that when the plain
it incorporate by reference such a meaning of one provision unambiguously requires that
provision if such is contained in we not enforce another. See Tex. Lottery Comm'n v. First
the [general] contract between [G.T. State Bank of DeQueen, 325 S.W.3d 628, 637 (Tex.2010).
Leach] and [Sapphire]. There is a direct conflict between section 11.1's provision
that all disputes “shall be decided by arbitration” and
The court of appeals held that the disclaimer in this section section 12.13's provision that “this Subcontract does not
12.13 “nullif [ies]” the arbitration agreement in section contain a provision for the mandatory arbitration of
11.1, and Sapphire relies on that holding here. disputes.” And if that were all that the two provisions
provided, an ambiguity might exist that requires us to rely
The Subcontractors contend that section 12.13's on canons of construction to determine the parties' intent.
disclaimer does not nullify the agreement in section
11.1 because (1) the agreement appears earlier within But section 12.13 explicitly states that the
the contract, and “terms stated earlier in an agreement Subcontract does not require mandatory arbitration
must be favored over subsequent terms” in that same “[n]otwithstanding any provision to the contrary” in any
agreement, Coker v. Coker, 650 S.W.2d 391, 393 of the contract documents. Cf. In re Lee, 411 S.W.3d 445,
(Tex.1983); (2) the agreement is more specific than the 454 (Tex.2013) ( “The use of the word ‘notwithstanding’
disclaimer, and specific provisions control over general indicates that the Legislature intended section 153.0071
provisions, see Forbau v. Aetna Life Ins. Co., 876 S.W.2d to be controlling.”). Like the statute at issue in DeQueen,
132, 133–34 (Tex.1994); (3) we must consider and give which expressly provided that any conflicting “rule of

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law, statute, or regulation ... is ineffective,” the language
of section 12.13 “specifically provide[s] the means for
resolving conflicts” by providing that, in the event IV.
of any conflict, section 12.13 prevails. DeQueen, 325
S.W.3d at 632, 637. There is thus no ambiguity, and
Conclusion
we need not rely on canons of construction like the
rules that earlier or more specific provisions prevail. Id. We affirm in part and reverse in part. We affirm the
Although these canons provide useful tools for resolving portion of the court of appeals' judgment affirming the
conflicting provisions, there is no conflict to resolve here trial court's denial of the Engineers', Insurance Brokers',
because the plain language of section 12.13 resolves the and Subcontractors' motions to compel arbitration of
conflict. Id. at 638. We therefore conclude that, even if Sapphire's claims against them, and we reverse the portion
Sapphire is equitably estopped from denying its assent of the court of appeals' judgment affirming the trial court's
to the agreements contained in the subcontracts, those denial of G.T. Leach's motion to compel arbitration of
agreements do not include a valid, enforceable agreement Sapphire's claims against it. We remand this case to the
to arbitrate its claims against the Subcontractors. The trial court for further proceedings consistent with this
court of appeals, therefore, did not err in affirming the trial opinion.
court's denial of the Subcontractors' motions to compel
arbitration.
All Citations
We therefore affirm the court of appeals with respect
to the trial court's denial of the Insurance Brokers', 458 S.W.3d 502, 58 Tex. Sup. Ct. J. 532
Engineers', and Subcontractors' motions to compel
arbitration.

Footnotes
1 “It is the policy of this state to encourage the peaceable resolution of disputes ... through voluntary settlement procedures,”
including binding and nonbinding arbitration. TEX. CIV. PRAC. & REM. CODE §§ 154.002, 154.027.
2 “A court shall order the parties to arbitrate on application of a party showing ... an agreement to arbitrate;” otherwise, “the
court shall deny the application.” Id. § 171.021(a)(1), (b).
3 Atlas Comfort is now known as Comfort Systems USA—South Central.
4 Sapphire initially filed two separate lawsuits, one against the Insurance Brokers and another against the architects who
designed the project. The architects first named G.T. Leach, the Subcontractors, and the Engineers as responsible third
parties, and Sapphire amended its pleadings to name them as defendants in that suit. When the Insurance Brokers
learned of these developments in that suit, they named G.T. Leach, the Subcontractors, and the Engineers as responsible
third parties in this suit. The architects later settled and resolved all claims asserted by and against them.
5 See Act of May 4, 1995, 74th Leg., R.S., ch. 136, § 1, sec. 33.004(e), 1995 Tex. Gen. Laws 971, 973, amended by Act
of June 2, 2003, 78th Leg., R.S., ch. 204, § 4.04, sec. 33.004(e), 2003 Tex. Gen. Laws 847, 856, repealed by Act of May
24, 2011, 82d Leg., R.S., ch. 203, § 5.02, sec. 33.004(e), 2011 Tex. Gen. Laws 757, 759.
6 456 S.W.3d 570.
7 Although we generally lack jurisdiction over interlocutory appeals, see TEX. GOV'T CODE § 22.225(b)(3), we have
jurisdiction to review a court of appeals' interlocutory judgment when its holding creates an inconsistency with prior
precedent “that should be clarified to remove unnecessary uncertainty in the law and unfairness to litigants.” Id. §
22.225(c), (e); see also Richmont Holdings, Inc. v. Superior Recharge Sys., L.L.C., 392 S.W.3d 633, 635 n.3 (Tex.2013)
(per curiam) (“We have jurisdiction to hear an appeal from an interlocutory order denying arbitration when the court of
appeals' decision conflicts with prior precedent.”). In this case, the court of appeals' holding creates such an inconsistency
with our decision in Perry Homes v. Cull, 258 S.W.3d 580, 587–92 (Tex.2008), and with the court of appeals' decision
in In re Global Constr. Co., 166 S.W.3d 795, 798–99 (Tex.App.—Houston [14th Dist.] 2005, no pet.), regarding the
issue of whether courts or arbitrators should decide whether a contractual deadline bars a demand for arbitration. The
inconsistency on this issue gives us jurisdiction, which permits us to address and resolve all of the issues that all of the

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parties raise in this case. See, e.g., Brown v. Todd, 53 S.W.3d 297, 301 (Tex.2001) (“As we have repeatedly recognized,
if our jurisdiction is properly invoked on one issue, we acquire jurisdiction of the entire case.”).
8 The general contract utilized a “Standard Form of Agreement Between Owner and Contractor” (Form A111–1997) and a
form of “General Conditions of the Contract for Construction” (Form A201–1997), both published by the American Institute
of Architects. Sapphire and G.T. Leach substantially revised these forms, however, by striking and adding language
throughout the contract to reflect their specific agreements. As revised, the arbitration section addresses numerous details
including the process for selecting the arbitrator(s), the rules governing the arbitration, the location and timing of the
arbitration, rights to discovery, finality and appeals from the arbitration award, and the duty to continue performing under
the contract while the arbitration is pending. As discussed further below, one section addresses the consolidation and
joinder of other parties within the arbitration proceeding.
9 By the time Sapphire named G.T. Leach as a defendant—and thus by the time G.T. Leach filed its motion to compel
arbitration—the two-year statute of limitations applicable to Sapphire's negligence claims had already run, but the four-
year statute applicable to Sapphire's breach-of-contract claims had not. The court of appeals did not mention this
distinction, but instead stated broadly that “[t]he parties do not dispute that the applicable statute of limitations had expired
when G.T. Leach sought arbitration.” 455 S.W.3d at 575 n.6; see also id. at 577 (stating that “G.T. Leach does not contest
that the statute of limitations for Sapphire's claims had expired when it filed its motion to compel arbitration.”). These
statements were incorrect. Although the parties did agree that the two-year statute on Sapphire's negligence claims had
expired, they also agreed that the four-year statute on Sapphire's breach-of-contract claims had not. Since we conclude
that the arbitrators must resolve Sapphire's contractual-deadline arguments, however, we need not consider the court
of appeals' error on this point, and we leave it to the arbitrators to resolve all issues related to the construction and
application of the contractual deadline in this case.
10 Sapphire cites to Parks v. Developers Surety & Indemnity Co., 302 S.W.3d 920, 924 (Tex.App.–Dallas 2010, no pet.)
(refusing to consider unconscionability as a defense to contract claim because the defendant failed to plead and assert
it in the trial court), and Posey v. Southwestern Bell Yellow Pages, Inc., 878 S.W.2d 275, 281 (Tex.App.–Corpus Christi
1994, no writ) (“Because the Poseys failed to assert in the court below that the limitation of liability clause was void,
unconscionable or unenforceable, we may not reverse that portion of the summary judgment on appeal.”).
11 Specifically, Sapphire argued: “The most prejudicial aspect of allowing arbitration this late in the game is that the Statute
of Limitations has already run on all of Plaintiff's negligence claims against all Defendants. This effect is so prejudicial
that the express language of the contract prohibits arbitration in this situation.”
12 Although G.T. Leach did not specifically argue in the court of appeals that the arbitrators must decide the contractual-
deadline issue, it did more broadly assert that “there is no legitimate issue as to the arbitrability of all of the issues between
Sapphire and GTL,” and “[b]ecause all of Sapphire's claims against [G.T. Leach] are clearly arbitrable under a valid and
enforceable arbitration provision, the only potentially viable argument Sapphire presents against enforcement is waiver.”
Because “disposing of appeals for harmless procedural defects is disfavored,” and “[a]ppellate briefs are to be construed
reasonably, yet liberally, so that the right to appellate review is not lost by waiver,” Perry v. Cohen, 272 S.W.3d 585, 587
(Tex.2008) (per curiam), G.T. Leach's broad assertions were arguably sufficient to encompass all supporting arguments,
including the argument that Sapphire's claim that the contractual deadline bars G.T. Leach's arbitration demand was
“clearly arbitrable.” See, e.g., Plexchem Int'l, Inc. v. Harris Cnty. Appraisal Dist., 922 S.W.2d 930, 930–31 (Tex.1996)
(holding that the assertion in the court of appeals that “[t]he trial court erred by granting ... summary judgment” was
“sufficient to preserve error and to allow argument as to all possible grounds upon which summary judgment should
have been denied”); see also TEX. R. APP. P. 38.1(f) (“The statement of an issue or point [in an appellate brief] will be
treated as covering every subsidiary question that is fairly included.”). We need not decide that issue, however, since we
conclude that G.T. Leach did not waive its argument even if it failed to raise it in the court of appeals.
13 We appear to have once held to the contrary in In re K.A.F., 160 S.W.3d 923 (Tex.2005), in which we stated that, although
petitioner's “constitutional complaints relate to her appeal and therefore could not have been asserted in the trial court,
she was required to raise them in the court of appeals in order to preserve error.” Id. at 928 (holding that petitioner “waived
these arguments by failing to raise them in the court of appeals”). In support of these statements, however, we cited
two cases in which we had addressed only the well-established rule that a party must preserve error by asserting its
complaints in the trial court. Id. at 928 (citing In re B.L.D., 113 S.W.3d at 350–51 (citing cases for the proposition that
objections and errors “must be preserved in the trial court”); Tex. Dep't of Protective & Regulatory Servs. v. Sherry, 46
S.W.3d 857, 861 (Tex.2001) (refusing to consider constitutional arguments that petitioner did not assert in the trial court).
We cited no rule or authority in K.A.F. to support the proposition that a petitioner waives an argument by failing to raise it
in the court of appeals when the petitioner's complaint first arises from that court's judgment. Consistent with our holdings

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in Bunton and Gilbert, as well as our holding today, our statement in K.A.F. should be read to mean that we may treat
such an argument as waived, as we did in that case, but we are not required to do so.
14 The general contract provides for arbitration under the TAA, and each of the defendants sought to compel arbitration
under that Act. While the Federal Arbitration Act (FAA) might also apply, no party argues that the FAA preempts the
TAA on any issue in this case, or that the TAA and FAA materially differ on any such issue. We therefore presume that
the TAA governs, but we may find guidance in court decisions addressing both acts. Cf. Ellis v. Schlimmer, 337 S.W.3d
860, 862 (Tex.2011) (observing that FAA preempts TAA “only when it or other state law would not allow enforcement
of an arbitration agreement that the FAA would enforce” and that party seeking to avoid application of TAA has burden
of raising that issue).
15 In deciding these questions of arbitrability, courts apply the common principles of general contract law to determine the
parties' intent. In re Poly–Am., L.P., 262 S.W.3d 337, 348 (Tex.2008).
16 The Court in Poly–America referenced a “strong federal presumption” in favor of arbitration because the contracts in that
case provided for arbitration under the FAA. Poly–Am., 262 S.W.3d at 348. But the Court has observed in other cases
that Texas law also strongly favors arbitration of disputes and recognizes a presumption in favor of arbitrability. See, e.g.,
Prudential Secs. Inc. v. Marshall, 909 S.W.2d 896, 898–99 (Tex.1995).
17 The general contract defines a “Claim” as
a demand or assertion by one of the parties seeking, as a matter of right, adjustment or interpretation of Contract
terms, payment of money, extension of time or other relief with respect to the terms of the Contract. The term “Claim”
also includes other disputes and matters in question between [Sapphire] and [G.T. Leach] arising out of or relating
to the Contract.
18 See, e.g., United SteelWorkers of Am., AFL–CIO–CLC v. Saint Gobain Ceramics & Plastics, Inc., 505 F.3d 417, 418 (6th
Cir.2007) (holding that application of contractual time limit was issue for arbitrators rather than courts); Marie v. Allied
Home Mortg. Corp., 402 F.3d 1, 11 (1st Cir.2005) (holding that trial court erred in interpreting and applying contractual
requirement that “[a]rbitration under this section must be initiated within sixty days” of event giving rise to the claim
because that issue was for arbitrators to decide); Shearson Lehman Hutton, Inc. v. Wagoner, 944 F.2d 114, 120–21 (2d
Cir.1991) (“Although Conticommodity [Services Inc. v. Philipp & Lion, 613 F.2d 1222, 1224–25 (2d Cir.1980) ] involved
a one-year time limitation set forth in the arbitration agreement itself, we stated emphatically that any limitations defense
—whether stemming from the arbitration agreement, arbitration association rule, or state statute—is an issue to be
addressed by the arbitrators.”); Nursing Home & Hosp. Union No. 434 AFL–CIO–LDIU by Mackson v. Sky Vue Terrace,
Inc., 759 F.2d 1094, 1097 (3d Cir.1985) (rejecting argument that grievances were “not subject to the arbitration process
because [the other party] did not comply with the specific time limits for filing grievances under the agreement” and
stating that “[e]ven assuming [that] argument has merit, the law is clear that matters of procedural arbitrability, such
as time limits, are to be left for the arbitrator once the court determines that the parties have agreed in the contract to
submit the subject-matter of the dispute to arbitration”); see also McNamara v. Yellow Transp., Inc., 570 F.3d 950, 957
(8th Cir.2009) (adopting reasoning of Marie in context of a party's argument that it was harmed by other party's delay
in seeking arbitration because by that time party would be contractually barred from initiating arbitration, but directing
trial court to retain jurisdiction on remand so that party opposing arbitration would not be left without a forum); Glass v.
Kidder Peabody & Co., 114 F.3d 446, 455 (4th Cir.1997) (“Defenses of laches, mere delay, statute of limitations, and
untimeliness constitute a broad category of waiver defenses that may be raised to defeat compelled arbitration. Laches,
like its companion defenses, however, is a matter of ‘procedural arbitrability’ solely for the arbitrators' decision and not
for the court.”).
19 The agreement at issue in Rubiola gave the “parties” the right to demand arbitration and defined “parties” to include
not only “each and all persons and entities signing this agreement,” but also all “individual partners, affiliates, officers,
directors, employees, agents, and/or representatives of any party to such documents, and ... any other owner and holder
of this agreement.” Rubiola, 334 S.W.3d at 222–23. We agreed that it thus “expressly provides that certain non-signatories
are to be parties to the agreement.” Id. at 224.
20 In addition, a supplemental provision of the general contract states that “[n]o person or entity shall be deemed to be
a third party beneficiary of any provisions of the Contract, nor shall any provisions thereof be interpreted to create
a right of action or otherwise permit anyone not a signatory party to the Contract to maintain an action for personal
injury or property damage.” While the Other Defendants contend that this provision was in an unsigned supplement
to the general contract and, in any event, does not expressly prohibit demands for arbitration, they concede that the
contract expressly incorporates these provisions as part of the “Contract Documents.” In any event, this provision reflects
Sapphire's intent that other parties not have rights under the general contract more clearly than any provision on which

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 25
G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502 (2015)
58 Tex. Sup. Ct. J. 532

the Other Defendants rely reflects an intent that they have such rights. Even ignoring this provision, the lack of any
provision by which Sapphire agrees to allow the Other Defendants to compel arbitration of Sapphire's claims against
them defeats their attempts to do so.
21 Even if “direct benefits” estoppel does not apply based on the claims in the lawsuit, we have recognized that “a nonparty
may seek or obtain direct benefits from a contract by means other than a lawsuit” and that application of the doctrine
may be based on “conduct during the performance of the contract” rather than conduct during the lawsuit. See Weekley
Homes, 180 S.W.3d at 132–33, 135 (holding that “when a nonparty consistently and knowingly insists that others treat
it as a party, it cannot later ‘turn[ ] its back on the portions of the contract, such as an arbitration clause, that it finds
distasteful’ ”) (citations omitted). The parties do not advance this theory here.
22 The Other Defendants point out that Sapphire's experts filed reports in the trial court in which they relied in part on the
general contract's specification and notes to establish the standards for the Other Defendants' contractual performance.
These reports, however, do not suggest that the general contract imposed the duty to meet these specifications. Instead,
it appears that Sapphire contends that the Other Defendants' separate contractual agreements included promises to
comply with these specifications.
23 Alternatively, the Insurance Brokers argue that
if Sapphire seeks to hold [them] jointly and severally liable for damages with respect to Sapphire's tort claims
against [G.T. Leach], then Sapphire must necessarily rely on allegations of interdependent and concerted misconduct
between those parties. Either way, Sapphire satisfies one or both bases for imposing equitable estoppel under this
Court's decision in Meyer and thus must be compelled to arbitrate its claims against the Insurance Defendants.
But we declined to adopt the “concerted misconduct” theory of equitable estoppel in In re Merrill Lynch Trust Co. FSB,
235 S.W.3d 185, 191–92 (Tex.2007). The Insurance Brokers do not address Merrill Lynch or raise any argument that
this case is distinguishable in any manner material to our analysis of the “concerted misconduct” theory in that case.
We therefore decline to reconsider that decision here.
24 In fact, Sapphire's fourth amended petition does not reference “joint and several liability” at all. The Other Defendants
quote Sapphire's counsel as having orally argued to the trial court that the defendants are jointly and severally liable for
all damages, but we must look to the pleadings to determine the nature of Sapphire's claims.
25 Cf. S. Union Co. v. City of Edinburg, 129 S.W.3d 74, 87 (Tex.2003) (noting that Texas law has recognized specific
legal theories under which corporate structure can be disregarded to hold corporate actors jointly and severally liable
for corporation's contractual obligations); TEX. BUS. ORGS. CODE § 152.304(a) (imposing joint and several liability on
partners for “all” partnership obligations); TEX. GOV'T CODE § 60.152(b)(1) (authorizing contractual assumption of joint
and several liability in certain government contracts); TEX. LAB. CODE § 407A.056 (requiring contractual assumption
of joint and several liability for group and employer under certain group self-insurance agreements); TEX. NAT. RES.
CODE § 161.323 (imposing joint and several liability on “veteran purchaser” and subsequent assignees of veteran with
respect to certain land contracts under some circumstances).

End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 26
Horizon Health Corp. v. Tyler-Holmes Memorial Hosp., 284 F.Supp.2d 439 (2003)

Remedies and Proceedings for
Enforcement in General
284 F.Supp.2d 439
United States District Court, When determining whether parties should be
N.D. Mississippi, compelled to arbitrate a dispute, first, the
Western Division. court must determine whether the parties
agreed to arbitrate the dispute; once the court
HORIZON HEALTH CORP., Plaintiff, finds that the parties agreed to arbitrate, it
v. must consider whether any federal statute
TYLER–HOLMES MEMORIAL HOSPITAL; or policy renders the claims nonarbitrable. 9
Board of Trustees of Tyler–Holmes Memorial U.S.C.A. § 1 et seq.
Hospital; and Board of Supervisors of
Cases that cite this headnote
Montgomery County, Mississippi, Defendants.

