Case: 20-1367 Document: 53 Page: 1 Filed: 03/12/2021
NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
CAJUN SERVICES UNLIMITED, LLC, DBA
SPOKED MANUFACTURING, T2 TOOLS &
DESIGN, LLC, SHANE TRICHE, HEATH TRICHE,
Plaintiffs-Appellees
v.
BENTON ENERGY SERVICE COMPANY, DBA
BESCO TUBULAR,
Defendant-Appellant
______________________
2020-1367
______________________
Appeal from the United States District Court for the
Eastern District of Louisiana in Nos. 2:17-cv-00491-BWA-
JCW, 2:18-cv-05630-BWA-JCW, 2:18-cv-05932-BWA-JCW,
Judge Barry W. Ashe.
______________________
Decided: March 12, 2021
______________________
WALTER JAMES SCOTT, JR., Scott Law Group LLP, Ev-
ergreen, CO, argued for plaintiffs-appellees. Also repre-
sented by GEORGE THEODORE SCOTT; TORI SHERER
BOWLING, Keogh, Cox & Wilson, Ltd., Baton Rouge, LA.
ROBERT MICHAEL KALLAM, Kean Miller LLP, Lafayette,
Case: 20-1367 Document: 53 Page: 2 Filed: 03/12/2021
2 CAJUN SERVS. UNLIMITED, LLC v. BENTON ENERGY SERV. CO.
LA, argued for defendant-appellant. Also represented by
AMANDA MARIE COLLURA-DAY, ROBERT DEVIN RICCI, New
Orleans, LA; LAUREN J. RUCINSKI, Baton Rouge, LA;
CHRISTOPHER RIVIERE, Riviere Abel, PLC, Thibodaux, LA.
______________________
Before LOURIE, HUGHES, and STOLL, Circuit Judges.
STOLL, Circuit Judge.
Benton Energy Service Company (BESCO) appeals the
United States District Court for the Eastern District of
Louisiana’s denial of its motion to compel arbitration. Be-
cause the district court did not err in concluding that
BESCO waived its right to compel arbitration of the claims
at issue, we affirm.
BACKGROUND
I
This case arose from a dispute between BESCO and
Cajun Services Unlimited, LLC, dba Spoked Manufactur-
ing, T2 Tools & Design, L.L.C., Shane Triche, and Heath
Triche (collectively, “Cajun”) over ownership and intellec-
tual property rights in an elevator roller insert system used
in oil drilling. BESCO and Cajun had a working relation-
ship in which Cajun prepared drawings and fabricated cer-
tain equipment for BESCO’s use in oil fields. Following a
2014 discussion of improvements to the elevator BESCO
used in the field, Cajun began manufacturing a roller in-
sert system to fit BESCO’s elevator.
Whenever BESCO’s field hands picked up the elevator
roller insert system from Cajun’s facilities for use in the
field, Cajun required them to sign a delivery ticket ac-
knowledging receipt. Around June 2015, Cajun started
printing terms and conditions on the delivery tickets.
Thereafter, BESCO’s field hands continued to pick up the
elevator roller insert system and sign the delivery tickets.
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CAJUN SERVS. UNLIMITED, LLC v. BENTON ENERGY SERV. CO. 3
Among the terms and conditions on the tickets was an
arbitration clause in Section 5.6:
Any dispute or difference arising out of or in con-
nection with this contract shall be determined by
the appointment of a single arbitrator to be agreed
between the parties, or failing agreement within
fourteen days, after either party has given to the
other a written request to concur in the appoint-
ment of an arbitrator, by an arbitrator to be ap-
pointed by the President or a Vice President of the
Chartered Institute of Arbitrators.
J.A. 420. The terms and conditions (also referred to as the
“Rental Agreement”) stated that the elevator roller insert
system “at all times remain[ed] the property of [Cajun]”
and prohibited BESCO from making any alteration or mod-
ification to the elevator roller insert system, or “dis-
sassembl[ing], reverse engineer[ing] or analyz[ing]” the
elevator roller insert system or having a third party do the
same. Id. The terms and conditions also purportedly gave
Cajun “all right, title and interest to all improvements and
modifications made to the [elevator roller insert system],
whether made by [Cajun] or [BESCO].” Id.