No. 3:02CV093–D–D. [3] Alternative Dispute Resolution
| Merits of controversy
Aug. 18, 2003. When conducting the two-pronged analysis
in determining whether parties should be
Successor to management consultation company brought
compelled to arbitrate a dispute, courts must
action against hospital, its board of trustees, and
not consider the merits of the underlying
board of supervisors of county arising out of breach
action. 9 U.S.C.A. § 1 et seq.
of a management contract pertaining to company's
management of a geropsychiatric treatment program Cases that cite this headnote
at hospital. Plaintiff moved to compel arbitration.
The District Court, Davidson, Chief Judge, held that
arguments advanced by hospital went to the merits of the [4] Alternative Dispute Resolution
underlying dispute, thus should be decided by arbitrator. Arbitrability of dispute
Alternative Dispute Resolution
Motion granted. Merits of controversy
Under the Federal Arbitration Act (FAA), the
federal district court ascertains only whether
the arbitration clause covers the allegations
West Headnotes (9)
at issue; if the dispute is within the scope
of the arbitration clause, the court may not
[1] Alternative Dispute Resolution delve further into the merits of the dispute. 9
Arbitration favored; public policy U.S.C.A. § 1 et seq.
Alternative Dispute Resolution
Cases that cite this headnote
Construction in favor of arbitration
The Federal Arbitration Act (FAA) expresses
a strong national policy in favor of [5] Alternative Dispute Resolution
arbitration, and any doubts concerning the Merits of controversy
scope of arbitrable issues should be resolved Arguments advanced by hospital, in response
in favor of arbitration. 9 U.S.C.A. § 1 et seq. to motion to compel arbitration brought by
management company related to a contract
Cases that cite this headnote dispute with hospital, that the Mississippi
Community Hospital Act (MCHA) did
[2] Alternative Dispute Resolution not require public hospitals to submit to
Arbitrability of dispute arbitration, that the arbitration agreement
violated the MCHA, and that the MCHA
Alternative Dispute Resolution
did not permit public entities from making a

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 1
Horizon Health Corp. v. Tyler-Holmes Memorial Hosp., 284 F.Supp.2d 439 (2003)

contract that extended beyond the term of the agreement against a non-signatory, courts
majority of the board members went to the should ask whether she is bound by that
merits of the underlying dispute, thus should agreement under traditional principles of
be decided by arbitrator. 9 U.S.C.A. § 1 et seq.; contract and agency law.
West's A.M.C. § 41–13–35.
Cases that cite this headnote
Cases that cite this headnote

[6] Alternative Dispute Resolution
Matters to Be Determined by Court Attorneys and Law Firms

Where a defense relates to a contract as a *440 John B. Clark, Daniel, Coker, Horton & Bell,
whole, and not specifically to an arbitration Jackson, MS, for plaintiff.
clause, then there is no distinction between
defenses which render a contract voidable Eugene R. Naylor, Wise, Carter, Child & Caraway,
and defenses which render a contract void; Jackson, MS, Alan D. Lancaster, Liston/Lancaster,
both should be submitted to the arbitrator. 9 Winona, MS, for defendants.
U.S.C.A. § 1 et seq.

Cases that cite this headnote
OPINION GRANTING MOTION
TO COMPEL ARBITRATION
[7] Alternative Dispute Resolution
Preemption DAVIDSON, Chief Judge.

States Presently before the court is the Plaintiff's motion to
Particular cases, preemption or compel arbitration. Upon due consideration, the court
supersession finds that the motion should be granted.
The strong federal policy favoring arbitration
preempts state laws that act to limit the
availability of arbitration. 9 U.S.C.A. § 1 et
A. Factual Background
seq.
Plaintiff Horizon Health Corporation (“Horizon”) is a
Cases that cite this headnote
corporation organized under the laws of the State of Texas
with its principal place of business in Texas. Horizon
[8] Commerce has asserted claims against Tyler–Holmes Memorial
Arbitration Hospital (“Tyler–Holmes”), the Board of Trustees of
The Federal Arbitration Act (FAA), resting Tyler–Holmes (“Trustees”), and the Board of Supervisors
on Congress's authority under the Commerce of Montgomery County, Mississippi (“Supervisors”),
Clause, creates a body of federal substantive arising out of a breach of a management contract
law that is applicable in both federal and state pertaining to a geropsychiatric treatment program at
courts. U.S.C.A. Const. Art. 1, § 8, cl. 3; 9 Tyler–Holmes hospital. Tyler–Holmes is a community
U.S.C.A. § 1 et seq. hospital organized under the laws of the State of
Mississippi, with its principal place of business in Winona,
Cases that cite this headnote Mississippi.

On or about March 1, 2000, Tyler–Holmes
[9] Alternative Dispute Resolution
and Perspectives Health Management Corporation
Persons affected or bound
(“Perspectives”), entered into an agreement for
Because arbitration is a creature of contract Perspectives to provide management-consultation services
law, when asked to enforce an arbitration to Tyler–Holmes at Winona, Mississippi. Subsequently,

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 2
Horizon Health Corp. v. Tyler-Holmes Memorial Hosp., 284 F.Supp.2d 439 (2003)

on or about June 4, 2001, Tyler–Holmes and 10, 104 S.Ct. 852, 857, 79 L.Ed.2d 1 (1984); Mouton
Perspectives executed an amended agreement (“Amended v. Metropolitan Life Ins. Co., 147 F.3d 453, 456 (5th
Management Agreement”), in which Perspectives agreed Cir.1998).
to reduce the monthly management fee. This was
done, at least partially, to assist Tyler–Holmes with [2] [3] [4] The Fifth Circuit has directed that courts
financial *441 difficulties. The Amended Management are to perform a two-step inquiry to determine whether
Agreement contains a mandatory arbitration clause, parties should be compelled to arbitrate a dispute.
requiring that all disputes and claims relating to the Primerica Life Ins. Co. v. Brown, 304 F.3d 469, 471 (5th
Agreement shall be settled by arbitration. On or about Cir.2002); R.M. Perez & Assoc., Inc. v. Welch, 960 F.2d
October 5, 2001, Horizon purchased most, if not all, of 534, 538 (5th Cir.1992) (citing Mitsubishi Motors Corp. v.
the assets from Perspectives, including certain accounts Soler Chrysler–Plymouth, 473 U.S. 614, 105 S.Ct. 3346,
receivable. Horizon thus became the successor to the 87 L.Ed.2d 444 (1985)). “First, the court must determine
rights of Perspectives as Manager under the Amended whether the parties agreed to arbitrate the dispute. Once
Management Agreement. According to Tyler–Holmes, the court finds that the parties agreed to arbitrate, it must
the geropsychiatric program experienced decreases in consider whether any federal statute or policy renders the
patient numbers, and the services provided through the claims nonarbitrable.” Primerica Life Ins. Co., 304 F.3d
Amended Management Agreement became unnecessary. at 471 (citations omitted). “When conducting this two-
Tyler–Holmes inquired about new terms for a new, pronged analysis, courts must not consider the merits of
and presumably more favorable, agreement. Apparently, the underlying action.” Id. (citing Snap–On Tools Corp.
Horizon was not interested in the proposed terms. v. Mason, 18 F.3d 1261, 1267 (5th Cir.1994)). “Under ...
Thereafter, Tyler–Holmes terminated the Agreement. the FAA, the federal district court ascertains only whether
the arbitration clause covers the allegations at issue. If the
Horizon filed this suit on or about June 12, 2002, to collect dispute is within the scope of the arbitration clause, the
approximately $778,000 which, according to Horizon, court may not delve further into the merits of the dispute.”
Tyler–Holmes owes in arrears and lost profits. The Id. (citations and internal quotes omitted).
complaint asserts a cause of action for, inter alia, breach of
contract. Thereafter, Horizon filed this motion to compel
arbitration and to stay this case pending arbitration.
C. Discussion

The parties do not dispute that the Agreement at issue
B. Discussion contains the following mandatory arbitration provision:

1. The Agreement's Arbitration Provision
*442 X.
[1] Congress provided in the Federal Arbitration Act
(FAA) that a written agreement to arbitrate in a contract
ARBITRATION, ATTORNEYS' FEES
involving interstate commerce “shall be valid, irrevocable,
and enforceable, save upon such grounds as exist at All disputes and claims relating to any provision
law or in equity for the revocation of any contract.” 9 hereof or relating to or arising out of the parties'
U.S.C. § 2 (1999). Section Three of the FAA specifically relationship or the creation or termination thereof
contemplates that parties, such as the Plaintiff, that are (including, without limitation, any claim that any
aggrieved by another party's failure to arbitrate under a provision of this Agreement, or any specification,
written agreement, may file a motion to stay the trial of an standard or procedure or any other obligation of
action until such arbitration has been had in accordance Hospital or Manager or both is illegal or otherwise
with the terms of the agreement. 9 U.S.C. § 3 (1999). unenforceable or voidable under any law, ordinance, or
In addition, the FAA expresses a strong national policy ruling) shall be settled by arbitration at the Office of the
in favor of arbitration, and any doubts concerning the American Arbitration Association in Mississippi which
scope of arbitrable issues should be resolved in favor is nearest to the Hospital, in accordance with the United
of arbitration. Southland Corp. v. Keating, 465 U.S. 1,

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 3
Horizon Health Corp. v. Tyler-Holmes Memorial Hosp., 284 F.Supp.2d 439 (2003)

States Arbitration Act (9 U.S.C. Section 1 et seq.) And not permit a public entity to make a contract that extends
the Rules of American Arbitration Association. All beyond the term of a majority of the board's members
awards of the arbitration shall be binding and non- might ultimately excuse Tyler–Holmes from compliance
appealable except as otherwise provided in the United with the contract. However, that also involves getting
States Arbitration Act.... The parties hereby agree the to the merits and should be decided by an arbitrator.
rendering of an award by the arbitrator or arbitrators Both of these arguments go the Amended Management
shall be a condition precedent to the initiation of any Agreement as a whole, and are not directed at the
legal proceeding with respect to any dispute arising in arbitration provision. The Fifth Circuit has stated “unless
connection with this Agreement. a defense relates specifically to the arbitration *443
Tyler–Holmes does not argue, and the court does not agreement, it must be submitted to the arbitrator as part of
find any federal statute or policy that renders the claims the underlying dispute.” Primerica Life Ins. Co., 304 F.3d
nonarbitrable. As such, the court must determine whether at 472. Where a defense relates to a contract as a whole,
the parties agreed to arbitrate the dispute. The arbitration and not specifically to an arbitration clause, then there is
clause is broad, and clearly the dispute in question falls no distinction between defenses which render a contract
within the scope of the arbitration agreement. voidable and defenses which render a contract void; both
should be submitted to the arbitrator. Id. at n. 2 (citing
Tyler–Holmes argues that the Amended Management Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S.
Agreement is invalid and/or voidable under Mississippi 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967)).
law, and as such, the arbitration agreement is not
enforceable. Tyler–Holmes advances three reasons to [7] [8] Tyler–Holmes' second assertion is that the
support such a position. First, Tyler–Holmes argues that MCHA and opinions of the Mississippi Attorney General
the arbitration agreement cannot be enforced because a hold that public bodies such as Tyler–Holmes may not
material term of the Amended Management Agreement be required to submit to arbitration. “Even if [Tyler–
violates Miss.Code § 41–13–35(5)(k) of the Mississippi Holmes is correct], the strong federal policy favoring
Community Hospital Act (“MCHA”). Tyler–Holmes arbitration preempts state laws that act to limit the
asserts that the MCHA requires that certain “financing availability of arbitration.” Saturn Distribution Corp.
arrangement[s],” such as are supposedly in the Amended v. Paramount Saturn, Ltd., 326 F.3d 684, 687 (5th
Management Agreement, be approved by the owner of the Cir.2003)(citing Southland Corp., 465 U.S. at 16, 104
hospital by virtue of a resolution. As such, Tyler–Holmes S.Ct. 852). Furthermore, “[t]he Arbitration Act, resting on
argues that because the entire agreement is invalid, the Congress's authority under the Commerce Clause, creates
arbitration clause cannot be enforced. Second, Tyler– a body of federal substantive law that is applicable in both
Holmes asserts that the MCHA and opinions of the federal and state courts.” IP Timberlands Operating Co.
Mississippi Attorney General hold that public bodies v. Denmiss Corp., 726 So.2d 96, 107 (Miss.1998)(citing
such as Tyler–Holmes may not be required to submit to Moses H. Cone Memorial Hosp. v. Mercury Constr.
arbitration. Third, Tyler–Holmes asserts that the MCHA Corp., 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983))
does not permit a public entity to make a contract (emphasis added). As such, Tyler–Holmes' arguments
that extends beyond the term of a majority of the about state law limiting the FAA are not well taken.
board's members. Tyler–Holmes asserts that the Amended
Management Agreement extends beyond the term of the [9] Finally, the court notes that Tyler–Holmes does
majority of the Tyler–Holmes' Trustees. not contest that the Trustees and Supervisors can be
compelled to arbitrate as well under traditional agency
[5] [6] As to the first and third reasons submitted principles. Horizon notes that Supervisors grant Trustees
by Tyler–Holmes, the court is of the opinion that these broad powers to govern community hospitals. Trustees
arguments are getting into the merits of the underlying in turn are authorized to employ administrators, such
dispute. Whether the Amended Management Agreement as Greg Mullen, the hospital administrator who signed
can be enforced because a material term of the Agreement the agreements in the case sub judice. Because arbitration
violates certain “financing arrangement[s]” in Miss.Code is a creature of contract law, when asked to enforce
§ 41–13–35(5)(k) should be decided by the arbitrator. an arbitration agreement against a non-signatory, courts
Similarly, Tyler–Holmes' assertion that the MCHA does should ask “whether ... she is bound by that agreement

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 4
Horizon Health Corp. v. Tyler-Holmes Memorial Hosp., 284 F.Supp.2d 439 (2003)

under traditional principles of contract and agency the claims in this case are arbitrable. As *444 such, the
parties' claims shall be dismissed without prejudice.
law.” Mississippi Fleet Card, LLC v. Bilstat, Inc., 175
F.Supp.2d 894, 901 (S.D.Miss.2001) (citation omitted).
A separate order in accordance with this opinion shall
See also Fleetwood Enterprises, Inc. v. Gaskamp, 280
issue this day.
F.3d 1069, 1076 (5th Cir.2002)(quoting Thomson–CSF,
S.A. v. American Arbitration Ass'n, 64 F.3d 773, 776
(2d. Cir.1995))(Stating there are several “theories under
‘common law principles of contract and agency law’ that ORDER GRANTING MOTION
provide a basis ‘for binding non-signatories to arbitration TO COMPEL ARBITRATION
agreements.’ ”). As such, the court finds that Horizon's
arguments are well taken, and Plaintiff's motion to compel Pursuant to an opinion issued this day, it is hereby
arbitration shall be granted against all Defendants. ORDERED that

(1) the Plaintiff's motion to compel arbitration (docket
entry 14–2) is GRANTED;
D. Conclusion
(2) the Plaintiff's claims shall be submitted to
For the above stated reasons, the Plaintiff's motion to arbitration, in accordance with the arbitration
compel arbitration is granted. The court is of the opinion agreement;
that the parties agreed to arbitrate the dispute. The court
is also of the opinion that no federal statute or policy (3) the Plaintiff's motion to stay the case (docket entry
renders the claims nonarbitrable. Finally, the court finds 14–1) is DENIED as moot;
that this cause should be dismissed without prejudice. The
(4) as arbitration has been compelled and all issues in
Fifth Circuit has held that Section Three of the FAA
this case disposed of, this case is CLOSED. Any of
(which provides that the court “shall ... stay the trial of
the parties may seek, by motion, to reopen this case
the action”) was not intended to limit dismissal of a case
in the event further action is required by the court.
in the proper circumstances and that if all of the issues
raised in the district court are arbitrable, dismissal of the
case is proper. See Alford v. Dean Witter Reynolds, Inc., All Citations
975 F.2d 1161, 1164 (5th Cir.1992) (holding that retaining
jurisdiction and staying “serve[s] no purpose” when all 284 F.Supp.2d 439
issues are arbitrable). As was the case in Alford, all of

End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 5
In re Amos, 397 S.W.3d 309 (2013)

The Court of Appeals has concurrent
mandamus jurisdiction with the Court of
397 S.W.3d 309
Criminal Appeals in criminal law matters.
Court of Appeals of Texas,
Dallas. Cases that cite this headnote
In re Heidi AMOS, Relator.
[2] Mandamus
No. 05–12–01500–CV. Remedy at Law
|
Mandamus
March 6, 2013.
Criminal prosecutions
Synopsis Prohibition
Background: Defendant filed motion to recuse original Existence and Adequacy of Other
trial judge. An assigned recusal hearing judge granted Remedies
the motion. Original trial judge filed motion for Prohibition
reconsideration. The recusal hearing judge scheduled a Proceedings in criminal prosecutions
hearing on the motion for reconsideration. Defendant
Mandamus and prohibition are available in
petitioned for writs of mandamus and prohibition as
a criminal proceeding if the relator shows (1)
means to challenging the recusal hearing judge's decision.
that the act she seeks to compel or prohibit
does not involve a discretionary or judicial
decision and (2) that she has no adequate
Holdings: The Court of Appeals, Fitzgerald, J., held that: remedy at law to redress the harm that she
alleges will ensue.
[1] recusal rule prohibited original trial judge's motion for
reconsideration; Cases that cite this headnote

[2] assigned recusal hearing judge exceeded her authority [3] Mandamus
when she attempted to entertain original trial judge's Nature and existence of rights to be
motion for reconsideration; protected or enforced
Mandamus
[3] any failure to notify judge of the hearing on defendant's Nature of acts to be commanded
motion to recuse did not violate judge's due process rights;
Prohibition
and
Acts and Proceedings of Courts, Judges,
and Judicial Officers
[4] claims challenging original trial judge's motion for
reconsideration and appointed recusal hearing judge's To establish that the act sought to be
order granting a rehearing on the matter would be compelled or prohibited does not involve a
reviewed for the first time in original mandamus and discretionary or judicial decision, for purposes
prohibition proceedings. of seeking writs of mandamus or prohibition,
the relator must show that she has a clear right
to the relief sought, meaning that the facts
Petition for writ of mandamus conditionally granted. and circumstances dictate only one rational
decision under unequivocal, well settled, and
clearly controlling legal principles.

West Headnotes (16) 2 Cases that cite this headnote

[1] Mandamus [4] Mandamus
Jurisdiction and authority

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 1
In re Amos, 397 S.W.3d 309 (2013)

Courts and judicial officers subject to
mandamus [7] Judges
Effect on acts and proceedings of judge
Prohibition
Acts and Proceedings of Courts, Judges, If a judge recuses himself or herself, the judge
and Judicial Officers thereby voluntarily steps out of the case for
all purposes and another judge is immediately
When a relator seeks extraordinary relief that
assigned to hear and dispose of the case.
amounts to the undoing of an accomplished
Vernon's Ann.Texas Rules Civ.Proc., Rule
judicial act, that relief is more in the nature of
18a(f)(2)(A).
mandamus than prohibition.
Cases that cite this headnote
Cases that cite this headnote

[8] Judges
[5] Judges
Determination of objections
Effect on acts and proceedings of judge
The “refer rule” requires the challenged judge
Original trial judge's motion for
to refer a recusal motion to another judge to
reconsideration of order granting criminal
decide the motion in the first instance and
defendant's recusal motion was improper in
allows only the newly assigned judge, a judge
the first instance, such that the assigned
other than the challenged judge, to hear and
recusal hearing judge's act of signing the
rule upon the motion to recuse; this process
order granting reconsideration and setting
affords the State and the defendant a fair and
defendant's motion to recuse for a new hearing
impartial forum in which each may litigate
was also improper; once the original trial
the merits of the motion. Vernon's Ann.Texas
judge referred the recusal motion for another
Rules Civ.Proc., Rule 18a.
judge to decide, the recusal rule prohibited
original trial judge from taking any further Cases that cite this headnote
action in the case until the motion was
decided, except for good cause stated in
writing or on the record, and rule even [9] Judges
prohibited original trial judge from filing Determination of objections
a response to the recusal motion. Vernon's Recusal process contemplates the resolution
Ann.Texas Rules Civ.Proc., Rules 18a(f)(2) of the recusal motion through the exercise
(A), 18a(c)(2). of the independent judgment of the assigned
judge absent any outside pressure; it would
2 Cases that cite this headnote defeat the purpose of the refer rule, requiring
the challenged judge to refer a recusal motion
[6] Judges to another judge to decide the motion in the
Determination of objections first instance, to permit the challenged judge
to insert herself in her official capacity as
The purpose of the “recuse-or-refer rule”
judge in order to exert pressure upon and
requiring the challenged judge to either
influence the assigned judge's judgment, as
recuse or refer a recusal motion to another
such a situation is not just inappropriate but
judge to decide the motion is to preserve
blatantly improper for a challenged judge to
public confidence in the impartiality of the
take action designed to influence the outcome
judiciary by minimizing a judge's involvement
of the matter at issue. Vernon's Ann.Texas
in recusal proceedings. Vernon's Ann.Texas
Rules Civ.Proc., Rule 18a.
Rules Civ.Proc., Rule 18a.
Cases that cite this headnote
1 Cases that cite this headnote

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 2
In re Amos, 397 S.W.3d 309 (2013)

When an otherwise qualified assigned judge
[10] Judges renders an order in a criminal case that
Determination of objections exceeds the authority conferred by his or her
Judges order of assignment, the order is erroneous,
Effect on acts and proceedings of judge although not void.
When enforcing the refer rule, requiring the
Cases that cite this headnote
challenged judge to refer a recusal motion to
another judge to decide the motion in the first
instance, courts make no distinction between [14] Constitutional Law
that period during which the recusal motion is Removal; recusal
pending and the period immediately following Judges
the ruling by the assigned judge; once a judge Determination of objections
has been recused, the prudent approach is for
Original trial judge had no protected interest
the recused judge and the assigned judge to
in presiding over defendant's particular
have no further communications with each
criminal case, and thus, any failure to notify
other concerning any aspect of that case.
judge of the hearing on defendant's motion
Vernon's Ann.Texas Rules Civ.Proc., Rule
to recuse did not violate judge's due process
18a.
rights. U.S.C.A. Const.Amend. 14.
2 Cases that cite this headnote
Cases that cite this headnote

[11] Judges
[15] Mandamus
Effect on acts and proceedings of judge
Criminal prosecutions
Assigned recusal hearing judge exceeded
Prohibition
her authority when she attempted to
Proceedings in criminal prosecutions
entertain original trial judge's motion for
reconsideration after assigned recusal hearing Claims challenging original trial judge's
judge had decided the motion to recuse motion for reconsideration of recusal order
and the presiding administrative judge had and appointed recusal hearing judge's order
transferred and reassigned the case to a new granting a rehearing on the matter would
judge in a new court. be reviewed for the first time in original
mandamus and prohibition proceedings even
Cases that cite this headnote though criminal defendant failed to oppose
or object to appointed recusal hearing
judge's reconsideration order, where original
[12] Judges
trial judge and appointed recusal hearing
Duration of authority
judge each acted without authorization and
The terms of the assignment order control directing defendant to make her objections
the extent of the visiting judge's authority before appointed recusal hearing judge
and when it terminates; thus, an otherwise possibly would have resulted in yet another
qualified assigned judge's action outside the original proceeding, and defendant was
scope of his or her assignment presents a afforded little or no time to respond to original
procedural irregularity. trial judge's motion for reconsideration.

Cases that cite this headnote Cases that cite this headnote

[13] Judges [16] Mandamus
Authority and Proceedings of Special or Vacation of judgment or order
Substitute Judges

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 3
In re Amos, 397 S.W.3d 309 (2013)

If a district judge enters an order for which he Pirtle orally found “the appearance of impropriety, the
has no authority, mandamus will issue. appearance of prejudice ... sufficient” to justify recusal,
and she signed an order granting the motion to recuse
Cases that cite this headnote that same day. On October 1, the presiding administrative
judge transferred the case to a new judge, the Honorable
Jeffrey Rosenfield, Dallas County Criminal Court of
Appeals No. 2.
Attorneys and Law Firms
About three weeks later, Judge Mullin filed a motion for
*311 Michael R. Casillas, Assistant District Attorney, reconsideration addressed to Judge Pirtle. Judge Mullin
Chief Prosecutor, Dallas, TX, for Appellant. argued that Judge Pirtle should reconsider and deny
Amos's motion for recusal because Judge Mullin was a
L.T. Butch Bradt, Houston, TX, Brady T. Wyatt III,
necessary party to the hearing, had not received notice of
Attorney at Law, Dallas, TX, for Appellees.
the hearing, and therefore had no opportunity to “cross-
Before Justices MOSELEY, FITZGERALD, and examine [the] witnesses, nor to present any witnesses
MYERS. or evidence to contravene the issues addressed.” 2 She
also argued that the motion for recusal did not establish
bias or prejudice sufficient to justify recusal. On October
OPINION 26, Judge Pirtle signed an order granting Judge Mullin's
motion for reconsideration and setting the motion to
Opinion by Justice FITZGERALD. recuse for a new hearing on November 1.

Relator Heidi Amos is the defendant in a pending criminal
Amos filed a petition for writ of mandamus or writ of
case. She filed a motion to recuse the trial judge presiding
prohibition in this Court on October 30, see In re Amos,
over her case, a former judge was assigned to decide the
No. 05–12–01463–CV, 2012 WL 5397108 (Tex.App.-
motion to recuse, and that judge granted the motion. The
Dallas Nov. 6, 2012, orig. proceeding) (mem. op.)
recused judge then filed a motion for reconsideration, and
(denying the petition for noncompliance with the Texas
the assigned judge signed an order purporting to grant
Rules of Appellate Procedure), and she filed a revised
rehearing of the motion to recuse and to set the motion
petition seeking the same relief on November 6. Thus, in
for a new hearing. By a petition for writ of mandamus and
this mandamus proceeding, Amos is the relator, Judge
writ of prohibition, Amos asks us to prevent the assigned
Pirtle is the respondent, and the State is the real party
judge from reconsidering her recusal order. We conclude
in interest. See TEX. R. APP. P. 52.2. We stayed Judge
that Amos has a clear right to the relief sought and that
Pirtle's order granting rehearing pending the disposition
she has no adequate remedy by appeal. Accordingly, we
of this original proceeding.
conditionally grant the writ of mandamus.

II. ANALYSIS
I. FACTS
A. Criminal mandamus standards
Amos filed a motion to recuse the trial judge presiding
[1] [2] [3] [4] We have concurrent mandamus
in her criminal case, the Honorable Etta Mullin, Dallas
jurisdiction with the Texas Court of Criminal Appeals
County *312 Criminal Court No. 5. The presiding
in criminal-law matters. Padilla v. McDaniel, 122 S.W.3d
administrative judge assigned the motion to a former
805, 807 (Tex.Crim.App.2003) (orig. proceeding) (per
judge, the Honorable Sue Pirtle, for decision. On
curiam). Mandamus and prohibition are available in a
September 28, 2012, Judge Pirtle conducted a hearing on
criminal proceeding if the relator shows (1) that the
the motion. Counsel for Amos and the State appeared;
act she seeks to compel or prohibit does not involve a
Amos did not appear. Counsel for Amos and counsel for
discretionary or judicial decision and (2) that she has
the State testified at the hearing. 1 The State presented no no adequate remedy at law to redress the harm that
other evidence and had no objections to the motion. Judge she alleges will ensue. Simon v. Levario, 306 S.W.3d

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 4
In re Amos, 397 S.W.3d 309 (2013)

318, 320 (Tex.Crim.App.2009) (orig. proceeding); see (A) (concerning motions to recuse filed before evidence
also In re State ex rel. Weeks, 391 S.W.3d 117, 122– has been offered at trial). The rules even provide that
23 (Tex.Crim.App. 2013) (orig. proceeding); De Leon the challenged judge “should not file a response to the
v. Aguilar, 127 S.W.3d 1, 5 (Tex.Crim.App.2004) (orig. motion.” TEX. R. CIV. P. 18a(c)(2).
proceeding). The first prong requires the relator to
show that she has a clear right to the relief sought, [8] [9] The “refer rule” requires a challenged judge to
meaning that the facts and circumstances dictate only refer the recusal motion to the presiding judge in the
one rational decision under unequivocal, well-settled, and first instance, and allows only the newly assigned judge,
clearly controlling legal principles. Simon, 306 S.W.3d a judge other than the challenged judge, to hear and
at 320. When a relator seeks extraordinary relief that rule upon the motion to recuse. This process affords the
amounts to the undoing of an accomplished judicial act, parties—the State and the defendant—a fair and impartial
that relief is more in *313 the nature of mandamus than forum in which each may litigate the merits of the motion.
prohibition. Id. at 320 n. 2. Further, this process contemplates the resolution of the
motion through the exercise of the independent judgment
of the assigned judge absent any outside pressure. It
B. Clear right to relief would defeat the purpose of the “refer rule” to permit the
challenged judge to insert herself in her official capacity
1. Impropriety of the motion for reconsideration
as judge in order to exert pressure upon and influence
[5] We conclude that Judge Mullin's motion for
the assigned judge's judgment. It is not just inappropriate
reconsideration was improper, and thus that Judge Pirtle
but blatantly improper for a challenged judge to take
clearly erred by signing the order granting reconsideration
action designed to influence the outcome of the matter
and setting Amos's motion to recuse for a new hearing.
at issue. To hold otherwise would seriously compromise
the independence of the assigned judge and undermine the
[6] “Recuse” means both to remove oneself as a judge
integrity of the judicial recusal process.
in a particular case and to challenge or object to a
judge as being disqualified from hearing a particular
[10] We make no distinction between that period during
case, such as because of prejudice. BLACK'S LAW
which the motion is pending and the period immediately
DICTIONARY 1303 (8th ed. 2004). Texas Rule of Civil
following the ruling by the assigned judge. Once a
Procedure 18a, which governs motions to recuse, applies
judge has been recused, the prudent approach is for
in criminal cases. Arnold v. State, 853 S.W.2d 543, 544
the recused judge and the assigned judge to have no
(Tex.Crim.App.1993). Under that rule, the challenged
further communications with each other concerning any
judge must either recuse or refer the motion for another
aspect of that case. See Mosley v. State, 141 S.W.3d
judge to decide. De Leon, 127 S.W.3d at 5. The purpose of
816, 833 (Tex.App.-Texarkana 2004, pet. ref'd). Judicial
the recuse-or-refer rule is to preserve public confidence in
action prohibited during the pendency of the recusal
the impartiality of the judiciary “by minimizing a judge's
motion should not be tolerated after *314 the assigned
involvement in recusal proceedings.” Carmody v. State
judge rules on the motion. In both instances, the rules
Farm Lloyds, 184 S.W.3d 419, 422 (Tex.App.-Dallas 2006,
plainly discourage any attempt by the challenged judge to
no pet.).
influence the judgment of the assigned judge.

[7] If a judge recuses himself or herself, the judge thereby
Additionally, there is some authority holding that the
voluntarily steps out of the case for all purposes and
parties to a criminal case are the State and the accused,
another judge is immediately assigned to hear and dispose
and that no third party may intervene in a criminal
of the case. If a judge refers the motion to recuse to
case. See Bell v. State, No. 01–05–01180–CR, 2006 WL
the presiding administrative judge, the rules require the
3628916, at *5 (Tex.App.-Houston [1st Dist.] Dec. 14,
challenged judge to step aside and another judge to
2006, no pet.) (mem. op., not designated for publication)
be assigned to resolve the motion. Once the challenged
(trial judge was not required to refer motion to recuse
judge refers the motion for another judge to decide, the
filed by third-party “public interest organization”); In re
challenged judge must take no further action in the case
Wingfield, 171 S.W.3d 374, 381 (Tex.App.-Tyler 2005,
until the motion is decided, except for good cause stated
orig. proceeding) (“Unlike the Rules of Civil Procedure,
in writing or on the record. TEX. R. CIV. P. 18a(f)(2)

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 5
In re Amos, 397 S.W.3d 309 (2013)

the Code of Criminal Procedure makes no provision for omitted). 3 Thus, an otherwise qualified assigned judge's
a third party to intervene in a ‘criminal action.’ ”). In action outside the scope of his or her assignment presents
Wingfield, the court went so far as to state that the trial a “procedural irregularity.” Wilson v. State, 977 S.W.2d
judge “had no discretion to consider the issues raised” 379, 380 (Tex.Crim.App.1998). In Wilson, a former judge
by purported intervenors in a criminal case. 171 S.W.3d was *315 assigned to a particular trial court for a specific
at 381. By analogy, Judge Pirtle had no discretion to five-week period, and he presided over the appellant's trial
consider the issues raised by Judge Mullin in her motion in that court even though his assignment had expired three
for reconsideration. days before the trial started. Id. at 379. The appellant
complained about the judge's lack of authority for the
Based on the foregoing authorities, we conclude that first time on appeal. Id. at 379–80. The court of criminal
Judge Mullin's motion for reconsideration was wholly appeals held that a defendant may challenge an otherwise
improper and without authority. Under the circumstances qualified judge's authority to preside in a particular case
of this case, after Amos filed the motion to recuse and by means of a pretrial objection (rather than a quo
Judge Mullin declined to recuse herself, Rule 18a(f)(2) warranto proceeding, as had been the rule previously),
(A) obliged Judge Mullin to take no further action in but the challenge cannot be raised for the first time on
the case until the issue of her recusal was decided. Once appeal. Id. at 380; accord Jackson v. State, No. 05–10–
Judge Pirtle granted the motion to recuse, Judge Mullin 01190–CR, 2012 WL 955361, at *2 (Tex.App.-Dallas Mar.
should not have involved herself in the case further. Cf. 22, 2012, no pet.) (not designated for publication) (“An
Dunn v. Cnty. of Dallas, 794 S.W.2d 560, 562 (Tex.App.- appellant may not object, for the first time on appeal, to
Dallas 1990, no writ) (once judge recused himself, he a procedural irregularity in the assignment of a former
could take no further action in the case except for good judge who is otherwise qualified.”). We conclude, based
cause stated in the order). Rule 18a(c)(2) states expressly on Wilson, that when an otherwise qualified assigned
that a challenged judge should not file a response to the judge renders an order in a criminal case that exceeds the
motion; it follows that a judge who has actually been authority conferred by his or her order of assignment, the
recused should not file a motion for reconsideration of order is erroneous, although not void.
that decision. See Mosley, 141 S.W.3d at 833 (stating that
a recused judge generally should have no communications In this case, the order of assignment by the presiding
with the judge ultimately assigned to the case). Any administrative judge provided as follows:
involvement by the recused judge after recusal can only
disserve the public policy of preserving public confidence Pursuant to Rule 18a, Texas Rules of Civil Procedure,
in the impartiality of the judiciary. See Carmody, 184 I [hereby] assign the:
S.W.3d at 422. We conclude that Judge Mullin should not
have filed the motion for reconsideration, and that Judge Honorable Sue Pirtle
Pirtle acted contrary to settled law when she granted the
Former Judge of The 382nd District Court
motion for reconsideration.
to the

2. The termination of Judge Pirtle's authority County Criminal Court # 5 of Dallas County, Texas
[11] In addition to the foregoing, we conclude that
Judge Pirtle exceeded her authority when she attempted This assignment is for the purpose of the assigned judge
to entertain Judge Mullin's motion for reconsideration hearing a Motion to Recuse as stated in the Conditions
after Judge Pirtle had decided the motion to recuse and of Assignment. This assignment is effective immediately
the presiding administrative judge had transferred and and shall continue for such time as may be necessary for
reassigned the case to a new judge in a new court. the assigned judge to hear and pass on such motion.

CONDITION(S) OF ASSIGNMENT:
[12] [13] “The terms of the assignment order control
the extent of the visiting judge's authority and when it Cause No. MA–10–6876: The State of Texas vs. Heidi
terminates.” Mangone v. State, 156 S.W.3d 137, 139– Amos.
40 (Tex.App.-Fort Worth 2005, pet. ref'd) (footnote

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 6
In re Amos, 397 S.W.3d 309 (2013)

therefore any failure to notify Judge Mullin of the recusal
Based on the language of this order, Judge Pirtle's hearing did not violate Judge Mullin's constitutional
authority in the case arguably expired on September 28, rights.
2012, when she ruled on Amos's motion to recuse. But we
need not decide this issue because in our view Judge Pirtle We conclude Amos has shown a clear right to relief from
definitely lost any authority she had on October 1, 2012, Judge Pirtle's order granting reconsideration of Amos's
when the presiding administrative judge transferred and motion to recuse.
reassigned Amos's criminal case to a new court, Dallas
County Criminal Court of Appeals No. 2. The transfer
order does not recognize or mention any continuing power C. Error preservation and adequate remedy at law
in Judge Pirtle to exercise any judicial authority in the case. [15] We next consider whether we should deny Amos's
Judge Pirtle's attempt to continue acting in the case after petition because she did not present any of her arguments
the case had been transferred in its entirety to a new judge to Judge Pirtle before filing this original proceeding. See
and court was improper and without authority. In re Watkins, 369 S.W.3d 702, 706 (Tex.App.-Dallas
2012, orig. proceeding). Under the particular facts of this
case, we conclude that Amos's failure to oppose or object
3. The State's response to Judge Pirtle's reconsideration order is excusable. The
[14] At our request, the State filed a response to Amos's record indicates that Judge Mullin served her motion for
petition. The State suggests that Judge Pirtle's order reconsideration by first-class mail on October 23, 2012,
granting reconsideration may have been proper as a way and Judge Pirtle granted reconsideration, apparently
of vindicating Judge Mullin's due-process rights. In her without a hearing, by order signed on Friday, October 26.
motion for reconsideration, Judge Mullin averred that Thus, depending on when Amos received the motion for
she had not been given notice of the recusal hearing reconsideration, she had little or no time to respond to
before Judge Pirtle, and she argued, among other things, the motion for reconsideration before Judge Pirtle granted
that the lack of notice violated her rights under the it. Moreover, Judge Pirtle's October 26 order set the new
Due Course of Law Clause of the Texas Constitution. hearing on Amos's motion to recuse at 10:00 a.m. on
See TEX. CONST. art. I, § 19. One element of a claim Thursday, November 1, again giving Amos little time to
under this clause is the existence of a constitutionally react. Amos's decision to seek emergency and mandamus
protected interest. See In re J.W.T., 872 S.W.2d 189, relief from this Court, which she did on October 30, was
194 (Tex.1994). Although the Texas Supreme Court has understandable under the circumstances. Although she
said that a public officer's interest in his or her elected could have presented her argument at the November 1
position is a protected interest, Tarrant Cnty. v. Ashmore, hearing, her contention is that Judge Pirtle could not
635 S.W.2d 417, 422 (Tex.1982), *316 we have found no properly set or conduct such a hearing in the first place.
authority that a trial judge's interest in presiding over a Under these circumstances, we conclude it is proper for us
particular case is constitutionally protected such that she to address the merits in this proceeding instead of directing
must be given notice of a hearing of a motion to recuse. In Amos to make her objections before Judge Pirtle, possibly
cases decided under the federal Due Process Clause, courts resulting in yet another original proceeding afterwards.
have held that possession of a constitutionally protected
interest in public employment generally does not give the [16] The court of criminal appeals has said that appeal
holder a protected interest in any particular job duties or is ordinarily an adequate remedy for an erroneous ruling
responsibilities. See Richards v. City of Weatherford, 145 on a motion to recuse. De Leon, 127 S.W.3d at 6. But
F.Supp.2d 786, 790–91 (N.D.Tex.2001), aff'd, 275 F.3d 46 Amos is not challenging an order granting or denying a
(5th Cir.2001). We generally construe the Due Course of motion to recuse; she is challenging an assigned judge's
Law Clause in the same way as its federal counterpart. consideration of an improper motion for reconsideration
Tex. Workers Comp. Comm'n v. Patient Advocates of filed by a recused judge. “ ‘If a district judge enters
Tex., 136 S.W.3d 643, 658 (Tex.2004). By analogy, Judge an order for which he has no authority, mandamus
Mullin had no protected interest in presiding over Amos's will issue.’ ” State ex rel. Cobb v. Godfrey, 739 S.W.2d
particular criminal case. We conclude that the order 47, 48 (Tex.Crim.App.1987) (orig. proceeding) (quoting
recusing Judge Mullin in a single case did not infringe any State ex rel. Holmes v. Denson, 671 S.W.2d 896, 899
interest protected by the Due Course of Law Clause, and (Tex.Crim.App.1984) (orig. proceeding)). In Godfrey, the

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 7
In re Amos, 397 S.W.3d 309 (2013)

trial judge attempted to grant a new trial after the authority over the case. In the civil context, mandamus
will lie when a court issues an order that actively
defendant's motion for new trial had been overruled by
interferes with the jurisdiction of another court possessing
operation of law. See id. at 47–48. The court of criminal
dominant jurisdiction. See In re Puig, 351 S.W.3d 301, 306
appeals granted mandamus relief, concluding *317 that
(Tex.2011) (orig. proceeding) (per curiam). We conclude
the judge lacked authority to take that action. Id. at 50.
that mandamus should issue to forestall any interference
with Judge Rosenfield's authority over this criminal case.
We conclude that mandamus is appropriate on the facts
of this case. Judge Mullin acted without authority when
she filed the motion for reconsideration, and Judge Pirtle
acted contrary to settled law when she granted the motion III. CONCLUSION
for reconsideration. If we withhold mandamus relief, any
further proceedings by Judge Pirtle will be improper, and For the foregoing reasons, we conditionally grant Amos's
any orders or judgments resulting from those proceedings petition for writ of mandamus. The writ will issue only
will be erroneous and subject to reversal, resulting in a if Judge Pirtle fails to vacate her October 26, 2012 Order
waste of judicial resources. Cf. De Leon, 127 S.W.3d at Granting Motion for Reconsideration of Order of Recusal
7 (indicating that mandamus may be appropriate where and Setting Hearing Date. We deny Amos's petition to the
reversal is so certain that a trial would be a waste extent she requests a writ of prohibition.
of judicial resources). Moreover, Judge Pirtle's attempt
to continue taking judicial action conflicts with the
All Citations
order of the presiding administrative judge transferring
Amos's case to Judge Rosenfield and interferes with his 397 S.W.3d 309

Footnotes
1 Counsel for the State testified in part, “I don't think that she [Judge Mullin] can be fair and impartial in your case with
Ms. Amos.”
2 Judge Mullin did not categorically state that she had no prior knowledge of the hearing.
3 The rule is the same in civil cases. See, e.g., Davis v. Crist Indus., Inc., 98 S.W.3d 338, 341 (Tex.App.-Fort Worth
2003, pet. denied) (“The terms of the assignment order control[ ] the extent of the visiting judge's authority and when
it terminates.”).