In March 2015, Cajun filed a provisional patent appli-
cation covering the elevator roller insert system, which ul-
timately issued as
U.S. Patent No. 9,988,862 on June 5,
2018. The ’862 patent is titled “Elevator Roller Insert Sys-
tem,” and names Cajun’s principals as the sole inventors
and Cajun as the sole assignee.
The parties’ relationship deteriorated toward the end
of 2015, when oil prices declined, and Cajun demanded
more money for the elevator roller insert system than
BESCO was willing to pay. BESCO stopped renting the
elevator roller insert system from Cajun and contracted
with a third party to manufacture new roller inserts for
BESCO’s elevators.
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4 CAJUN SERVS. UNLIMITED, LLC v. BENTON ENERGY SERV. CO.
II
A
On January 20, 2017, Cajun filed suit against BESCO
in the Eastern District of Louisiana, alleging eight causes
of action: (1) violation of the Defend Trade Secrets Act
(DTSA); (2) violation of the Louisiana Uniform Trade Se-
crets Act (LUTSA); (3) violation of Louisiana Unfair Trade
Practices and Consumer Protection Law (LUPTA); (4) bad
faith breach of contract; (5) fraud; (6) civil conspiracy;
(7) declaratory judgment that Cajun retained all right, ti-
tle, and interest to the elevator roller insert system; and
(8) injunctive relief to preclude BESCO from using the ele-
vator roller insert system. Complaint at 14–27, Cajun
Servs. Unlimited, LLC v. Benton Energy Serv. Co.,
No. 17-cv-00491 (E.D. La. Jan. 20, 2017), ECF No. 1 (Ca-
jun I). BESCO filed an answer that did not mention arbi-
tration and included counterclaims for: (1) unfair and
deceptive trade practices; (2) breach of contract; (3) fraud-
ulent inducement; and (4) declaratory judgment that
BESCO did not utilize any of Cajun’s confidential and pro-
prietary information. Answer at 17–20, Cajun I,
No. 17-cv-00491 (E.D. La. Feb. 16, 2017). Cajun filed a first
amended complaint, and BESCO filed an answer, which
again omitted any reference to arbitration.
Discovery proceeded in Cajun I on all claims and the
parties filed motions for summary judgment in Octo-
ber 2017. BESCO filed a motion for partial summary judg-
ment seeking dismissal of Cajun’s DTSA, LUTSA, and
LUPTA claims, arguing that Cajun had no cognizable trade
secrets and no standing to assert trade secrets, and, in the
alternative, that BESCO had not misappropriated any
trade secrets that may have existed. BESCO’s summary-
judgment briefing did not mention arbitration. Cajun filed
two motions for summary judgment, one concerning the
breach-of-contract claims and counterclaims and the other
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CAJUN SERVS. UNLIMITED, LLC v. BENTON ENERGY SERV. CO. 5
concerning BESCO’s counterclaims for unfair and decep-
tive trade practices and fraudulent inducement.
BESCO filed separate oppositions to each of Cajun’s
motions for summary judgment on October 24, 2017, about
six weeks before trial was scheduled to begin. BESCO’s
opposition to Cajun’s trade-practices motion did not men-
tion arbitration. BESCO raised arbitration for the first
time in its opposition to Cajun’s breach-of-contract motion.
In a footnote, BESCO made a single-sentence, alternative
argument that the claims should be arbitrated: “Even if
this Court determined that the Disputed [Terms & Condi-
tions] constituted a binding agreement between [Cajun]
and Besco, the Court should nonetheless deny the motion
for summary judgment so that this matter can proceed in
arbitration in accordance with the provisions of the Dis-
puted [Terms & Conditions].” J.A. 216. BESCO reiterated
this alternative argument in its reply brief in support of its
own motion for summary judgment. J.A. 237 (“[E]ven if the
alleged terms and conditions do constitute a binding agree-
ment between Cajun and Besco, which is at all times de-
nied, this Honorable Court should dismiss this action so
that the dispute can proceed to arbitration in accordance
with the provisions of Cajun’s own ‘agreement.’”).