End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 8
In re Christus Spohn Health System Corp., 231 S.W.3d 475 (2007)

Cases that cite this headnote
231 S.W.3d 475
Court of Appeals of Texas,
Corpus Christi–Edinburg. [2] Mandamus
Presumptions and Burden of Proof
In re CHRISTUS SPOHN HEALTH The relator requesting a writ of mandamus
SYSTEM CORPORATION d/b/ has the burden to establish that the trial court
a Christus Spohn Hospital Shoreline. abused its discretion.

No. 13–07–399–CV. Cases that cite this headnote
|
July 31, 2007.
[3] Mandamus
Synopsis Acts and Proceedings of Courts, Judges,
Background: Decedent's survivors brought wrongful and Judicial Officers
death action against decedent's former employer arising Mandamus
out of murder in employer's parking garage. Employer Civil Proceedings Other Than Actions
filed motion to compel arbitration. The trial court If a trial court erroneously denies a party's
denied the motion, and employer petitioned for writ of motion to compel arbitration under the
mandamus. Federal Arbitration Act (FAA), the movant
has no adequate remedy at law and is entitled
to a writ of mandamus.
Holdings: The Court of Appeals, Corpus Christi–
1 Cases that cite this headnote
Edinburg, Valdez, C.J., held that:

[1] employer substantially invoked the judicial process, [4] Alternative Dispute Resolution
and Evidence
There is a strong presumption against waiver
[2] survivors were prejudiced by employer's action. of arbitration rights.

Cases that cite this headnote
Writ denied.

[5] Alternative Dispute Resolution
Evidence
West Headnotes (23) A heavy burden of proof is required to
establish waiver of arbitration rights, and
[1] Mandamus the court must resolve all doubt in favor of
Remedy by Appeal or Writ of Error arbitration.

Mandamus Cases that cite this headnote
Matters of Discretion
A writ of mandamus will issue to correct a
[6] Alternative Dispute Resolution
clear abuse of discretion when there is no
Trial or Hearing
adequate remedy by appeal; a trial court
abuses its discretion if it reaches a decision so Whether a party has waived its contractual
arbitrary and unreasonable as to amount to a right to arbitrate is a question of law.
clear and prejudicial error of law or if it clearly 1 Cases that cite this headnote
fails to correctly analyze or apply the law.

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 1
In re Christus Spohn Health System Corp., 231 S.W.3d 475 (2007)

opposing party proved that it suffered
[7] Alternative Dispute Resolution prejudice as a result.
Waiver or Estoppel
Waiver of the right to arbitration may be 2 Cases that cite this headnote
express or implied.
[13] Alternative Dispute Resolution
Cases that cite this headnote
Suing or Participating in Suit
The judicial process has been substantially
[8] Alternative Dispute Resolution invoked such that a right to arbitration
Waiver or Estoppel has been waived when the party seeking
Whether waiver of the right to arbitration has arbitration has taken specific and deliberate
occurred depends on the individual facts and actions, after the filing of suit, that are
circumstances of each case. inconsistent with a right to arbitrate or
has actively tried, but failed, to achieve a
Cases that cite this headnote satisfactory result through litigation before
turning to arbitration.
[9] Alternative Dispute Resolution
5 Cases that cite this headnote
Waiver or Estoppel
Waiver of the right to arbitration occurs only
where a party has acted inconsistently with its [14] Alternative Dispute Resolution
right to arbitrate and such actions prejudiced Suing or Participating in Suit
the other party. Actions that are inconsistent with the right to
arbitrate and thus raise the issue of waiver of
Cases that cite this headnote that right may include some combination of
filing an answer, setting up a counterclaim,
[10] Alternative Dispute Resolution pursuing extensive discovery, moving for a
Suing or Participating in Suit continuance, and failing to timely request
A party waives an arbitration clause when it arbitration.
substantially invokes the judicial process to
2 Cases that cite this headnote
the other party's detriment.

1 Cases that cite this headnote [15] Alternative Dispute Resolution
Suing or Participating in Suit
[11] Alternative Dispute Resolution Examples that indicate the party is attempting
Waiver or Estoppel to achieve a satisfactory result through
Waiver of an arbitration right must be litigation before turning to arbitration such
intentional. that the right to arbitration is waived include
moving for summary judgment or seeking a
Cases that cite this headnote final resolution of the dispute.

2 Cases that cite this headnote
[12] Alternative Dispute Resolution
Suing or Participating in Suit
[16] Alternative Dispute Resolution
The test for determining waiver of the right
Suing or Participating in Suit
to arbitration is two-pronged: (1) whether
the party seeking arbitration substantially Attempts at settlement do not evidence waiver
invoked the judicial process, and (2) whether of the right to arbitration.

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 2
In re Christus Spohn Health System Corp., 231 S.W.3d 475 (2007)

opponent's incurring costs and fees due to the
Cases that cite this headnote movant's actions or delay.

Cases that cite this headnote
[17] Alternative Dispute Resolution
Waiver or Estoppel
Delay alone generally does not establish [22] Alternative Dispute Resolution
waiver of the right to arbitration. Suing or Participating in Suit
Decedent's employer substantially invoked
Cases that cite this headnote the judicial process for purposes of waiver
of right to arbitration in wrongful death
[18] Alternative Dispute Resolution action brought by decedent's survivors, where
Suing or Participating in Suit employer did not request arbitration until
14 months after lawsuit was filed, two
Purely defensive measures do not
separate trial settings had been passed and the
substantially invoke the judicial process as
matter had already been set for trial a third
required to waive a right to arbitration.
time, at employer's request, before employer
2 Cases that cite this headnote moved to compel arbitration, employer had
sought substantive discovery on the merits,
pertaining to both liability and damages,
[19] Alternative Dispute Resolution
through numerous discovery requests and
Suing or Participating in Suit
motions, and employer had filed a third-party
A party does not substantially invoke petition, had filed a motion for contempt,
the judicial process and waive a right and had attempted to impose sanctions which
to arbitration merely by participating in suggested that it was attempting to achieve
discovery; in contrast, pursuing extensive a satisfactory result through the judicial
discovery may substantially invoke the process.
judicial process.
1 Cases that cite this headnote
1 Cases that cite this headnote

[23] Alternative Dispute Resolution
[20] Alternative Dispute Resolution Suing or Participating in Suit
Suing or Participating in Suit
Decedent's survivors were prejudiced by
Even when a party has substantially invoked employer's act in invoking the judicial
the judicial process, a party's right to process such that employer waived right
arbitration is not waived absent a clear to arbitration in wrongful death action;
showing that the opposing party has been survivors' counsel testified by affidavit as
prejudiced. to the expenses incurred and the time
spend on depositions and discovery, that
1 Cases that cite this headnote
he would have used a different discovery
strategy had employer timely requested
[21] Alternative Dispute Resolution arbitration, and that he would have limited
Waiver or Estoppel the depositions and expenses incurred because
In determining whether a party has been of the limits customarily proposed in
prejudiced such that the right to arbitration arbitration proceedings, and survivor testified
has been waived, courts focus on factors such by affidavit that he and his children had been
as: (1) the movant's access to information that receiving counseling and were expecting the
is not discoverable in arbitration and (2) the matter to be resolved.

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 3
In re Christus Spohn Health System Corp., 231 S.W.3d 475 (2007)

(orig.proceeding); Serv. Corp. Int'l v. Lopez, 162 S.W.3d
Cases that cite this headnote 801, 808 (Tex.App.-Corpus Christi 2005, no pet.).

II. Background
Attorneys and Law Firms
This is a premises liability case. Debra Slough worked
*477 Charles W. Hurd, III, Joy M. Soloway, Fulbright
as a nurse at Christus Spohn Shoreline. Jesus Alvarez
& Jaworski, Christine Kirchner, Jennifer Simons, Stephen
abducted Slough from Christus Spohn's parking garage
J. Knight, Chamberlain, Hrdlicka, White, Williams &
and murdered her. Debra Slough's husband, Corey
Martin, Houston, Darrell L. Barger, Hartline, Dacus,
Slough, filed suit against Christus Spohn individually and
Barger, Dreyer, Corpus Christi, for relator.
on behalf of their three minor children. Relator contends
David T. Bright, Watts Law Firm, Robert C. Hilliard, that the trial court erred in failing to grant its motion
Hilliard & Munoz, Corpus Christi, for real party in to compel arbitration based on an arbitration clause
interest. included in its employee benefit plan. Real parties in
interest contend, inter alia, that there is neither a valid
Before Chief Justice VALDEZ and Justices BENAVIDES arbitration agreement nor that their claims fall within
and VELA. the scope of that agreement. Real parties in interest raise
further defenses to arbitration, including waiver, estoppel,
and procedural and substantive unconscionability. We
OPINION conclude that the issue of waiver is dispositive of this
matter. See Tex.R.App. P. 47.1.
Opinion by Chief Justice VALDEZ.

Relator, Christus Spohn Health System Corporation d/
b/a Christus Spohn Hospital Shoreline, seeks a writ of III. Applicable Law
mandamus ordering the trial court to compel arbitration
[4] [5] [6] [7] [8] There is a strong presumption
of a wrongful death claim brought by real parties in
against waiver of arbitration rights. In re Bank One, 216
interest, the family of a deceased employee. We deny the
S.W.3d 825, 827 (Tex.2007); In re D. Wilson Constr.
petition for writ of mandamus.
Co., 196 S.W.3d 774, 783 (Tex.2006) (orig.proceeding);
see In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 763
(Tex.2006) (orig.proceeding). A “heavy burden of proof”
I. Standard of Review is required to establish waiver of arbitration rights, and
the court must resolve all doubt in favor of arbitration. In
[1] [2] [3] A writ of mandamus will issue to correct
re Bruce Terminix Co., 988 S.W.2d 702, 702 (Tex.1998).
a clear abuse of discretion when there is no adequate
Whether a party has waived its contractual right to
remedy by appeal. See Walker v. Packer, 827 S.W.2d 833,
arbitrate is a question of law. See In re Oakwood Mobile
840 (Tex.1992). A trial court abuses its discretion if it
Homes, 987 S.W.2d 571, 574 (Tex.1999) (orig.proceeding).
reaches a decision so arbitrary and unreasonable as to
Waiver may be express or implied. EZ Pawn Corp. v.
amount to a clear and prejudicial error of law or if it
Mancias, 934 S.W.2d 87, 89 (Tex.1996) (orig.proceeding);
clearly fails to correctly analyze or apply the law. In re
Southwind Group, Inc. v. Landwehr, 188 S.W.3d 730,
Ford Motor Co., 165 S.W.3d 315, 317 (Tex.2005). The
735 (Tex.App.-Eastland 2006, orig. proceeding). Whether
relator has the burden to establish that the trial court
waiver has occurred depends on the individual facts and
abused its discretion. See id. If a trial court erroneously
circumstances of each case. Southwind Group, Inc., 188
denies a party's motion to compel arbitration under the
S.W.3d at 735; Williams Indus., Inc. v. Earth Dev. Sys.
FAA, the movant has no adequate remedy at law and
Corp., 110 S.W.3d 131, 135 (Tex.App.-Houston [1st Dist.]
is entitled *478 to a writ of mandamus. In re Nexion
2003, no pet.); Sedillo v. Campbell, 5 S.W.3d 824, 827
Health at Humble, Inc., 173 S.W.3d 67, 69 (Tex.2005)
(Tex.App.-Houston [14th Dist.] 1999, no pet.).

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 4
In re Christus Spohn Health System Corp., 231 S.W.3d 475 (2007)

[9] [10] [11] [12] Waiver occurs only where “a partydispute. Williams Indus., Inc., 110 S.W.3d at 135. In this
has acted inconsistently with its right to arbitrate and regard, we would note that attempts at settlement do not
such actions prejudiced the other party.” In re Oakwood evidence waiver. In re Certain Underwriters at Lloyd's, 18
Homes, 987 S.W.2d at 574. Stated differently, “a party S.W.3d at 876; D. Wilson Constr. Co. v. McAllen Indep.
waives an arbitration clause when it substantially invokes Sch. Dist., 848 S.W.2d 226, 230 (Tex.App.-Corpus Christi
the judicial process to the other party's detriment.” In re 1992, writ dism'd w.o.j.).
Bank One, 216 S.W.3d at 827; see In re Vesta, 192 S.W.3d
at 763. Waiver of an arbitration right must be intentional. [17] [18] [19] Delay alone generally does not establish
In re Bank One, 216 S.W.3d at 827; EZ Pawn Corp., waiver. In re Vesta, 192 S.W.3d at 763. Similarly, purely
934 S.W.2d at 89; In re Certain Underwriters at Lloyd's, defensive measures do not substantially invoke the judicial
18 S.W.3d 867, 872 (Tex.App.-Beaumont 2000, orig. process. See Transwestern Pipeline Co. v. Horizon Oil &
proceeding). Therefore, the test for determining waiver Gas Co., 809 S.W.2d 589, 593 (Tex.App.-Dallas 1991,
is two-pronged: (1) did the party seeking arbitration writ dism'd w.o.j.) (citing filing of general denial to
substantially invoke the judicial process, and (2) did the preclude default judgment and filing of protective order
opposing party prove that it suffered prejudice as a result. in response to discovery request as examples of defensive
Perry Homes v. Cull, 173 S.W.3d 565, 569–70 (Tex.App.- measures); see also In re Serv. Corp. Int'l, 85 S.W.3d 171,
Fort Worth 2005, pet. granted). 174 (Tex.2002) (orig.proceeding) (holding that objecting
to trial setting showed intent to avoid rather than to
[13] The judicial process has been substantially invoked participate in judicial process). A party does not, for
when the party seeking arbitration has taken specific instance, substantially invoke the judicial process merely
and deliberate actions, after the filing of suit, that are by participating in discovery. In re Bruce Terminix Co.,
inconsistent with a right to arbitrate or has actively 988 S.W.2d at 704; Southwind Group, Inc., 188 S.W.3d
tried, but failed, to achieve a satisfactory result through at 736–737; In re Nasr, 50 S.W.3d 23, 27 (Tex.App.-
litigation before turning to arbitration. In re Vesta Group, Beaumont 2001, orig. proceeding). In contrast, pursuing
*479 Inc., 192 S.W.3d at 763; Williams Indus., 110 extensive discovery may substantially invoke the judicial
S.W.3d at 135. Compare Sedillo, 5 S.W.3d at 827 (waiver process. Southwind Group, Inc., 188 S.W.3d at 736–737;
may occur when a party has taken specific and deliberate Nationwide of Bryan, Inc., 969 S.W.2d at 522.
acts after suit has been filed that are inconsistent with the
right to arbitrate), and Nationwide of Bryan v. Dyer, 969 [20] [21] Even when a party has substantially invoked
S.W.2d 518, 521 (Tex.App.-Austin 1998, no pet.) (same), the judicial process, a party's right to arbitration is not
with Grand Homes 96, L.P. v. Loudermilk, 208 S.W.3d 696, waived absent a clear showing that the opposing party has
703–704 (Tex.App.-Fort Worth 2006, pet. filed) (waiver been prejudiced. See In re Vesta Ins. Group, 192 S.W.3d
may occur when a party has actively tried, but failed, to at 763; In re Bruce Terminix Co., 988 S.W.2d at 704. In
achieve a satisfactory result in litigation before turning determining whether or not a party has been prejudiced,
to arbitration); Southwind Group, Inc., 188 S.W.3d at 736 courts focus on factors such as: (1) the movant's access to
(same); Williams Indus., Inc., 110 S.W.3d at 135 (same). information that is not discoverable in arbitration; and (2)
the opponent's incurring costs and fees due to the movant's
[14] [15] [16] Actions that are inconsistent with the actions or delay. See In re Bruce Terminix Co., 988 S.W.2d
right to arbitrate and thus raise the issue of waiver may at 704; Southwind Group, Inc., 188 S.W.3d at 737; Williams
include some combination of filing an answer, setting up Indus., Inc., 110 S.W.3d at 135.
a counterclaim, pursuing extensive discovery, moving for
a continuance, and failing to timely request arbitration.
See In re Certain Underwriters at Lloyd's, 18 S.W.3d at
IV. Analysis
872–873; Sedillo, 5 S.W.3d at 827; Central Nat'l Ins. Co.
v. Lerner, 856 S.W.2d 492, 494 (Tex.App.-Houston [1st We now turn to the procedural history of this matter. The
Dist.] 1993, orig. proceeding). Examples that indicate the underlying lawsuit was originally filed on December 16,
party is attempting to achieve a satisfactory result through 2005. Spohn did not move to compel arbitration *480
litigation before turning to arbitration include moving for until February 8, 2007, after the case had been set for
summary judgment or seeking a final resolution of the trial on three separate dates and almost fourteen months

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 5
In re Christus Spohn Health System Corp., 231 S.W.3d 475 (2007)

after the inception of the lawsuit. Spohn filed an amended mentioning *481 an alleged right to arbitration, Spohn
motion to compel arbitration on February 22, 2007. The presented seventeen of its employees for deposition.
trial court heard arguments on the motion to compel
arbitration on March 2, 2007, and requested supplemental The parties, including Spohn, sought affirmative relief
briefing, which was subsequently filed in April and May. regarding their discovery efforts. In the criminal cause
On June 20, 2007, Spohn filed a petition for writ of pending against Jesus Alvarez filed in the 156th District
mandamus complaining of the trial court's failure to rule Court of Bee County, Texas, Spohn moved to hold
and argued that the trial court's failure to rule was a denial counsel for real parties in interest in contempt of court
of the motion to compel “[f]or all practical purposes.” The based on alleged discovery abuse. While we ordinarily
trial court entered an order denying Spohn's motion to would not consider actions in a separate cause as
compel arbitration on June 28, 2007. During the fourteen- indicative of waiver, we would note that Spohn's motion
month interval before the motion to compel arbitration for contempt expressly stated that:
was filed, the parties substantially litigated this case. The
real parties added an additional defendant to the lawsuit, Movant seeks a contempt finding
and Spohn filed a motion for leave to designate Jesus from this Court, so it may
Alvarez as a responsible third party and filed an original present such finding to [respondent
third party petition seeking to add claims against Jesus in this underlying proceeding] in
Alvarez to the lawsuit. Spohn also applied for a temporary connection with various steps civil
restraining order and temporary injunction against real defense counsel will take to suppress
parties in interest, which were granted by the trial court. the use of the improperly obtained
video and/or transcript of Mr.
As mentioned previously, the matter was set for trial on Alvarez's sworn statement, for any
no less than three occasions before Spohn first mentioned purpose, in the civil matter.
the issue of arbitration. Spohn participated in a docket
Accordingly, we construe Spohn's actions in this separate
control conference and a docket control order was entered
lawsuit as part of its strategic plan of defense in the
setting this matter for trial on December 3, 2006, with an
underlying matter that would be inconsistent with a right
alternate setting for April 2, 2007. After plaintiffs added
to arbitrate. Moreover, real parties in interest sought and
an additional defendant, the parties agreed to pass the
received sanctions against Spohn in the instant case for its
December setting and proceed with the April 2, 2007
failure to identify persons with relevant knowledge and its
setting. On January 3, 2007, Spohn filed a verified motion
representations regarding the lack of video surveillance of
for continuance, requesting that the trial date be reset, and
Spohn's premises, when it possessed, but failed to identify
also requested entry of a Level III discovery plan. The
or produce, video surveillance of Spohn's premises on the
trial court granted Spohn's motion for continuance and,
date of Debra Slough's abduction and murder.
on January 8, 2007, reset the case for trial in August of
2007.
Finally, counsel for real parties in interest testified, by
affidavit, that he had asked counsel for Spohn early
During this same fourteen-month period of time before
in the litigation whether there were any reasons real
Spohn moved to compel arbitration, the parties engaged
parties could not bring the claims set out in their petition
in voluminous discovery. Spohn initiated and commenced
because he was concerned that Spohn might consider
a significant amount of affirmative discovery. In addition
decedent Debra Slough to be an employee within the
to standard requests for disclosure, Spohn sent seven
course and scope of her employment, and thus subject
separate sets of written discovery to real parties in
to the employee benefit plan containing the arbitration
interest. These discovery requests, which are part of
agreement. Counsel stated that Spohn repeatedly and
the record, are substantive and address the merits of
expressly denied this. Counsel for Spohn also took the
the case, including both liability and damage issues. 1 position that Slough's murder did not qualify as an
Spohn also ordered nineteen sets of business records from “event” under the employee benefit plan because of a
third parties. Spohn filed numerous discovery motions, “criminal act by a third party.” Further, Spohn has denied
including eight motions to compel, and requested entry any benefits to the Slough family under the employee
of an agreed protective order. Without referencing or benefit plan.

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 6
In re Christus Spohn Health System Corp., 231 S.W.3d 475 (2007)

$60,000 to $70,000 in expenses in developing this matter
[22] Considering the individual facts and circumstances for trial. Counsel further testified that he and co-counsel
of this case, we conclude that Spohn substantially spent more than 1,000 hours on the case in preparing
invoked the judicial process. Although delay alone does it for trial, and, estimating their hourly rate at $350
not establish waiver, fourteen months passed before per hour, had invested more than $350,000 in attorney's
Christus moved to compel arbitration, and, under these fees. Counsel deposed seventeen witnesses before Spohn
circumstances, we would conclude that Spohn failed to moved to compel arbitration and ordered records through
timely request arbitration. See In re Certain Underwriters depositions on written questions from twenty-three non-
at Lloyd's, 18 S.W.3d at 872–873; Sedillo, 5 S.W.3d at 827. parties. Counsel propounded twelve substantive sets of
Two separate trial settings had been passed and the matter written discovery to Spohn. Counsel testified that, had
had already been set for trial a third time, at Spohn's Spohn requested arbitration before discovery, he would
request via a verified motion for continuance, before have used a different discovery strategy and limited
Spohn moved to compel arbitration. Cf. Interconex, Inc. the depositions and expenses incurred because of the
v. Ugarov, 224 S.W.3d 523, 534–35 (Tex.App.-Houston limits customarily proposed in arbitration proceedings.
[1st Dist.] 2007, no pet.) (movant acted inconsistently with Counsel further testified that Spohn's failure to identify
its right to arbitrate when it requested that the case be fact witnesses and failure to acknowledge the existence of,
reset and failed to file a motion to compel arbitration until or produce, video surveillance of its premises on the date
shortly before trial, which it had specifically requested of the incident, greatly increased the time and expense of
and caused to be set at a certain date). According to this lawsuit. Finally, counsel for real parties testified that
the written discovery contained in the record, Spohn he had relied on representations by Spohn's counsel that
sought substantive discovery on the merits, pertaining to this was not an “event” under Spohn's plan because of a
both liability and damages, through numerous discovery “criminal act by a third party.”
requests and motions. Southwind Group, Inc., 188 S.W.3d
at 736–737; Nationwide of Bryan, Inc., 969 S.W.2d at Corey Slough testified by affidavit that he and his children
522. Moreover, Spohn's third-party petition, motion for were expecting this matter to be resolved by trial in
contempt, and attempt to impose sanctions constitute April or August, and having to continue this matter via
specific and deliberate actions that are inconsistent *482 arbitration, with no specific end date in sight, would be
with the right to arbitrate and suggest that Spohn was “highly prejudicial and detrimental” to him and his three
attempting to achieve a satisfactory result through the daughters. “We have been receiving counseling to get
judicial process. through this ordeal, and it will be very prejudicial for this
to keep going because of Spohn's agreement to the trial
While none of these factors alone would establish waiver setting, and now trying to back out of it....”
of the right to arbitration, the combination herein does.
See In re Certain Underwriters at Lloyd's, 18 S.W.3d at Based on the record, we conclude that real parties in
872–873; Sedillo, 5 S.W.3d at 827; Central Nat'l Ins. Co. interest have made a clear showing of prejudice. See In re
v. Lerner, 856 S.W.2d 492, 494 (Tex.App.-Houston [1st Vesta Ins. Group, 192 S.W.3d at 763.
Dist.] 1993, orig. proceeding).

[23] Having determined that Spohn substantially
V. Conclusion
invoked the judicial process, we next consider whether
real parties in interest have made a clear showing that Even given the strong presumption against waiver, we
they have been prejudiced. See In re Vesta Ins. Group, 192 conclude that Spohn substantially invoked the judicial
S.W.3d at 763; In re Bruce Terminix Co., 988 S.W.2d at process to its opponents' detriment. Real parties in interest
704. have identified acts by Spohn that are inconsistent with
its right to arbitrate and have further shown resultant
In the instant case, counsel for real parties in interest prejudice on their part. Accordingly, the Court, having
testified by affidavit that compelling arbitration would examined and fully considered the petition for writ
“greatly prejudice” real parties in interest. Counsel of mandamus and response thereto is of the opinion
testified that real parties in interest spent approximately that relator has not shown itself entitled to the relief

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 7
In re Christus Spohn Health System Corp., 231 S.W.3d 475 (2007)

sought. Accordingly, the petition for writ of mandamus All Citations
is DENIED. See Tex.R.App. P. 52.8(a). Any pending
motions are dismissed as moot. 231 S.W.3d 475

Footnotes
1 Written discovery propounded by Spohn includes: (1) Spohn's first set of interrogatories and first request for production
to Corey Slough, individually (thirteen interrogatories and thirteen requests for production); (2) Spohn's first request for
production to Corey Slough, as representative of the estate of Debra Slough, deceased (nine interrogatories); (3) Spohn's
second request for production and first set of interrogatories to Corey Slough, as representative of the estate of Debra
Slough, deceased (seven requests for production and one interrogatory); (4) Spohn's third request for production to Corey
Slough, as representative of the estate of Debra Slough, deceased (twelve requests for production); (5) Spohn's first set
of interrogatories and requests for production to Corey Slough, as next friend to Katelyn Slough (fourteen interrogatories
and ten requests for production); (6) Spohn's first set of interrogatories and requests for production to plaintiff, Corey
Slough, as next friend to Holly Slough (same); and (7) Spohn's first set of interrogatories and requests for production to
plaintiff, Corey Slough, as next friend to Stacey Slough (same).

End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 8
In re Fleetwood Homes of Texas, L.P., 257 S.W.3d 692 (2008)
51 Tex. Sup. Ct. J. 1066

A party waives an arbitration clause in a
contract by substantially invoking the judicial
KeyCite Yellow Flag - Negative Treatment process to the other party's detriment or
Distinguished by El Paso Healthcare System, Ltd. v. Green, Tex.App.- 
prejudice.
El Paso, February 29, 2016
257 S.W.3d 692 19 Cases that cite this headnote
Supreme Court of Texas.

In re FLEETWOOD HOMES OF TEXAS, L.P. [3] Alternative Dispute Resolution
and Fleetwood Enterprises, Inc., Relators. Waiver, laches, or estoppel
Waiver of the contractual right to arbitration
No. 06–0943. is a legal question for the court, based on the
| totality of the circumstances.
June 20, 2008.
17 Cases that cite this headnote
Synopsis
Background: Owner of mobile home parks brought
action against manufacturer of mobile homes, relating to [4] Alternative Dispute Resolution
manufacturer's cancellation of parties' dealer agreement. Suing or participating in suit
The 278th District Court, Walker County, Kenneth Defendant manufacturer of mobile homes did
H. Keeling, J., denied defendant's motion to compel not impliedly waive its right to arbitration,
arbitration. Manufacturer petitioned for writ of under dealer agreement with plaintiff owner
mandamus. The Waco Court of Appeals, 2006 WL of mobile home parks, by failing to pursue
3028222, denied the petition. Manufacturer petitioned for its arbitration demand for eight months
writ of mandamus. while discussing a trial setting and allowing
limited discovery, where plaintiff was not
prejudiced; defendant took no depositions
and instead merely noticed one deposition
[Holding:] The Supreme Court held that defendant did not
before canceling it and merely served one set
impliedly waive its contractual right to arbitration.
of written discovery the day before it moved
to compel arbitration, and defendant filed no
Writ conditionally granted. dispositive motions, nor did it wait until eve of
trial to move to compel.

12 Cases that cite this headnote
West Headnotes (7)
[5] Alternative Dispute Resolution
[1] Alternative Dispute Resolution Unconscionability
Suing or participating in suit Arbitration clause of dealer agreement
Parties that conduct full discovery, file between manufacturer of mobile homes
motions going to the merits, and seek and owner of mobile home parks was
arbitration only on the eve of trial waive any not substantively unconscionable, though it
contractual right to arbitration. limited both parties' right to discovery; limited
discovery was one of arbitration's most
17 Cases that cite this headnote distinctive features.

2 Cases that cite this headnote
[2] Alternative Dispute Resolution
Suing or participating in suit
[6] Costs
Prevailing party

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 1
In re Fleetwood Homes of Texas, L.P., 257 S.W.3d 692 (2008)
51 Tex. Sup. Ct. J. 1066

Absent a contractual agreement, Texas law home parks in southeast Texas that also sells and leases
allows attorney fees only for a prevailing mobile homes. The agreement included an arbitration
plaintiff. V.T.C.A., Civil Practice & Remedies clause covering “any dispute, controversy or claim among
Code §§ 38.001, 38.002. the Parties.” In August 2005 Fleetwood cancelled the
agreement on the ground that Gulf was planning to sell or
3 Cases that cite this headnote use mobile homes at a location other than that specified
in the dealer agreement.
[7] Alternative Dispute Resolution
Unconscionability After Gulf filed suit in October 2005, Fleetwood filed
an answer demanding arbitration, *694 but did not
Arbitration clause of dealer agreement
actually move to compel arbitration until July 2006. Gulf
between manufacturer of mobile homes and
opposed the motion on two grounds: express waiver and
owner of mobile home parks, allowing either
unconscionability.
party to recover attorney fees as prevailing
party, was not substantively unconscionable.
[2] [3] “[A] party waives an arbitration clause by
2 Cases that cite this headnote substantially invoking the judicial process to the other
party's detriment or prejudice.” Perry Homes v. Cull, 2008
WL 1922978, at *4, 258 S.W.3d 589, 590 (Tex.2008).
Waiver is a legal question for the court based on the
Attorneys and Law Firms totality of the circumstances, and asks whether a party has
substantially invoked the judicial process to an opponent's
*693 Michael J. Craddock, Felicia Norvell, David detriment, the latter term meaning inherent unfairness
Charles Routzon Jr., Craddock Reneker & Davis, L.L.P., caused by “a party's attempt to have it both ways by
Rachel Elizabeth Khirallah, Dallas, TX, for Relator. switching between litigation and arbitration to its own
advantage.” Id. 2008 WL 1922978, at *8, at 596.
Michael Allen Starzyk, April Lee Walter, Starzyk &
Associates, P.C., Alan M. Bush, Woodlands, TX, for Real Gulf argues that Fleetwood expressly waived arbitration,
Party in Interest. pointing to several emails from Fleetwood's counsel
regarding a proposed trial setting, culminating in the
Opinion
following:
PER CURIAM.
I have reviewed the Setting Request
[1] Parties that “conduct full discovery, file motions and would ask that we try to
going to the merits, and seek arbitration only on the get a setting in March.... Given
eve of trial” waive any contractual right to arbitration. the documentation I received last
In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 764 week and the work we need to
(Tex.2006). The relators here did none of those, instead do as a result of those documents,
merely discussing a potential trial setting and sending Fleetwood is not going to be in
a set of written discovery the day before moving to a position to try this case in
compel arbitration. The trial court held the relators December. If you are agreeable to
waived arbitration, and a divided court of appeals denied this, we could sign an agreed Setting
mandamus relief. 2006 WL 3028222. We disagree, and Request, otherwise, I will have to
thus conditionally grant it. See In re Weekley, 180 S.W.3d oppose the request after you submit
127, 130 (Tex.2005) (“Mandamus relief is proper to it and request a later setting.
enforce arbitration agreements governed by the FAA.”).
We need not decide whether Gulf is correct that express
waiver is governed by different rules than those that
Fleetwood Enterprises, Inc., manufactures mobile homes.
govern implied waiver, as we disagree that this rises to the
In January 2005 it signed a dealer agreement with Gulf
level of an express waiver. Nothing in this communication
Regional Services, Inc., an owner and developer of mobile

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 2
In re Fleetwood Homes of Texas, L.P., 257 S.W.3d 692 (2008)
51 Tex. Sup. Ct. J. 1066

expressly waives arbitration or revokes the arbitration arbitration limits its right to discovery. But limited
discovery is one of arbitration's “most distinctive
demand Fleetwood included in every answer it filed.
features.” Perry Homes, 2008 WL 1922978, at *9, 258
S.W.3d at 587; see also Preston v. Ferrer, 552 U.S.
[4] Instead, the question here is whether Fleetwood
346, ––––, 128 S.Ct. 978, 169 L.Ed.2d 917 (2008) (“A
impliedly waived arbitration by failing to pursue its
prime objective of an agreement to arbitrate is to achieve
arbitration demand for eight months while discussing
streamlined proceedings and expeditious results.”). Gulf's
a trial setting and allowing limited discovery. We have
argument that “streamlined” discovery makes arbitration
already answered that question “No.” In EZ Pawn Corp.
unconscionable would nullify almost all arbitration
v. Mancias, we held a party had not waived arbitration
agreements. We hold that arbitration's limits on discovery
by filing an answer, discussing a docket-control order,
for both parties does not make it unconscionable. See In re
sending written discovery, noticing a deposition, and
Palm Harbor Homes, Inc., 195 S.W.3d 672, 678 (Tex.2006)
agreeing to postpone a trial setting. 934 S.W.2d 87, 90
(“The test for substantive unconscionability is whether,
(Tex.1996). Gulf points out correctly that the movant in
given the parties' general commercial background and
EZ Pawn had not yet “discovered” the arbitration clause
the commercial needs of the particular trade or case, the
until after these actions had already taken place. Id. at 89.
clause involved is so one-sided that it is unconscionable
But our opinion was based on the nonmovant's failure to
under the circumstances existing when the parties made
show any prejudice, id. at 90, a requirement we recently
the contract.” (internal quotation marks omitted)).
reaffirmed. See Perry Homes, 2008 WL 1922978, at *7,
258 S.W.3d at 595.
[6] [7] Second, Gulf asserts the agreement here is
unconscionable because it allows the prevailing party to
As in EZ Pawn, the evidence here is legally insufficient
recover attorney's fees. It is true that absent a contractual
to support a finding of prejudice. Gulf does not
agreement like this, Texas law allows attorney's fees
explain how it possibly could have been prejudiced by
only for a prevailing plaintiff. See TEX. CIV. PRAC. &
exchanging emails about a trial setting. Moreover, while
REM.CODE § 3 8.001–.002. But allowing both parties to
these communications are a factor to be considered in
recover fees hardly makes an agreement “one-sided”; such
the totality-of-the-circumstances, they are not the only
agreements, common in commercial contexts, surely make
factors. See id. 2008 WL 1922978, at *10, at 599. Here,
them less so.
Fleetwood took no depositions, although it noticed one
deposition before cancelling it. 1 It served one set of
Because Gulf has failed to show that Fleetwood waived
written discovery the day before it moved to compel
its contractual right to arbitration, we conditionally grant
arbitration. It filed no dispositive motions, nor did it
Fleetwood's petition for writ of mandamus and direct the
wait until the eve of *695 trial to move to compel.
trial court to compel arbitration. We are confident that the
Taken together, these actions are not enough to overcome
trial court will promptly comply, and our writ will issue
the presumption against waiver. See In re Vesta Ins.
only if it does not.
Group, Inc., 192 S.W.3d 759, 763 (Tex.2006); In re Bruce
Terminix, 988 S.W.2d 702, 704 (Tex.1998).
All Citations
[5] Gulf also argues the arbitration clause is substantively
unconscionable, citing two reasons. First, it asserts that 257 S.W.3d 692, 51 Tex. Sup. Ct. J. 1066

Footnotes
1 Gulf deposed three Fleetwood representatives, but does not explain how it was prejudiced in being allowed to do so. See
Perry Homes, 2008 WL 1922978, at *10, 258 S.W.3d at 599 (“[A] party who requests lots of discovery is not prejudiced by
getting it and taking it to arbitration in the same way [as] a party who produces lots of discovery ....”) (emphasis in original).

End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 3
In re Flores, Not Reported in S.W.3d (2016)
2016 WL 890969

to cover mass murder, computer crimes resulting in mass
murder, and mass murder which could be constituted
2016 WL 890969
as a threat to the public interest of health and safety.”
Only the Westlaw citation is currently available.
Relator's petition for writ of mandamus does not comply
SEE TX R RAP RULE 47.2 FOR with the rules of appellate procedure. It does not include
DESIGNATION AND SIGNING OF OPINIONS. the certification required by rule 52.3(j) and does not
include an appendix or record. See TEX.R.APP. P.
Court of Appeals of Texas, 52.3(j), 52.3(k), 52.7(a). Although these deficiencies alone
Dallas. are sufficient to deny the petition, see In re Butler, 270
S.W.3d 757, 759 (Tex.App.—Dallas 2008, no pet.), in the
In re Eric Flores, Relator
interest of judicial economy, we consider the petition.
No. 05–16–00210–CV
Mandamus relief is appropriate in a criminal case only
|
when a relator establishes (1) that he has no adequate
Opinion Filed March 9, 2016
remedy at law to redress his alleged harm, and (2)
Original Proceeding from the 416th Judicial District that what he seeks to compel is a ministerial act, not
Court, Collin County, Texas, Trial Court Cause No. 416– a discretionary or judicial decision. In re Allen, 462
81913–2015 S.W.3d 47, 49 (Tex.Crim.App.2015) (orig.proceeding).
The parties to a criminal case are the State and the
Attorneys and Law Firms accused, and no third party may intervene in a criminal
case. In re Amos, 397 S.W.3d 309, 314 (Tex.App.—Dallas
Eric Flores, El Paso, TX, for relator.
2013, orig. proceeding); see also In re Wingfield, 171
Brian W. Wice, Houston, TX, for real party in interest. S.W.3d 374, 381 (Tex.App.—Tyler 2005, orig. proceeding)
(“Unlike the Rules of Civil Procedure, the Code of
Before Justices Bridges, Brown, and Stoddart Criminal Procedure makes no provision for a third party
to intervene in a ‘criminal action.’ ”). A trial court has
no discretion to consider issues raised by third parties in
MEMORANDUM OPINION a criminal case. In re Amos, 397 S.W.3d at 314; In re
Wingfield, 171 S.W.3d at 381. Thus, the trial court had
Opinion by Justice Stoddart no ministerial duty to allow relator to seek joinder of
additional offenses against the defendant in this case.
*1 In this petition for writ of mandamus relator, who
is an inmate, complains that the trial court has refused We DENY the petition for writ of mandamus.
to allow him to file a motion in a criminal case pending
against another criminal defendant “for joinder of certain
offense[s] stating that the defendant had also committed All Citations
other criminal offense[s] such as conspiracy of fabrication
Not Reported in S.W.3d, 2016 WL 890969

End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 1
In re Kellogg Brown & Root, Inc., 166 S.W.3d 732 (2005)
48 Tex. Sup. Ct. J. 678

KeyCite Yellow Flag - Negative Treatment West Headnotes (20)
Distinguished by Zbranek Custom Homes, Ltd. v. Allbaugh, Tex.App.- 
Austin, December 23, 2015
166 S.W.3d 732 [1] Action
Supreme Court of Texas. Moot, Hypothetical or Abstract
Questions
In re KELLOGG BROWN & ROOT, INC., Relator. Appeal and Error
Want of Actual Controversy
No. 03–1129.
A case becomes moot if a controversy ceases
|
to exist between the parties at any stage of the
Argued Dec. 1, 2004.
legal proceedings, including the appeal.
|
Decided May 20, 2005. 114 Cases that cite this headnote
Synopsis
Background: Second-tier subcontractor brought action [2] Alternative Dispute Resolution
against first-tier subcontractor and contractor to recover Review
damages on breach of contract and quantum meruit Conclusion of arbitration between contractor
theories and obtain a declaratory judgment on ownership and first-tier subcontractor did not render
of collateral and liens. Contractor moved to abate suit or moot second-tier subcontractor's challenge to
compel second-tier subcontractor to join arbitration with order compelling arbitration, even though
first-tier subcontractor despite second-tier subcontractor's court could no longer compel the second-tier
status as non-signatory. The District Court, Harris subcontractor to join the arbitration.
County, Mark D. Davidson, J., denied motion.
Contractor appealed and sought writ of mandamus. The Cases that cite this headnote
Houston Court of Appeals, First District, Evelyn V.
Keyes, J., 126 S.W.3d 176, conditionally granted writ
[3] Appeal and Error
and ordered trial court to issue order compelling second-
Want of Actual Controversy
tier subcontractor to arbitrate. Second-tier subcontractor
petitioned for writ of mandamus. A case is not rendered moot simply because
some of the issues become moot during the
appellate process.