Cajun I ended on May 18, 2018 when, “at the request
of counsel for both parties,” the district court administra-
tively closed the case “pending request by either party to
re-open the case in the future with the parties reserving all
rights.” J.A. 259–60. Due to standing issues with Cajun’s
DTSA claim, the district court dismissed that claim with-
out prejudice. The DTSA claim was the lynchpin of the dis-
trict court’s jurisdiction, but the district court retained
supplemental jurisdiction of Cajun’s state law claims in
“anticipat[ion of Cajun] moving to amend its complaint
once this case is re-opened in order to add its anticipated
patent infringement claim.” J.A. 259.
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6 CAJUN SERVS. UNLIMITED, LLC v. BENTON ENERGY SERV. CO.
On June 4, 2018, the day before the ’862 patent issued,
BESCO filed a declaratory judgment action seeking decla-
rations that the ’862 patent claims were invalid, not in-
fringed, and unenforceable. Complaint at 6–7, Benton
Energy Serv. Co. v. Cajun Servs. Unlimited, LLC,
No. 18-cv-05630 (E.D. La. June 4, 2018) (BESCO).
On June 14, 2018, Cajun filed another suit against
BESCO, asserting the same causes of action as in the Ca-
jun I litigation, except that Cajun added a patent infringe-
ment claim and removed its civil conspiracy claim.
Complaint at 26–39, Cajun Servs. Unlimited, LLC v. Ben-
ton Energy Serv. Co., No. 18-cv-05932 (E.D. La. June 14,
2018), ECF No. 1 (Cajun II). BESCO answered the Ca-
jun II complaint on August 13, 2018, raising arbitration as
an affirmative defense to Cajun’s breach-of-contract
claims. Answer at 18, Cajun II, No. 18-cv-05932 (E.D. La.
Aug. 13, 2018), ECF No. 20 (“Any alleged breach of contract
claims based on the language and provisions of the Rental
Agreement are subject to arbitration.”). BESCO also as-
serted counterclaims for noninfringement, invalidity, and
unenforceability of Cajun’s patent, unfair and deceptive
trade practices, fraudulent inducement, breach of contract,
and the lack of a valid agreement.
On August 15, 2018, the district court entered an order
consolidating BESCO and Cajun II with Cajun I. 1
J.A. 331–32. Cajun filed an amended complaint in the con-
solidated action in November 2018. BESCO filed an an-
swer to Cajun’s amended complaint, including arbitration
as an affirmative defense to Cajun’s breach-of-contract
claims. J.A. 480.
1 The district court ultimately granted Cajun’s mo-
tion to dismiss the BESCO declaratory judgment claims for
lack of subject-matter jurisdiction in April 2019.
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CAJUN SERVS. UNLIMITED, LLC v. BENTON ENERGY SERV. CO. 7
In April 2019, BESCO filed three motions for summary
judgment: a first seeking dismissal of Cajun’s trade-secret
claims; a second seeking dismissal of Cajun’s breach-of-
contract claim; and a third seeking dismissal of Cajun’s pa-
tent infringement claims. BESCO raised arbitration in its
briefing supporting its motion for summary judgment on
Cajun’s breach-of-contract claims only. Specifically,
BESCO included a footnote to the last sentence of its brief,
stating:
In the event Besco’s Motion for Partial Summary
Judgment is denied and a determination is
made . . . that the Terms and Conditions . . . is a
binding and enforceable agreement . . . , Besco in-
tends to seek a dismissal and/or stay of any and all
breach of contract claims asserted by Cajun so that
these claims can be resolved by arbitration pursu-
ant to Section 5.6 of the Terms and Conditions/Dis-
puted [Terms & Conditions].
J.A. 500.
In June 2019, the district court held a pretrial confer-
ence. The parties’ proposed pretrial order stated several
contested issues related to arbitration, including “whether
all or any part of this dispute must be submitted to, and
decided by, arbitration,” to the extent the Rental Agree-
ment was binding; “[w]hich claims of any party, if any, are
subject to the . . . arbitration provision”; and “[w]hether
Besco has waived the arbitration provision.” J.A. 657.