Holdings: The Supreme Court, Jefferson, C.J., held that: 28 Cases that cite this headnote

[1] conclusion of arbitration between contractor and
[4] Alternative Dispute Resolution
first-tier subcontractor did not render moot second-tier
Validity
subcontractor's challenge to order compelling arbitration,
Alternative Dispute Resolution
and
Disputes and Matters Arbitrable Under
Agreement
[2] second-tier subcontractor was not required to arbitrate
its quantum meruit claim against contractor under direct In general, a party seeking to compel
benefits estoppel theory. arbitration under the Federal Arbitration Act
(FAA) must establish that: (1) there is a
valid arbitration agreement, and (2) the claims
Relief conditionally granted. raised fall within that agreement's scope. 9
U.S.C.A. § 1 et seq.

108 Cases that cite this headnote

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 1
In re Kellogg Brown & Root, Inc., 166 S.W.3d 732 (2005)
48 Tex. Sup. Ct. J. 678

Persons Affected or Bound
[5] Alternative Dispute Resolution
Under certain circumstances, principles of
Construction in Favor of Arbitration
contract law and agency may bind a non-
Alternative Dispute Resolution signatory to an arbitration agreement. 9
Evidence U.S.C.A. § 1 et seq.
Doubts regarding an agreement's scope are
resolved in favor of arbitration because there 23 Cases that cite this headnote
is a presumption favoring agreements to
arbitrate under the Federal Arbitration Act [10] Alternative Dispute Resolution
(FAA). 9 U.S.C.A. § 1 et seq. Waiver or Estoppel

59 Cases that cite this headnote Estoppel
Contracts
Under “direct benefits estoppel,” a non-
[6] Alternative Dispute Resolution
signatory plaintiff seeking the benefits of
Constitutional and Statutory Provisions
a contract is estopped from simultaneously
and Rules of Court
attempting to avoid the contract's burdens,
Alternative Dispute Resolution such as the obligation to arbitrate disputes.
Evidence
The presumption in favor of agreements to 33 Cases that cite this headnote
arbitrate arises only after the party seeking
to compel arbitration proves that a valid [11] Alternative Dispute Resolution
arbitration agreement exists; the purpose of Waiver or Estoppel
the Federal Arbitration Act (FAA) is to make
A non-signatory plaintiff may be compelled
arbitration agreements as enforceable as other
by direct benefits estoppel to arbitrate if it
contracts, not more so. 9 U.S.C.A. § 1 et seq.
seeks to enforce terms of a contract containing
121 Cases that cite this headnote an arbitration provision.

43 Cases that cite this headnote
[7] Alternative Dispute Resolution
What Law Governs
[12] Alternative Dispute Resolution
Under the Federal Arbitration Act (FAA), Waiver or Estoppel
ordinary principles of state contract law
If a non-signatory's claims can stand
determine whether there is a valid agreement
independently of the underlying contract, then
to arbitrate. 9 U.S.C.A. § 1 et seq.
arbitration generally should not be compelled
34 Cases that cite this headnote under theory of direct benefits estoppel.

13 Cases that cite this headnote
[8] Alternative Dispute Resolution
Contractual or Consensual Basis
[13] Implied and Constructive Contracts
Because arbitration is contractual in nature, Work and Labor in General; Quantum
the Federal Arbitration Act (FAA) generally Meruit
does not require parties to arbitrate when they
“Quantum meruit” is an equitable remedy
have not agreed to do so. 9 U.S.C.A. § 1 et seq.
that is based upon the promise implied by
7 Cases that cite this headnote law to pay for beneficial services rendered and
knowingly accepted.

[9] Alternative Dispute Resolution 36 Cases that cite this headnote

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 2
In re Kellogg Brown & Root, Inc., 166 S.W.3d 732 (2005)
48 Tex. Sup. Ct. J. 678

containing an arbitration provision, that
[14] Implied and Constructive Contracts relationship does not, in itself, bind the
Contract for Services non-signatory to the arbitration provision;
A party generally cannot recover under instead, a non-signatory should be compelled
quantum meruit when there is a valid contract to arbitrate a claim only if it seeks, through
covering the services or materials furnished. the claim, to derive a direct benefit from the
contract containing the arbitration provision.
44 Cases that cite this headnote
48 Cases that cite this headnote
[15] Implied and Constructive Contracts
Effect of Express Contract [19] Estoppel
A party to a contract may seek alternative Contracts
relief under both contract and quasi-contract Non-signatory second-tier subcontractor
theories. was not bound by arbitration clause
in contractor's agreement with first-tier
19 Cases that cite this headnote subcontractor and, therefore, was not
required to arbitrate its quantum meruit
[16] Alternative Dispute Resolution claim against contractor under direct
Disputes and Matters Arbitrable Under benefits estoppel theory; the second-tier
Agreement subcontractor's asserted right to payment
Alternative Dispute Resolution stemmed directly from the agreement with
Pleading the first-tier subcontractor, and the second-
tier subcontractor was effectively precluded
Pleading in the alternative under both
from asserting rights under main contract
contract and quasi-contract theories does not
which stated that the approved use of
defeat the effect of an arbitration clause
any subcontractor created no contractual
that broadly covers all disputes between
relationship between the subcontractor and
signatories that arise out of the underlying
contractor.
agreement.
5 Cases that cite this headnote
18 Cases that cite this headnote

[20] Mechanics' Liens
[17] Alternative Dispute Resolution
Mechanics and Artisans
Persons Affected or Bound
Mechanics' Liens
Alternative Dispute Resolution
Materialmen
Waiver or Estoppel
The self-executing constitutional lien attaches
Under direct benefits estoppel, a non-
to buildings and special-order articles that are
signatory plaintiff cannot be compelled to
made or repaired by mechanics, materialmen,
arbitrate on the sole ground that, but for the
and artisans who have a direct contractual
contract containing the arbitration provision,
relationship with the owner of the property.
it would have no basis to sue.
Vernon's Ann.Texas Const. Art. 16, § 37.
27 Cases that cite this headnote
5 Cases that cite this headnote

[18] Estoppel
Contracts
Under direct benefits estoppel, although a
non-signatory's claim may relate to a contract

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 3
In re Kellogg Brown & Root, Inc., 166 S.W.3d 732 (2005)
48 Tex. Sup. Ct. J. 678

compelled, we conditionally grant mandamus relief and
Attorneys and Law Firms order the court of appeals to vacate its order.
*734 Jack G. Carnegie, John L. Hagan, Jones Day,
Kevin B. Finkel, Johnson Finkel DeLuca & Kennedy,
P.C., Houston, for relator. I

Jeffrey Raizner, Doyle Raizner LLP, Jack F. Burleigh,
Houston, Ira E. Hoffman, Grayson Kubli & Hoffman, Factual Background
P.C., McLean, Jeff H. Galloway, John Fellas, Hughes
In October 1999, MacGREGOR (USA), Inc. contracted
Hubbard & Reed LLP, New York, NY, for real party in
with Ingalls Shipbuilding, Inc. (“Ingalls”) to build
interest.
elevator trunks for two cruise ships. MacGREGOR
Jeffery T. Nobles, Beirne Maynard & Parsons, L.L.P., (USA) assigned the contract to its sister company,
Robert Bryan Tobor, Houston, Clint Alexander Corrie, *735 MacGREGOR (FIN) Oy 1 (“MacGregor”). In
Joseph Lawrence Mira, Bierne, Maynard & Parsons, LLP, August 2000, MacGregor subcontracted part of the
Dallas, John D. White, Jones Walker Waechter Poitevent job to Unidynamics, which agreed to fabricate a set
Carrere & Denegre, The Woodlands, for Gulf Coast of the elevator trunks for one of the ships. 2 In June
Holdings Inc. 2001, Unidynamics and KBR entered into a second-tier
subcontract, under which KBR agreed to furnish labor,
Opinion
equipment, and facilities to fabricate the elevator trunks.
Chief Justice JEFFERSON delivered the opinion of the In the fabrication subcontract between MacGregor and
Court. Unidynamics, the parties agreed that: “Any disputes
arising from the interpretation or application of this
In this original proceeding, the question is whether contract including any document pertaining thereto, shall
Kellogg Brown & Root, Inc. (“KBR”), as a non- be settled by arbitration in accordance with General
signatory to a contract containing an arbitration Conditions (ECE 188), (Appendix 10).” 3 The second-
clause, must arbitrate its claims against Unidynamics, tier subcontract between Unidynamics and KBR did not
Inc. (“Unidynamics”) and MacGREGOR (FIN) Oy contain an arbitration provision.
(“MacGregor”)—the signatories to the contract. The
trial court denied MacGregor's motion, which sought to After the ship buyer declared bankruptcy in November
compel KBR to pursue its claims in an ongoing arbitration 2001, Ingalls directed MacGregor to cease work and
between MacGregor and Unidynamics. The court of notify its subcontractors to do the same. MacGregor
appeals held that the trial court abused its discretion and directed Unidynamics to comply with “the same
conditionally granted mandamus relief, ordering the trial instructions that Ingalls gave MacGregor.” Unidynamics
court to vacate its order denying MacGregor's motion and conveyed those instructions to KBR. On or around
“issue an order compelling KBR to arbitrate all claims.” November 5, 2001, KBR ceased work, stored the elevator
126 S.W.3d 176, 184. KBR sought mandamus relief in this trunks and other equipment, and sent Unidynamics
Court. invoices for unpaid fabrication services and storage costs.
Because KBR had not been paid in full, it asserted liens on
Approximately two months after KBR filed its the elevator trunk fabrications, parts, and other materials
petition here, the arbitration between MacGregor and (the “collateral”).
Unidynamics concluded. As a result, the relief MacGregor
requested in the lower courts—that KBR be compelled “to A dispute then arose between MacGregor and
pursue its claims in the arbitration between MacGregor Unidynamics regarding who owned the collateral and
(FIN) and Unidynamics”—is no longer available. The who owed KBR for the fabrication services and
case is not moot, however, because the parties continue to storage costs. The dispute stemmed from MacGregor
dispute whether KBR should be compelled to “arbitrate and Unidynamics' Agreement Concerning Passing of
all claims” pursuant to the court of appeals' order. Id. Title (the “Title Agreement”), executed on December
at 184. Because we conclude that KBR cannot be so 5, 2001, and fully incorporated into their fabrication

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 4
In re Kellogg Brown & Root, Inc., 166 S.W.3d 732 (2005)
48 Tex. Sup. Ct. J. 678

subcontract. Among other things, the Title Agreement action should be abated because the collateral's ownership
provided that full title to the collateral would pass was “the very issue ... being arbitrated before the ICC.”
irrevocably to MacGregor immediately after MacGregor MacGregor, Unidynamics, and KBR then negotiated an
made two payments to Unidynamics, which were to agreement, which the trial court entered as an Agreed
occur no later than December 19, 2001. The Title Order. Pursuant to that order, MacGregor agreed to post
Agreement further required Unidynamics to release the a $1,000,000 bond and, upon presentation of the bond,
collateral to MacGregor upon MacGregor's request. It KBR agreed to release the collateral to MacGregor. 5
is undisputed that MacGregor timely paid Unidynamics; MacGregor posted the bond on October 28, 2002.
however, Unidynamics asserted that the payments were
ineffective to pass title to MacGregor. When MacGregor Meanwhile, on October 18, 2002, MacGregor filed a
demanded that Unidynamics release the elevator trunks, motion to abate the state court proceedings pending
Unidynamics refused. The collateral remained in KBR's its arbitration with Unidynamics or, in the alternative,
possession. to compel KBR to pursue its claims in the ongoing
arbitration between MacGregor and Unidynamics. The
trial court denied MacGregor's motion. On December
II 19, 2002, MacGregor filed an interlocutory appeal and
a petition for writ of mandamus in the court of appeals,
contending that the trial court abused its discretion.
Procedural Background The court of appeals dismissed the interlocutory appeal
as moot and conditionally granted mandamus relief,
In May 2002, pursuant to the arbitration provision
ordering the trial court “to vacate its order denying
in the fabrication subcontract, MacGregor asked the
MacGregor's plea in abatement and motion to compel
International Chamber of Commerce (“ICC”) to arbitrate
arbitration, to issue an order compelling KBR to
its dispute with Unidynamics. Among other things,
arbitrate all claims, and to stay all proceedings pending
MacGregor sought: (1) damages for breach of contract
by Unidynamics for failure to release the collateral, (2) arbitration.” 6 126 S.W.3d at 184–85.
a determination *736 as to which defendant owned the
collateral, and (3) a determination regarding MacGregor's On December 9, 2003, KBR petitioned this Court for
proportionate responsibility for the storage costs KBR a writ of mandamus. On February 4, 2004, while the
billed Unidynamics. Unidynamics filed an answer and petition was pending before us, the arbitration between
asserted counterclaims. MacGregor and Unidynamics MacGregor and Unidynamics concluded, and the ICC
then commenced arbitration in Paris, France. issued a final arbitration award. KBR does not contest
that award.
While the arbitration was proceeding, both MacGregor
and Unidynamics demanded that KBR release the
collateral. KBR refused the demands and, on September III
17, 2002, filed suit against both companies in Harris
County. KBR claimed that Unidynamics breached its
contract and, in the alternative, that it was entitled to Mootness
recover quantum meruit damages against Unidynamics
[1] [2] As a preliminary matter, we must decide
and MacGregor. KBR also sued for declaratory relief to
whether the ICC's final arbitration *737 award moots
determine which defendant owned the collateral. Subject
this mandamus proceeding. A case becomes moot if a
to the court's ruling on ownership, KBR sought a judicial
controversy ceases to exist between the parties at any stage
declaration that it possessed valid constitutional and
of the legal proceedings, including the appeal. Allstate
statutory liens against the collateral in its possession. 4 Ins. Co. v. Hallman, 159 S.W.3d 640, 642 (Tex.2005);
MacGregor answered and sought a temporary restraining Bd. of Adjustment of San Antonio v. Wende, 92 S.W.3d
order, temporary injunction, and permanent injunction 424, 427 (Tex.2002); Williams v. Lara, 52 S.W.3d 171,
directing KBR to release the collateral. Unidynamics 184 (Tex.2001). This case stems from the lower courts'
opposed MacGregor's application, arguing that the court action on MacGregor's motion to “compel [ ] KBR to

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In re Kellogg Brown & Root, Inc., 166 S.W.3d 732 (2005)
48 Tex. Sup. Ct. J. 678

pursue its claims in the arbitration between [MacGregor] [4] [5] [6] The parties do not dispute the court of
and Unidynamics.” Because that arbitration is over, KBR appeals' holding that the arbitration provision at issue
can no longer be compelled to “join the arbitration.” is governed by the Federal Arbitration Act (“FAA”).
See 126 S.W.3d at 183 (concluding that the trial court See 9 U.S.C. §§ 1–16; 126 S.W.3d at 181. In general,
abused its discretion by refusing to compel KBR to join a party seeking to compel arbitration under the FAA
the ongoing arbitration). The question, then, is whether must establish that: (1) there is a valid arbitration
this proceeding is moot. agreement, and (2) the claims raised fall within that
agreement's scope. In re FirstMerit Bank, 52 S.W.3d
[3] A case is not rendered moot simply because some 749, 753 (Tex.2001); In re Oakwood Mobile Homes, Inc.,
of the issues become moot during the appellate process. 987 S.W.2d 571, 573 (Tex.1999). Doubts regarding an
See Allstate, 159 S.W.3d at 642–43 (holding that a dispute agreement's scope are resolved in favor of arbitration
concerning attorney's fees preserved a live controversy in because there is a presumption favoring agreements to
an otherwise moot appeal); Camarena v. Tex. Employment arbitrate under the FAA. In re FirstMerit Bank, 52 S.W.3d
Comm'n, 754 S.W.2d 149, 151 (Tex.1988) (same). In this at 753; Cantella & Co. v. Goodwin, 924 S.W.2d 943, 944
case, the court of appeals ordered the trial court “to issue (Tex.1996). However, “the presumption arises only after
an order compelling KBR to arbitrate all claims.” 126 the party seeking to compel arbitration proves that a valid
S.W.3d at 184. Although it is no longer possible for KBR arbitration agreement exists,” *738 J.M. Davidson, Inc.
to join the Paris arbitration, the court of appeals' ultimate v. Webster, 128 S.W.3d 223, 227 (Tex.2003), because “the
directive has no temporal component. It requires KBR to purpose of the FAA was to make arbitration agreements
“arbitrate all claims.” as enforceable as other contracts, not more so.” Bridas
S.A.P.I.C. v. Gov't of Turkm., 345 F.3d 347, 354 n. 4 (5th
The live controversy in this proceeding is whether Cir.2003) (citations omitted); see also E.E.O.C. v. Waffle
KBR must arbitrate those claims that remain now that House, Inc., 534 U.S. 279, 293, 122 S.Ct. 754, 151 L.Ed.2d
the arbitration between MacGregor and Unidynamics 755 (2002) (“The FAA directs courts to place arbitration
has concluded. KBR's petition consisted of: (1) a agreements on equal footing with other contracts....”).
breach-of-contract claim against Unidynamics; (2) in the
alternative, a quantum meruit claim against Unidynamics [7] [8] [9] Under the FAA, ordinary principles of state
and MacGregor; and (3) a declaratory judgment action to contract law determine whether there is a valid agreement
determine the collateral's owner and to establish that KBR to arbitrate. First Options of Chi., Inc. v. Kaplan, 514 U.S.
possessed valid liens. The arbitrator determined that, 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995); Wash.
pursuant to the Title Agreement between MacGregor Mut. Fin. Group, LLC v. Bailey, 364 F.3d 260, 264 (5th
and Unidynamics, title to the collateral passed from Cir.2004); J.M. Davidson, Inc., 128 S.W.3d at 227–28; In re
Unidynamics to MacGregor on December 10, 2001. KBR Halliburton Co., 80 S.W.3d 566, 568 (Tex.2002). Because
is satisfied with this resolution of the ownership dispute, arbitration is contractual in nature, the FAA generally
and thus, we need not address whether the ownership “does not require parties to arbitrate when they have
dispute must be arbitrated. Additionally, we need not not agreed to do so.” Volt Info. Scis., Inc. v. Bd. of Trs.
address whether KBR should be compelled to arbitrate of Leland Stanford Junior Univ., 489 U.S. 468, 478–79,
its claims against Unidynamics, because the parties now 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989) ( “Arbitration
agree that those claims are not subject to arbitration. under the [FAA] is a matter of consent, not coercion....”),
Our inquiry is accordingly limited to determining whether quoted in E.E.O.C., 534 U.S. at 293–94, 122 S.Ct. 754;
KBR must arbitrate its quantum meruit and lien-validity see also Bridas, 345 F.3d at 361 (citing J. Douglas Uloth
claims against MacGregor. & J. Hamilton Rial, III, Equitable Estoppel as a Basis
for Compelling Nonsignatories to Arbitrate—A Bridge Too
Far?, 21 Rev. Litig. 593, 632 (2002)). Federal and Texas
state courts have recognized, however, that “[i]t does
IV
not follow ... that under the [FAA] an obligation to
arbitrate attaches only to one who has personally signed
Discussion the written arbitration provision”; instead, under certain
circumstances, principles of contract law and agency may

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 6
In re Kellogg Brown & Root, Inc., 166 S.W.3d 732 (2005)
48 Tex. Sup. Ct. J. 678

bind a non-signatory to an arbitration agreement. Fisser compelled to arbitrate. Moreover, we recognize that it is
v. Int'l Bank, 282 F.2d 231, 233 (2d Cir.1960), quoted in important for federal and state law to be as consistent as
Int'l Paper Co. v. Schwabedissen Maschinen & Anlagen, possible in this area, because federal and state courts have
206 F.3d 411, 416 (4th Cir.2000), and Thomson–CSF, S.A. concurrent jurisdiction to enforce the FAA. See Moses H.
v. Am. Arbitration Ass'n, 64 F.3d 773, 776 (2d Cir.1995); Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1,
see also Bailey, 364 F.3d at 267 (quoting Thomson– 25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). Our decision
CSF, 64 F.3d at 776); In re FirstMerit Bank, 52 S.W.3d today rests on state law, but it is informed by persuasive
at 755 (citing Nationwide of Bryan, Inc. v. Dyer, 969 and well-reasoned federal precedent.
S.W.2d 518, 520 (Tex.App.-Austin 1998, no pet.)); S.W.
Tex. Pathology Assocs. v. Roosth, 27 S.W.3d 204, 208 Federal courts have recognized six theories, arising out
(Tex.App.-San Antonio 2000, pet. dism'd w.o.j.). of common principles of contract and agency law, that
may bind non-signatories to arbitration agreements: (1)
Although state law determines the validity of an incorporation by reference; (2) assumption; (3) agency;
arbitration agreement, courts have applied both federal (4) alter ego; (5) equitable estoppel, and (6) third-party
and state law to determine the related, but distinct, issue beneficiary. See, e.g., Bridas, 345 F.3d at 356. 7 Here,
of whether non-signatory plaintiffs should be compelled MacGregor asserts that KBR is bound to arbitrate
to arbitrate their claims. See, e.g., Bailey, 364 F.3d at under the doctrine of “direct benefits estoppel”—a type
267–68 (applying federal law); Bridas, 345 F.3d at 355– of equitable estoppel that federal courts apply in the
63 (applying federal law); Fleetwood Enters. v. Gaskamp, arbitration context. See, e.g., Bailey, 364 F.3d at 268;
280 F.3d 1069, 1074–77 (5th Cir.2002) (applying state Bridas, 345 F.3d at 361–62; E.I. DuPont de Nemours & Co.
law); Roosth, 27 S.W.3d at 208–09 (applying state law); v. Rhone Poulenc Fiber & Resin Intermediates, S.A.S., 269
Dyer, 969 S.W.2d at 520 (applying state law); Lakeland F.3d 187, 199–201 (3d Cir.2001); Int'l Paper Co., 206 F.3d
Anesthesia, Inc. v. United Healthcare of La., Inc., 871
at 418. 8
So.2d 380, 392–95 (La.Ct.App.2004) (applying federal
and state law). The FAA does not specify whether state or
[10] [11] [12] Under “direct benefits estoppel,” a non-
federal law governs, and the United States Supreme Court
signatory plaintiff seeking the benefits of a contract is
has not directly addressed the issue.
estopped from simultaneously attempting to avoid the
contract's burdens, such as the obligation to arbitrate
Federal courts of appeals, however, have frequently
disputes. R.J. Griffin & Co. at 160–61; Bailey, 364 F.3d
applied federal substantive law when deciding whether
at 268; Int'l Paper Co., 206 F.3d at 418 (“[T]he doctrine
a non-signatory must arbitrate. See, e.g., Bailey, 364
recognizes that a party may be estopped from asserting
F.3d at 267 n. 6; Bridas, 345 F.3d at 355–63; InterGen
that the lack of his signature precludes enforcement of
N.V. v. Grina, 344 F.3d 134, 142–50 (1st Cir.2003);
the contract's arbitration clause when he has consistently
Dominium Austin Partners v. Emerson, 248 F.3d 720,
maintained that other provisions of the same contract
728 (8th Cir.2001); Int'l Paper Co., 206 F.3d at 417 n.
should be enforced to benefit him.”); Thomson–CSF,
4; Thomson–CSF, 64 F.3d at 778–79. The Fourth and
64 F.3d at 778. Thus, a non-signatory plaintiff may be
Fifth Circuits have reasoned that “ ‘federal substantive
compelled to arbitrate if it seeks to enforce terms of a
law of arbitrability’... resolve[s] this question,” because
contract containing an arbitration provision. See R.J.
the determination of whether a non-signatory is bound
Griffin & Co., 384 F.3d at 161–64; Bailey, 364 F.3d at
“presents no state *739 law question of contract
268; Bridas, 345 F.3d at 361–62 (“Direct benefits estoppel
formation or validity.” R.J. Griffin & Co. v. Beach Club II
applies when a nonsignatory ‘knowingly exploits the
Homeowners Ass'n, 384 F.3d 157, 160 n. 1 (4th Cir.2004)
agreement containing the arbitration clause.’ ”) (quoting
(quoting Int'l Paper Co., 206 F.3d at 417 n. 4); Bailey,
E.I. DuPont de Nemours & Co., 269 F.3d at 199); Int'l
364 F.3d at 267 n. 6 (same). We are not convinced that
Paper Co., 206 F.3d at 418. For example, if a non-
state law plays no role in making this determination. See
signatory's breach-of-warranty and breach-of-contract
Roosth, 27 S.W.3d at 208–09 (applying state law); Dyer,
claims are based on certain terms of a written contract,
969 S.W.2d at 520 (applying state law). Nevertheless, we
then the non-signatory cannot avoid an arbitration
are mindful of the extensive body of federal precedent that
provision within that contract. See Int'l Paper Co., 206
has explored the extent to which non-signatories can be
F.3d at 418. If, however, a non-signatory's *740 claims

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In re Kellogg Brown & Root, Inc., 166 S.W.3d 732 (2005)
48 Tex. Sup. Ct. J. 678

can stand independently of the underlying contract, then MacGregor and Unidynamics; therefore, the scope of that
arbitration generally should not be compelled under this subcontract's arbitration clause does not answer whether
theory. See, e.g., R.J. Griffin & Co., 384 F.3d at 164; KBR must arbitrate.
Bridas, 345 F.3d at 362.
[17] To advance its estoppel theory, MacGregor
Consistent with the federal doctrine of “direct benefits contends that KBR's quantum meruit claim is “based on”
estoppel,” this Court has held that a non-signatory the fabrication subcontract in the sense that KBR's labor
plaintiff may be compelled to arbitrate if its claims and services were linked inextricably to that subcontract.
are “based on a contract” containing an agreement to It is true, of course, that KBR was fabricating trunks
arbitrate. In re FirstMerit Bank, 52 S.W.3d at 755 (“[A] that were at the contract's core and that, in performing
litigant who sues based on a contract subjects him or the work, KBR relied on the fabrication subcontract's
herself to the contract's terms.”). In FirstMerit Bank, specifications. However, under “direct benefits estoppel,”
the non-signatory plaintiffs sued the signatory defendant a non-signatory plaintiff cannot be compelled to arbitrate
for, among other things, breach of contract, revocation on the sole ground that, but for the contract containing
of acceptance, and breach of warranty. Id. at 752–53, the arbitration provision, it would have no basis to sue.
755. By bringing the breach-of-contract and breach- The work to be performed under a second-tier subcontract
of-warranty claims, the plaintiffs sought benefits that will inherently be related to and, to a certain extent,
stemmed directly from the contract's terms. We concluded defined by contracts higher in the chain. See Black's Law
that, by seeking to enforce the contract, the non-signatory Dictionary 1464 (8th ed.2004) (defining subcontractor as
plaintiffs “subjected themselves to the contract's terms, “[o]ne who is awarded a portion of an existing contract
including the Arbitration Addendum.” Id. at 756; see by a contractor, esp. a general contractor”). If this were a
also Roosth, 27 S.W.3d at 208 (“The nonsignatory cannot sufficient basis for binding a non-signatory subcontractor,
enforce specific terms of the agreement while seeking to arbitration agreements would become easier to enforce
avoid the arbitration provision.”). than other contracts, counter to the FAA's purpose. See
*741 InterGen, 344 F.3d at 145–46 (noting that federal
The issue here is whether KBR sought to enforce courts have “been hesitant to estop a nonsignatory seeking
terms of the fabrication subcontract by (1) bringing a to avoid arbitration”).
quantum meruit claim against MacGregor, or (2) seeking
a declaration that it possessed valid liens. We begin with [18] We conclude that, under “direct benefits estoppel,”
quantum meruit. although a non-signatory's claim may relate to a contract
containing an arbitration provision, that relationship does
[13] [14] [15] [16] Quantum meruit is an equitablenot, in itself, bind the non-signatory to the arbitration
remedy that “ ‘is based upon the promise implied by provision. Instead, a non-signatory should be compelled
law to pay for beneficial services rendered and knowingly to arbitrate a claim only if it seeks, through the claim, to
accepted.’ ” Vortt Exploration Co., Inc. v. Chevron U.S.A., derive a direct benefit from the contract containing the
Inc., 787 S.W.2d 942, 944 (Tex.1990) (quoting Truly v. arbitration provision. See Bailey, 364 F.3d at 268; MAG
Austin, 744 S.W.2d 934, 936 (Tex.1988)). A party generally Portfolio Consult., GMBH v. Merlin Biomed Group LLC,
cannot recover under quantum meruit when there is a 268 F.3d 58, 61 (2d Cir.2001) (“The benefits must be direct
valid contract covering the services or materials furnished. —which is to say, flowing directly from the agreement.”);
Murray v. Crest Constr., Inc., 900 S.W.2d 342, 345 Int'l Paper Co., 206 F.3d at 417–18; Thomson–CSF, 64
(Tex.1995); Woodard v. S.W. States, Inc., 384 S.W.2d 674, F.3d at 778–79; In re FirstMerit Bank, 52 S.W.3d at 755. 9
675 (Tex.1964) (“Recovery on an express contract and on
quantum meruit are inconsistent.”). A party to a contract [19] In its quantum meruit claim against MacGregor,
may, however, seek alternative relief under both contract KBR seeks payment for services rendered. KBR provided
and quasi-contract theories. Pleading in the alternative services pursuant to its contract with Unidynamics. KBR's
does not defeat the effect of an arbitration clause that asserted right to payment therefore stems directly from
broadly covers all disputes between signatories that arise the KBR–Unidynamics contract, not the fabrication
out of the underlying agreement. But in this case, KBR subcontract. The fabrication subcontract includes no
is not a signatory to the fabrication subcontract between provision for paying KBR. In fact, KBR is effectively

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In re Kellogg Brown & Root, Inc., 166 S.W.3d 732 (2005)
48 Tex. Sup. Ct. J. 678

precluded from asserting rights under that contract, Corpus Christi 1972, no writ) (discussing validity and
enforceability of warehouseman's lien).
which expressly provides that “Approved use of any
subcontractor creates no contractual relationship between
In this Court, MacGregor's sole argument for compelling
the subcontractor and [MacGregor].” 10 Thus, we
arbitration of KBR's lien-validity claims is that the claims
conclude that the court of appeals abused its discretion
require a determination of ownership, and thus, they are
to the extent it compelled KBR to arbitrate its quantum
“based on” the Title Agreement within the fabrication
meruit claim against MacGregor.
subcontract. 11 Ownership was, of course, a central
issue before and during the Paris arbitration. When the
[20] Having determined that KBR's quantum meruit
arbitration award resolved the ownership dispute, it also
claim is not subject to arbitration, we turn to KBR's
eliminated the only rationale that MacGregor has asserted
lien-validity claims. KBR sought a judicial declaration
thus far for arbitrating the liens' validity.
that it possessed valid constitutional and warehouseman's
statutory liens. See Tex. Const. art. XVI, § 37; Tex. Bus. &
We do not decide whether other arguments may exist to
Com.Code § 7.209(a)(1). The self-executing constitutional
compel KBR to arbitrate the validity of its liens. To the
lien attaches to buildings and special-order articles that
extent a lien dispute still remains, the trial court is in the
are made or repaired by mechanics, material men, and
best position to determine, on principles we have declared
artisans who have a direct contractual relationship with
today, whether it must be arbitrated.
the owner of the property. See Tex. Const. art. XVI,
§ 37; CVN Group, Inc. v. Delgado, 95 S.W.3d 234, 240
(Tex.2002) (“[F]or constitutional liens that *742 are
self-executing, there are no technical requirements....”); V
First Nat'l Bank v. Whirlpool Corp., 517 S.W.2d 262,
268 (Tex.1974) (holding that “the constitutional lien on
Conclusion
manufactured chattels is available ... only upon articles
made especially for a purchaser pursuant to a special We conditionally grant mandamus relief and order the
order and in accordance with the purchaser's plans or court of appeals to vacate its order compelling KBR to
specifications”); Hayek v. W. Steel Co., 478 S.W.2d 786, “arbitrate all claims.” See 126 S.W.3d at 184. The writ will
790 (Tex.1972); Strang v. Pray, 89 Tex. 525, 35 S.W. 1054, issue only if the court of appeals fails to comply.
1056 (1896). The warehouseman's lien arises “against the
bailor on the goods covered by a warehouse receipt or
on the proceeds thereof in his possession for charges for
storage or transportation ..., insurance, labor, or charges Justice JOHNSON did not participate in the decision.
present or future in relation to the goods, and for expenses
All Citations
necessary for preservation of the goods....” Tex. Bus. &
Com.Code § 7.209(a)(1); see also Flores v. Didear Van 166 S.W.3d 732, 48 Tex. Sup. Ct. J. 678
& Storage Co., 489 S.W.2d 406, 407–09 (Tex.Civ.App.-

Footnotes
1 The term “Oy” for Finnish companies is an abbreviation of “osakeyhtiö” (“osake” means “share,” “yhtiö” means “society”).
See http://encyclopedia. laborlawtalk.com/Oy (last visited May 18, 2005, and available in Clerk of Court's file).
2 In October 2000, MacGregor and Unidynamics entered into another subcontract, under which Unidynamics agreed to
preassemble and install the elevator trunks. That subcontract is not at issue in this case.
3 The arbitration provision in ECE 188 provided: “Any dispute arising out of the Contract shall be finally settled, in
accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce [“ICC”], by one or
more arbitrators designated in conformity with those Rules.”
4 See Tex. Const. art. XVI, § 37; Tex. Bus. & Com.Code § 7.209.
5 The parties agreed that the bond would be enforceable and payable in Texas, and that it would “constitute an unconditional
promise to pay upon demand accompanied by proof of Final Judgment adjudicating the validity and amount, if any, of
[KBR's] lien or liens against ... the collateral.”

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In re Kellogg Brown & Root, Inc., 166 S.W.3d 732 (2005)
48 Tex. Sup. Ct. J. 678

6 As of the date of this opinion, the trial court has not acted on the court of appeals' orders. Proceedings have not resumed
in the trial court since the court of appeals ordered a stay on January 9, 2003. See 126 S.W.3d at 180–81.
7 Most federal courts, however, list only five of these theories, omitting third-party beneficiary as a separate ground. See
Local Union No. 38, Sheet Metal Workers' Int'l Ass'n v. Custom Air Sys., Inc., 357 F.3d 266, 268 (2d Cir.2004); Javitch
v. First Union Sec., Inc., 315 F.3d 619, 629 (6th Cir.2003); Fleetwood, 280 F.3d at 1076; Employers Ins. of Wausau v.
Bright Metal Specialties, Inc., 251 F.3d 1316, 1322 (11th Cir.2001); Bel–Ray Co. v. Chemrite (Pty) Ltd., 181 F.3d 435,
446 (3d Cir.1999); Int'l Paper Co., 206 F.3d at 417; Thomson–C.S.F., 64 F.3d at 776.
8 While not all federal courts use the phrase “direct benefits estoppel,” we adopt that terminology from Bridas to describe
this form of estoppel. See 345 F.3d at 361–62.
9 Federal courts have also applied “direct benefits estoppel” to bind “non-signatories who, during the life of the contract,
have embraced the contract despite their non-signatory status but then, during litigation, attempt to repudiate the
arbitration clause in the agreement.” E.I. DuPont de Nemours & Co., 269 F.3d at 200; see also InterGen, 344 F.3d at 146
(holding equitable estoppel theory inapplicable to non-signatory that did not seek to derive direct benefits from contracts
“during their currency”); Am. Bureau of Shipping v. Tencara Shipyard S.P.A., 170 F.3d 349, 353 (2d Cir.1999) (holding
non-signatory who received lower insurance rates and ability to sail under French flag due to contract was bound by
arbitration clause within contract); In re VMS Ltd. P'ship Sec. Litig., 26 F.3d 50, 52 (7th Cir.1994) (holding wife bound by
arbitration clause that only her husband signed as she accepted benefits of investment services). We do not reach this
application of “direct benefits estoppel” here. MacGregor's argument for arbitration rests not on KBR's actions during the
life of the fabrication subcontract, but on KBR's attempt to benefit from that contract through litigation.
10 See MCI Telecomms. Corp. v. Tex. Utils. Elec. Co., 995 S.W.2d 647, 651 (Tex.1999) (“The intention to contract or confer
a direct benefit to a third party must be clearly and fully spelled out or enforcement by the third party must be denied.”);
City of LaPorte v. Taylor, 836 S.W.2d 829, 831 (Tex.App.-Houston [1st Dist.] 1992, no writ) (“Generally, in construction
contracts, in the absence of an express agreement to the contrary, a subcontractor is not in privity with the owner....”).
11 KBR's petition included the following:
29. Ownership. Given the Defendants' competing claims known to Plaintiff by the Defendants, Plaintiff seeks a
declaration from the Court as to which Defendant(s) possesses the ownership rights, title and interest in the elevator
shaft fabrications, component parts and other materials....
30. Constitutional Lien. Subject to the determination of ownership, Plaintiff also seeks a judicial declaration that
Plaintiff possesses a valid constitutional lien to the elevator shaft fabrications, component parts and other materials
pursuant to Article 16, § 37 of the Texas Constitution.
31. Statutory Lien. Subject to the determination of ownership, Plaintiff also seeks a judicial declaration that Plaintiff
possesses a valid statutory lien to the elevator shaft fabrications, component parts and other materials pursuant to
§ 7.209 of the Texas Business and Commerce Code.
(Emphasis added.)

End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 10
In re Labatt Food Service, L.P., 279 S.W.3d 640 (2009)
28 IER Cases 1268, 52 Tex. Sup. Ct. J. 352

KeyCite Yellow Flag - Negative Treatment West Headnotes (15)
Declined to Follow by Boler v. Security Health Care, L.L.C., Okla., 
September 30, 2014
279 S.W.3d 640 [1] Mandamus
Supreme Court of Texas. Modification or Vacation of Judgment or
Order
In re LABATT FOOD SERVICE, L.P., Relator. Mandamus
Civil Proceedings Other Than Actions
No. 07–0419.
A party denied the right to arbitrate pursuant
|
to an agreement subject to the Federal
Argued Sept. 9, 2008.
Arbitration Act (FAA) does not have an
|
adequate remedy by appeal and is entitled to
Decided Feb. 13, 2009.
mandamus relief to correct a clear abuse of
|
discretion. 9 U.S.C.A. § 1 et seq.
Rehearing Denied May 1, 2009.
6 Cases that cite this headnote
Synopsis
Background: Parents and children of employee brought
wrongful death action, in the 150th Judicial District [2] Appeal and Error
Court, Bexar County, Janet Littlejohn, J., against Cases Triable in Appellate Court
employer. The 57th Judicial District Court, Bexar County, Appeal and Error
Joe Frazier Brown, Jr., J., denied employer's motion Abuse of Discretion
to compel arbitration. Employer petitioned for writ of
Under an abuse of discretion standard, the
mandamus. The San Antonio Court of Appeals, 2007 WL
appellate court defers to the trial court's
1424092, denied the petition. Employer petitioned for writ
factual determinations if they are supported
of mandamus.
by evidence, but reviews the trial court's legal
determinations de novo.

Holdings: The Supreme Court, Johnson, J., held that: 97 Cases that cite this headnote

[1] under Texas law, the arbitration provision in an [3] Alternative Dispute Resolution
agreement between an employee and his employer, signed Scope and Standards of Review
before the employee's death and requiring arbitration
Whether an arbitration agreement is
pursuant to the Federal Arbitration Act, requires the
enforceable is subject to de novo review.
employee's wrongful death beneficiaries to arbitrate their
wrongful death claims against the employer even though 54 Cases that cite this headnote
they did not sign the agreement, disapproving of In re
Kepka, 178 S.W.3d 279, and Gomez v. Zardenetta, 1998
[4] Alternative Dispute Resolution
WL 19858, and
Matters to Be Determined by Court
[2] it was for the arbitrator, rather than the court, to Under the Federal Arbitration Act (FAA),
resolve beneficiaries' claim that entire contract signed by whether an arbitration agreement binds a
employee, including the arbitration clause, was invalid. nonsignatory is a gateway matter to be
determined by courts rather than arbitrators
unless the parties clearly and unmistakably
Writ conditionally granted. provide otherwise. 9 U.S.C.A. § 1 et seq.