BESCO filed its objections to Cajun’s proposed jury in-
structions in July 2019. Relevant here, BESCO “object[ed]
to any jury instruction which would attempt to empower
the jury to determine the issues of whether the Agreement
was breached, whether the breach caused any actual dam-
age to [Cajun], and/or the calculation of any purported
damages resulting from the alleged breach.” J.A. 687. The
jury could not decide these issues, BESCO maintained, be-
cause if “the Agreement is enforceable, then the arbitration
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8 CAJUN SERVS. UNLIMITED, LLC v. BENTON ENERGY SERV. CO.
clause included therein will be triggered and the parties’
dispute must be resolved by arbitration pursuant to Sec-
tion 5.6 of the Agreement.”
Id. Notwithstanding BESCO’s
position that some or all of Cajun’s claims would be subject
to arbitration if the Rental Agreement were enforceable,
BESCO’s proposed verdict form asked the jury to deter-
mine liability and damages on BESCO’s counterclaims if it
found the Rental Agreement enforceable. J.A. 1297–303.
The district court held a four-day jury trial starting on
July 8, 2019. The jury found in Cajun’s favor on all of Ca-
jun’s claims remaining in the case and rejected BESCO’s
counterclaims.
B
After receiving the jury’s verdict, BESCO moved to
compel arbitration of all of Cajun’s claims, asking the dis-
trict court to “vacate the jury verdict on all issues other
than the finding of a valid and enforceable written agree-
ment between Cajun and Besco.” Cajun Servs. Unlimited,
LLC v. Benton Energy Serv. Co., No. 17-cv-491,
2019 WL
6173766, at *2 (E.D. La. Nov. 11, 2019). BESCO asserted
that all claims should be arbitrated because they “arise out
of the equipment rentals under the Rental Agreement.”
Id.
Cajun responded that BESCO waived any right to compel
arbitration by failing to timely raise the issue. The district
court denied BESCO’s motion to compel arbitration, con-
cluding that BESCO had waived arbitration of all of its
claims by “substantially invok[ing] the judicial process to
[Cajun’s] prejudice.”
Id. at *10.
In particular, the district court found that BESCO had
substantially invoked the judicial process with respect to
all of the claims at issue. Regarding BESCO’s non-contract
claims, the district court found that BESCO “sought a res-
olution of [Cajun’s] trade-secret, unfair-trade-practices,
fraud, and patent-infringement claims, as well as its own
claims against [Cajun], through the judicial system, with-
out arguing that any of these claims should be resolved
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CAJUN SERVS. UNLIMITED, LLC v. BENTON ENERGY SERV. CO. 9
through arbitration until” after trial.
Id. at *6. Addressing
BESCO’s contract claims, the district court acknowledged
that “[a]fter October 2017, Besco did consistently mention
its arbitral rights in regard to the contract claims as it con-
tinued to dispute the existence of the Rental Agreement
and litigate the other claims.”
Id. at *8. But, considering
the balance of BESCO’s conduct, the district court decided
that this did not alter the conclusion that “Besco’s actions
before mentioning its arbitral rights constitute[d] overt
acts which evince a desire to resolve the dispute through
litigation rather than arbitration.”
Id. at *9. Specifically,
“during the seven months preceding any notice of an intent
to arbitrate, Besco filed two answers with affirmative de-
fenses and counterclaims, filed a joint motion for a protec-
tive order (without seeking to limit discovery to the issue
of contract validity), engaged in full-fledged discovery, and
filed a motion for summary judgment on Cajun’s trade-se-
cret claims.”
Id.
The district court further found that Cajun was preju-
diced as a result of BESCO’s delay in seeking arbitration.
The court emphasized that Cajun was forced to incur legal
expenses defending against BESCO’s counterclaims and
BESCO’s discovery in the Cajun I lawsuit on claims that
BESCO now argues are subject to arbitration. See
id. at *6,
*9. The court reasoned that Cajun’s expenses in litigating
both BESCO’s motions for summary judgment and the
BESCO declaratory judgment action provided an addi-
tional basis for prejudice, because BESCO did not notify
Cajun of any intent to “seek arbitration of any non-contract
claim until the final pretrial conference on June 25, 2019,
over two years after the initial complaint was filed.”
Id.
at *6. The district court further found that BESCO’s Octo-
ber 2017 assertions that the contract claims should be ar-
bitrated did not eliminate prejudice to Cajun as to those
claims, because BESCO’s “total inaction on its intent to
seek arbitration, while otherwise continuing to litigate,
made it unreasonable for Besco to expect [Cajun] to believe
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10 CAJUN SERVS. UNLIMITED, LLC v. BENTON ENERGY SERV. CO.
Besco actually intended to move for arbitration.”
Id. at *10.
BESCO appeals. 2
DISCUSSION
On appeal, BESCO challenges the district court’s de-
nial of its motion to compel arbitration. Specifically,
BESCO argues that the district court committed clear er-
ror in finding that BESCO substantially invoked the litiga-
tion process and that BESCO’s conduct in this case
prejudiced Cajun. Because the district court’s conclusions
are not clearly erroneous, we affirm.
I
As a threshold matter, we conclude that we have juris-
diction over BESCO’s appeal. The district court had juris-
diction under
28 U.S.C. § 1338 due to Cajun’s assertion of
a patent infringement claim. The Federal Arbitration Act
allows an appeal from “an order . . . denying a petition . . .
to order arbitration to proceed,”
9 U.S.C. § 16(a)(1)(B), thus
“render[ing] appealable under section 1292(a)(1) the denial
2 Following oral argument, Cajun informed us that
it had filed a petition for involuntary bankruptcy against
debtor BESCO, and we stayed BESCO’s appeal in this
court consistent with
11 U.S.C. § 362(a)(1), which imposes
an automatic stay on judicial proceedings against a debtor
when a petition for involuntary bankruptcy is filed. Order
Staying Appeal, Cajun Servs. Unlimited, LLC v. Benton
Energy Serv. Co., No. 20-1367 (Oct. 26, 2020), ECF No. 48.
The parties later informed us that the United States Bank-
ruptcy Court for the Eastern District of Louisiana modified
the automatic stay for the limited purpose of allowing the
appeal in this court to proceed to final judgment. Notice
Regarding Bankruptcy at 2, Cajun Servs. Unlimited, LLC
v. Benton Energy Serv. Co., No. 20-1367 (Dec. 18, 2020),
ECF No. 49. We hereby lift the stay of this appeal in this
court.
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CAJUN SERVS. UNLIMITED, LLC v. BENTON ENERGY SERV. CO. 11
of an injunctive order (i.e., motions to compel arbitration).”
Microchip Tech. Inc. v. U.S. Philips Corp.,
367 F.3d 1350,
1355 (Fed. Cir. 2004). “Since the district court had juris-
diction under
28 U.S.C. § 1338, and the order is appealable
under section 1292(a)(1), we, rather than the regional cir-
cuit, have appellate jurisdiction.”
Id. (citing
28 U.S.C.
§ 1292(c)(1)).
II
We apply Fifth Circuit law to our review of the district
court’s denial of BESCO’s motion to compel arbitration.
See
id. at 1356 (“We are obligated to follow regional circuit
law on questions of arbitrability that are not ‘intimately in-
volved in the substance of enforcement of a patent right.’”
(quoting Flex-Foot, Inc. v. CRP, Inc.,
238 F.3d 1362, 1365
(Fed. Cir. 2001))). The Fifth Circuit reviews the denial of
a motion to compel arbitration de novo and reviews any un-
derlying factual findings for clear error. In re Mirant Corp.,
613 F.3d 584, 588 (5th Cir. 2010). “The district court’s fac-
tual findings are clearly erroneous only if, after reviewing
the record, we are firmly convinced that a mistake has been
made.” Nicholas v. KBR, Inc.,
565 F.3d 904, 907 (5th Cir.
2009) (citing Baldwin v. Stalder,
137 F.3d 836, 839
(5th Cir. 1998)).
Under Fifth Circuit law, waiver of a party’s right to ar-
bitrate “will be found when the party seeking arbitration
substantially invokes the judicial process to the detriment
or prejudice of the other party.” Republic Ins. Co. v. PAICO
Receivables, LLC,
383 F.3d 341, 344 (5th Cir. 2004) (quot-
ing Subway Equip. Leasing Corp. v. Forte,
169 F.3d 324,
326 (5th Cir. 1999)). “There is a strong presumption
against finding a waiver of arbitration, and the party
claiming that the right to arbitrate has been waived bears
a heavy burden.”