19 Cases that cite this headnote

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 1
In re Labatt Food Service, L.P., 279 S.W.3d 640 (2009)
28 IER Cases 1268, 52 Tex. Sup. Ct. J. 352

may be bound to an arbitration clause when
[5] Alternative Dispute Resolution rules of law or equity would bind them to the
What Law Governs contract generally. 9 U.S.C.A. § 1 et seq.
Texas courts apply Texas procedural rules
in determining whether nonsignatories are 22 Cases that cite this headnote
bound by an arbitration agreement that is
subject to the Federal Arbitration Act (FAA). [10] Death
9 U.S.C.A. § 1 et seq. Creation of New Cause of Action

9 Cases that cite this headnote Death
Persons Entitled to Sue
Because, at common law, there was no
[6] Alternative Dispute Resolution
recognized cause of action for the wrongful
What Law Governs
death of another person, the Texas Legislature
Under the Federal Arbitration Act (FAA), enacted the Wrongful Death Act in order to
state law generally governs whether a litigant create a cause of action to allow a deceased
agreed to arbitrate, and federal law governs tort victim's surviving parents, children, and
the scope of the arbitration clause. 9 U.S.C.A. spouse to recover damages for their losses
§ 1 et seq. from the victim's death. V.T.C.A., Civil
Practice & Remedies Code § 71.002 et seq.
8 Cases that cite this headnote
4 Cases that cite this headnote
[7] Alternative Dispute Resolution
What Law Governs [11] Death
Texas Supreme Court would apply Right of Action of Person Injured
Texas substantive law rather than federal Death
substantive law when determining whether Defenses
nonsignatories were bound by an arbitration
Statutory wrongful death beneficiaries' claims
agreement that was subject to the Federal
place them in the exact “legal shoes” of the
Arbitration Act (FAA), and would endeavor
decedent, and they are subject to the same
to keep it consistent with federal law. 9
defenses to which the decedent's claims would
U.S.C.A. § 1 et seq.
have been subject. V.T.C.A., Civil Practice &
12 Cases that cite this headnote Remedies Code § 71.003(a).

9 Cases that cite this headnote
[8] Alternative Dispute Resolution
Constitutional and Statutory Provisions
[12] Alternative Dispute Resolution
and Rules of Court
Persons Affected or Bound
A purpose of the Federal Arbitration Act
Under Texas law, the arbitration provision
(FAA) is to make arbitration agreements as
in an agreement between an employee and
enforceable as other contracts, but not more
his employer, signed before the employee's
so. 9 U.S.C.A. § 1 et seq.
death and requiring arbitration pursuant to
16 Cases that cite this headnote the Federal Arbitration Act (FAA), requires
the employee's wrongful death beneficiaries to
arbitrate their wrongful death claims against
[9] Alternative Dispute Resolution the employer even though they did not sign the
Persons Affected or Bound agreement; disapproving of In re Kepka, 178
Nonsignatories to an arbitration agreement S.W.3d 279, and Gomez v. Zardenetta, 1998
subject to the Federal Arbitration Act (FAA)

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 2
In re Labatt Food Service, L.P., 279 S.W.3d 640 (2009)
28 IER Cases 1268, 52 Tex. Sup. Ct. J. 352

WL 19858. 9 U.S.C.A. § 1 et seq.; V.T.C.A., A court may determine a specific challenge
Civil Practice & Remedies Code § 71.003(a). to the validity of the arbitration clause in a
contract, but a broader challenge to the entire
26 Cases that cite this headnote contract, either on a ground that directly
affects the entire contract or on the ground
[13] Death that one of the contract's provisions is illegal
Right of Action of Person Injured and renders the whole contract invalid, must
go to the arbitrator.
While damages for a wrongful death
action are for the exclusive benefit of the 18 Cases that cite this headnote
wrongful death beneficiaries and are meant to
compensate them for their own personal loss,
the cause of action is entirely derivative of the
decedent's rights. V.T.C.A., Civil Practice &
Attorneys and Law Firms
Remedies Code §§ 71.003(a), 71.004(a).
*642 Robert A. Valadez, Mark A. Giltner, Shelton &
24 Cases that cite this headnote
Valadez, San Antonio, Nissa M. Dunn, for relator.

[14] Alternative Dispute Resolution Fidel Rodriguez Jr., San Antonio, Leo D. Figueroa, for
Existence and Validity of Agreement real party in interest.
It was for the arbitrator, rather than Opinion
the court, to resolve claim by employee's
wrongful death beneficiaries that employer Justice JOHNSON delivered the opinion of the Court.
could not compel them to arbitrate their
wrongful death claims pursuant to “Election Under Texas law, wrongful death beneficiaries are
of Comprehensive Benefits, Indemnity, and generally bound by a decedent's pre-death contractual
Arbitration Agreement” that employee had agreement because of the derivative nature of their claims.
executed with employer, which employer did In this case, we consider whether the arbitration provision
not provide workers' compensation insurance in an agreement between a decedent and his employer
but provided an occupational injury plan; requires the employee's wrongful death beneficiaries to
beneficiaries did not specifically challenge arbitrate their wrongful death claims against the employer
validity of arbitration clause and instead even though they did not sign the agreement. We hold that
broadly challenged the contract by asserting it does.
that the contract as a whole was invalid
because the indemnity clause violated the
Labor Code's provision that an employee's I. Background
cause of action against a non-subscriber
employer to recover damages for personal Labatt Food Service, L.P. does not provide workers'
injuries or death sustained in the course and compensation insurance to cover its employees in the
scope of employment could not be waived event of on-the-job injuries. Rather, it provides an
by an employee before the employee's injury “occupational injury plan” (the plan) under which
or death, with beneficiaries also asserting its employees may elect to participate. To become
that the arbitration clause was not severable. participants in the plan, employees sign an agreement
V.T.C.A., Labor Code § 406.033(e). entitled “Election of Comprehensive Benefits, Indemnity,
and Arbitration Agreement.” The agreement contains
24 Cases that cite this headnote several numbered paragraphs. Of primary relevance to
this proceeding are three of those paragraphs. Paragraph
[15] Alternative Dispute Resolution three provides that the employee elects to be covered
Existence and Validity of Agreement under the plan “individually and on behalf of heirs
and beneficiaries.” Paragraph three also provides that

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 3
In re Labatt Food Service, L.P., 279 S.W.3d 640 (2009)
28 IER Cases 1268, 52 Tex. Sup. Ct. J. 352

the employee will indemnify Labatt from claims and
suits based on injury to or death of the employee from
B. Governing Law
occupational causes, except for claims filed pursuant to
the plan. Paragraph four consists of an arbitration clause [4] Under the FAA, whether an arbitration agreement
providing that disputes related to either the agreement, binds a nonsignatory is a gateway matter to be determined
the plan, or to an employee's occupational injury or by courts rather than arbitrators unless the parties clearly
death must be submitted to binding arbitration pursuant and unmistakably provide otherwise. In re Weekley
to the Federal Arbitration Act (FAA). See 9 U.S.C. §§ Homes, L.P., 180 S.W.3d 127, 130 (Tex.2005); see Howsam
1–16. Paragraph eight provides for the severability of any v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83–84, 123
invalid provision. S.Ct. 588, 154 L.Ed.2d 491 (2002). As this arbitration
agreement is silent about who is to determine whether
Carlos Dancy, Jr., an employee of Labatt, elected to particular persons are bound by the agreement, courts,
participate in the plan and signed an agreement. Dancy rather than the arbitrator, should determine the issue. See
later died from an apparent asthma attack that occurred First Options of Chic., Inc. v. Kaplan, 514 U.S. 938, 944–
while he was working. His parents and children filed a 45, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995).
wrongful death action against Labatt. Labatt responded
by filing a motion to compel arbitration in which it [5] [6] [7] [8] We apply Texas procedural rules in
asserted the arbitration agreement bound the wrongful determining whether nonsignatories are bound by an
death beneficiaries. The beneficiaries argued they were not arbitration agreement. In re Weekley Homes, 180 S.W.3d
bound by Dancy's arbitration agreement for two reasons: at 130. It is not entirely clear, however, if state or
(1) they were not signatories to the agreement, and (2) the federal substantive law governs whether nonsignatories
entire agreement was void because the indemnity clause are bound to arbitrate under an agreement subject to the
was a pre-injury waiver in violation of Texas Labor Code FAA. Id.; see Wash. Mut. Fin. Group, LLC v. Bailey,
section 406.033(e). 364 F.3d 260, 267 n. 6 (5th Cir.2004). Under the FAA,
state law generally governs whether a litigant agreed
The trial court denied Labatt's motion without stating its to arbitrate, and federal law governs the scope of the
reasons. The court of appeals denied mandamus relief. arbitration clause. In re Weekley Homes, 180 S.W.3d
Labatt now seeks mandamus relief from this Court. at 130. But whether nonsignatories are bound by an
arbitration agreement is a distinct issue that may involve
either or both of these matters. Id. at 130–31; see also
II. Are the Beneficiaries Bound to Arbitrate? In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 738
(Tex.2005) (noting whether nonsignatory plaintiffs should
be compelled to arbitrate their claims is related to validity
A. Standard of Review but is also a distinct issue). The FAA does not specify
whether state or federal law governs, and the United
[1] [2] [3] A party denied the right to arbitrate pursuant
States Supreme Court has not directly addressed the issue.
to an agreement subject to *643 the FAA does not
In re Weekley Homes, 180 S.W.3d at 130. Pending an
have an adequate remedy by appeal and is entitled to
answer from the United States Supreme Court, we have
mandamus relief to correct a clear abuse of discretion.
determined to apply state substantive law and endeavor
In re L & L Kempwood Assocs., L.P., 9 S.W.3d 125,
to keep it consistent with federal law. Id. We keep in
128 (Tex.1999). Under an abuse of discretion standard,
mind that a purpose of the FAA is “to make arbitration
we defer to the trial court's factual determinations if
agreements as enforceable as other contracts, but not
they are supported by evidence, but we review the trial
more so.” Prima Paint Corp. v. Flood & Conklin Mfg. Co.,
court's legal determinations de novo. Brainard v. State,
388 U.S. 395, 404 n. 12, 87 S.Ct. 1801, 18 L.Ed.2d 1270
12 S.W.3d 6, 30 (Tex.1999); see Walker v. Packer, 827
(1967); see Fleetwood Enter., Inc. v. Gaskamp, 280 F.3d
S.W.2d 833, 839–40 (Tex.1992). Whether an arbitration
1069, 1074 n. 5 (5th Cir.2002).
agreement is enforceable is subject to de novo review.
See J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227
Mindful of the foregoing, we move to the issue before us
(Tex.2003).
—whether an arbitration agreement governed by the FAA

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 4
In re Labatt Food Service, L.P., 279 S.W.3d 640 (2009)
28 IER Cases 1268, 52 Tex. Sup. Ct. J. 352

binds the nonsignatory wrongful death beneficiaries of a beneficiaries are bound to arbitrate due to the derivative
party to the agreement. nature of their claims.

[10] [11] At common law there was no recognized cause
of action for the wrongful death of another person. Russell
C. Beneficiaries as Nonsignatories
v. Ingersoll–Rand Co., 841 S.W.2d 343, 344 (Tex.1992).
[9] We have previously determined that nonsignatories The Legislature enacted the Wrongful Death Act in
to an agreement subject to the FAA may be bound to order to create a cause of action to allow a deceased
an arbitration clause when rules of law or equity would tort victim's surviving parents, children, and spouse to
bind them to the contract generally. In re Weekley Homes, recover damages for their losses from the victim's death.
180 S.W.3d at 131 (noting that if state law would bind Shepherd v. Ledford, 962 S.W.2d 28, 31 (Tex.1998); see
a nonparty to a contract generally, the FAA appears to TEX. CIV. PRAC. & REM.CODE §§ 71.002–.004. Under
preempt an exception for arbitration clauses because the the Wrongful Death Act as it applies here, wrongful
FAA requires states to place arbitration *644 contracts death beneficiaries may pursue a cause of action “only if
on equal footing with other contracts); see also Allied– the individual injured would have been entitled to bring
Bruce Terminix Cos., Inc. v. Dobson, 513 U.S. 265, 281, an action for the injury if the individual had lived.”
115 S.Ct. 834, 130 L.Ed.2d 753 (2005) (noting that a TEX. CIV. PRAC. & REM.CODE § 71.003(a). This
state “may not ... decide that a contract is fair enough to language is not a recent innovation but is a recodification
enforce all its basic terms ... [yet] not fair enough to enforce of language which has consistently been part of the
its arbitration clause”). Therefore, we look to whether Wrongful Death Act. See Russell, 841 S.W.2d at 346.
the agreement signed by Dancy would generally bind his And we have consistently held that the right of statutory
beneficiaries under Texas law. beneficiaries to maintain a wrongful death action is
entirely derivative of the decedent's right to have sued for
Several rules of law and equity may bind nonsignatories to his own injuries immediately prior to his death. See id. at
a contract. For example, we have held that the principles 345–47. Thus, it is well established that statutory wrongful
of equitable estoppel and agency may bind nonsignatories death beneficiaries' claims place them in the exact “legal
to an arbitration agreement. In re Weekley Homes, 180 shoes” of the decedent, and they are subject to the same
S.W.3d at 131–35; see also In re Kellogg Brown & Root, defenses to which the decedent's claims would have been
166 S.W.3d at 739 (noting nonsignatories may be bound to subject. Id. at 347.
arbitration agreement under “direct benefits estoppel”); In
re Merrill Lynch Trust Co. FSB, 235 S.W.3d 185, 191–95 Accordingly, we long ago held that a decedent's pre-
(Tex.2007) (recognizing estoppel may bind a nonsignatory death contract may limit or totally bar a subsequent
to an arbitration agreement but holding plaintiffs were action by his wrongful death beneficiaries. See Sullivan–
not bound to arbitration agreement under “concerted Sanford Lumber Co. v. Watson, 106 Tex. 4, 155 S.W.
misconduct estoppel” because it was not a recognized 179, 180 (1913); Thompson v. Fort Worth & R.G. Ry.
theory of estoppel under Texas law); In re FirstMerit Co., 97 Tex. 590, 80 S.W. 990, 992 (1904); see also
Bank, N.A., 52 S.W.3d 749, 755–56 (Tex.2001) (holding Russell, 841 S.W.2d at 347 (affirming holdings *645
a nonsignatory who sues based on a contract subjects in Thompson and Sullivan–Sanford Lumber Co.). In
himself to the contract's terms, including its arbitration Thompson, R.K. Thompson sued to recover damages for
agreement). injuries he suffered while riding a train. He accepted a
settlement offer and executed a full release of the railway
Labatt argues that under these circumstances the company. 80 S.W. at 990. Shortly after signing the release,
beneficiaries should be bound by the agreement because Thompson died from his injuries. Id. at 991. His wife
(1) they are third party beneficiaries of the agreement; (2) and children then sued the railway company seeking to
they are bound by the agreement because of the derivative recover damages for his death. Id. at 990. The Court noted
nature of their claims; and (3) Texas Family Code section that if Thompson had survived, he would not have been
151.001 afforded Dancy the legal authority to bind his entitled to bring suit because of the contractual release and
minor children to the agreement. Because we determine it because the Wrongful Death Act provided, in language
is dispositive, we first consider Labatt's argument that the similar to the current Act, that beneficiaries were only

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 5
In re Labatt Food Service, L.P., 279 S.W.3d 640 (2009)
28 IER Cases 1268, 52 Tex. Sup. Ct. J. 352

entitled to bring suit if the decedent would have been v. Boehmer, 700 S.W.2d 687, 690 (Tex.App.-Corpus
entitled to maintain an action for the injury. Id. at 991– Christi 1985, no writ) (release and settlement signed by
92. The Court held that although the beneficiaries were automobile accident victim barred survival and wrongful
not parties to the release, the contractual release signed death actions after victim died from injuries sustained in
by Thompson barred their wrongful death claims because accident).
they stood in the same legal shoes as Thompson and were
subject to the same contractual defenses. Id. at 992. [12] Despite this line of authority, the wrongful death
beneficiaries argue that agreements to arbitrate are
In Sullivan–Sanford Lumber Co., the Court again held different than other contracts, and they should not be
that a pre-death contractual release signed by a decedent bound by Dancy's agreement. We reject their argument.
barred a subsequent action by his wrongful death If we agreed with them, then wrongful death beneficiaries
beneficiaries. 155 S.W. at 180. The Sullivan–Sanford in Texas would be bound by a decedent's contractual
Lumber Company allowed non-employees to ride their agreement that completely disposes of the beneficiaries'
trains without charge but issued them boarding passes claims, but they would not be bound by a contractual
containing the following language: agreement that merely changes the forum in which *646
the claims are to be resolved. Not only would this be an
The user of this pass rides only anomalous result, we believe it would violate the FAA's
on the following conditions: (1) express requirement that states place arbitration contracts
This permit is accepted with the on equal footing with other contracts. 9 U.S.C. § 2; see
understanding that the person using Volt Info. Scs., Inc. v. Bd. of Trs. of Leland Stanford Junior
it assumes all risk of injury of Univ., 489 U.S. 468, 474, 109 S.Ct. 1248, 103 L.Ed.2d 488
any character while using the same (1989).
and hereby waives any claim for
damages in case of injury.... [13] The beneficiaries also argue that they should not
be bound because Dancy did not have the authority to
135 S.W. 635, 636 (Tex.Civ.App.-Texarkana 1911), rev'd,
bind them to the arbitration agreement when the wrongful
106 Tex. 4, 155 S.W. 179 (1913). J.A. Watson was riding a
death cause of action actually belongs to the surviving
train courtesy of a boarding pass when the train collided
spouse, children, and parents of the deceased. While it
with another train killing Watson. Id. His wife and
is true that damages for a wrongful death action are for
children sued the Lumber Company. Id. The Court held,
the exclusive benefit of the beneficiaries and are meant to
as it did in Thompson, that the beneficiaries were not
compensate them for their own personal loss, the cause of
entitled to recover under the Wrongful Death Act because
action is still entirely derivative of the decedent's rights.
Watson himself could not have recovered for his injuries
TEX. CIV. PRAC. & REM.CODE §§ 71.003(a), .004(a);
if he had survived, and his wrongful death beneficiaries
Russell, 841 S.W.2d at 347. Thus, regardless of the fact
were subject to the same contractual defenses that Watson
that Dancy's beneficiaries are seeking compensation for
would have been subject to had he sued. 155 S.W. at 180.
their own personal loss, they still stand in Dancy's legal
shoes and are bound by his agreement.
Consistent with our holdings in Thompson and Watson,
many courts of appeals have held that a decedent's
In the alternative, the beneficiaries urge us to circumvent
pre-death contract may limit or bar a subsequent
the derivative claim rule by holding that wrongful
wrongful death action. See Newman v. Tropical Visions,
death actions are analogous to and should be treated
Inc., 891 S.W.2d 713, 719 (Tex.App.-San Antonio
similarly to loss of consortium claims. A tort action
1994, writ denied) (pre-injury liability release signed
seeking damages for loss of consortium, however, is
by decedent before taking scuba diving lessons barred
fundamentally different than a statutory wrongful death
subsequent wrongful death and survival action against
action. If Dancy had suffered a severe but nonfatal
scuba instructor); Winkler v. Kirkwood Atrium Office
injury, his children would have been entitled to bring a
Park, 816 S.W.2d 111, 115 (Tex.App.-Houston [14th
claim to recover for the loss of care, guidance, love, and
Dist.] 1991, writ denied) (release executed by decedent
before joining health club precluded his beneficiaries from protection ordinarily provided by their father. 1 Reagan
bringing wrongful death and survival action); McClellan v. Vaughn, 804 S.W.2d 463, 466 (Tex.1990). Their lost

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 6
In re Labatt Food Service, L.P., 279 S.W.3d 640 (2009)
28 IER Cases 1268, 52 Tex. Sup. Ct. J. 352

consortium claims would be derivative in the sense that however, resolve the issue based on what the contracting
the beneficiaries would be required to establish Labatt parties intended. Allen v. Pacheco, 71 P.3d 375, 379–80
was liable for their father's underlying injury in order to (Colo.2003) (beneficiaries bound when contract reflects
recover damages. Whittlesey v. Miller, 572 S.W.2d 665, intent of the parties to bind beneficiaries); Herbert v.
668 (Tex.1978). But loss of consortium claims are not Superior Court, 169 Cal.App.3d 718, 215 Cal.Rptr. 477,
entirely derivative as are wrongful death claims; instead, 480 (1985) (beneficiaries bound when contract reflects
they are separate and independent claims distinct from intent of the parties to bind beneficiaries).
the underlying action. Id. at 667, 669. Thus, a settlement
agreement signed by an injured spouse does not bar a A review of the cases decided based on statutory language
subsequent loss of consortium claim by the non-injured indicates that courts in states where wrongful death
spouse. Id. at 669. actions are recognized as independent and separate causes