Id. (citing Subway,
169 F.3d at 326).
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12 CAJUN SERVS. UNLIMITED, LLC v. BENTON ENERGY SERV. CO.
A
“To invoke the judicial process ‘[t]he party must, at the
very least, engage in some overt act in court that evinces a
desire to resolve the arbitrable dispute through litigation
rather than arbitration.’”
Id. (alteration in original) (quot-
ing Subway,
169 F.3d at 329). A district court’s finding
that a party substantially invoked the judicial process is
reviewed for clear error.
Id. at 346 (“[T]he district court
finding that Republic invoked the judicial process . . . is not
clearly erroneous.”).
The district court did not clearly err in finding that
BESCO substantially invoked the judicial process with re-
spect to both the contract and non-contract claims. 3
BESCO filed two answers in Cajun I and participated in
full-fledged discovery on the merits of the contract claims
before it first hinted that it would seek to arbitrate those
claims in October 2017. Even then, BESCO did not seek to
stay proceedings on the merits pending resolution of the
threshold question of the validity of the agreement contain-
ing the arbitration provision. Instead, BESCO stated only
3 On appeal, BESCO asserts that the district court
erred in treating the contract and non-contract claims sep-
arately. BESCO does not appear to dispute, however, that
invocation of the judicial process is determined on a claim-
by-claim basis. See Subway,
169 F.3d at 328 (“We hold to-
day that a party only invokes the judicial process to the ex-
tent it litigates a specific claim it subsequently seeks to
arbitrate.”). Nor does BESCO appear to challenge the dis-
trict court’s factual finding that BESCO “acted differently”
with respect to how it sought to litigate the contract and
non-contract claims. Cajun,
2019 WL 6173766, at *4; see
Appellant’s Br. 37–39. Accordingly, we conclude that
BESCO has not demonstrated that the district court erred
by analyzing the contract and non-contract claims sepa-
rately.
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CAJUN SERVS. UNLIMITED, LLC v. BENTON ENERGY SERV. CO. 13
that the district court should deny Cajun’s motion for sum-
mary judgment on the merits if the court found a valid
agreement “so that this matter can proceed in arbitration.”
J.A. 216. Other than including this obscure statement in a
footnote, BESCO did not take any action to initiate an ar-
bitration in accordance with the terms of the Rental Agree-
ment until nearly two years later, following a trial on the
merits.
As the district court properly found, BESCO partici-
pated in litigation even more fully with respect to the non-
contract claims. BESCO waited until the June 2019 pre-
trial conference in the consolidated action to “put[ Cajun]
on notice that it would even possibly seek arbitration of
any non-contract claim.” Cajun,
2019 WL 6173766, at *6.
In addition to its litigation activity in Cajun I, 4 BESCO
filed two answers, asserted counterclaims, and filed three
motions for summary judgment before it ever suggested
that the non-contract claims were subject to arbitration at
the June 2019 pretrial conference. Even then, BESCO’s
actions were inconsistent with the notion that the non-con-
tract claims must be arbitrated. Indeed, BESCO’s pro-
posed verdict form asked the jury to determine liability and
damages on BESCO’s counterclaims. We agree with the
district court that these facts collectively demonstrate
BESCO’s “desire to resolve the arbitrable dispute through
litigation rather than arbitration.” Republic Ins.,
383 F.3d
at 344 (quoting Subway,
169 F.3d at 329).
The district court’s decision is also consistent with the
Fifth Circuit’s decisions in Republic Insurance and General
4 BESCO argues that we should disregard its actions
in Cajun I in considering whether BESCO waived its right
to compel arbitration in the consolidated action. Appel-
lant’s Reply 6; see Appellant’s Br. 26, 29. We disagree and
conclude that the consolidated action is properly viewed as
a continuation of Cajun I.
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14 CAJUN SERVS. UNLIMITED, LLC v. BENTON ENERGY SERV. CO.
Guaranty Insurance Co. v. New Orleans General Agency,
Inc.,
427 F.2d 924 (5th Cir. 1970). In Republic Insurance,
the Fifth Circuit affirmed the district court’s denial of Re-
public’s motion to compel arbitration.
383 F.3d at 349. The
court reasoned that Republic had waived its right to arbi-
trate because it “wait[ed] to file its motion to compel arbi-
tration until days before the trial,” and it “undertook
extensive litigation activities before asserting its right to
arbitrate,” such as answering counterclaims, conducting
full-fledged discovery, amending its complaint, filing sev-
eral motions, and filing the required pretrial materials
with the district court.
Id. at 344–45. On its contract
claims, BESCO, like Republic, filed two answers and par-
ticipated in full-fledged discovery on the merits of the con-
tract claims before hinting that it would seek to arbitrate
those claims. With respect to the non-contract claims,
BESCO further filed an additional suit, two answers, and
four motions for summary judgment before raising arbitra-
tion. Like Republic, BESCO’s failure to move to compel ar-
bitration in a timely fashion “prevented the district court
from limiting the judicial proceedings to the threshold
question of whether a valid agreement to arbitrate exists.”
Id. at 345.
On the other hand, in General Guaranty, the Fifth Cir-
cuit reversed the district court’s denial of the defendant’s
motion to compel arbitration when the defendant’s first re-
sponsive pleading contained an alternative argument re-
questing a stay pending arbitration, and the district court’s
denial was based on: (1) the defendant’s failure to “ask for
arbitration before suit was filed”; (2) the defendant “al-
low[ing] plaintiff to proceed with taking depositions . . . be-
fore indicating any intent to request arbitration”; and
(3) the defendant “ask[ing] the court . . . for a stay to arbi-
trate only in the alternative.”
427 F.2d at 926–28. Unlike
the defendant in General Guaranty, BESCO did not raise
its right to arbitration in its first responsive pleading. Nor
did BESCO raise its right to arbitration in a manner
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CAJUN SERVS. UNLIMITED, LLC v. BENTON ENERGY SERV. CO. 15
“consistent with orderly participation in the lawsuit,” that
would provide for “preservation of the time and effort of
[the] court and [the] parties.”
Id. at 929. The holding in
General Guaranty that the defendant “did not lose its
rights to arbitration by pleading alternatively that the con-
tract had been abandoned and that court proceedings
should be stayed pending arbitration,”
id. at 928, also un-
dermines BESCO’s assertion that it could not raise the is-
sue of arbitrability of the claims until after the jury had
decided whether the parties had a valid agreement, see Ap-
pellant’s Br. 25–26, 34.
For all these reasons, we conclude that the district
court did not clearly err in finding that BESCO substan-
tially invoked the litigation process.
B
“[F]or purposes of a waiver of an arbitration agree-
ment: ‘prejudice . . . refers to the inherent unfairness in
terms of delay, expense, or damage to a party’s legal posi-
tion that occurs when the party’s opponent forces it to liti-
gate an issue and later seeks to arbitrate that same issue.’”
Republic Ins.,
383 F.3d at 346 (alterations in original)
(quoting Subway,
169 F.3d at 327). A finding of prejudice
in support of the conclusion that a party has waived its
right to compel arbitration is a finding of fact reviewed for
clear error. Price v. Drexel Burnham Lambert, Inc.,
791 F.2d 1156, 1163 (5th Cir. 1986).
The district court did not clearly err in finding that Ca-
jun was prejudiced by BESCO’s conduct in this case. The
district court acknowledged that, in Cajun I, BESCO raised
arbitration as an alternative argument in a footnote at the
end of its October 2017 summary-judgment opposition
brief, and that this may have informed Cajun of BESCO’s
intent to arbitrate Cajun’s contract claims as of that time.
The district court reasonably concluded, however, that not-
withstanding this footnote, “Besco’s total inaction on its in-
tent to seek arbitration, while otherwise continuing to
Case: 20-1367 Document: 53 Page: 16 Filed: 03/12/2021
16 CAJUN SERVS. UNLIMITED, LLC v. BENTON ENERGY SERV. CO.
litigate, made it unreasonable for Besco to expect [Cajun]
to believe Besco actually intended to move for arbitration.”
Cajun,
2019 WL 6173766, at *10; see Republic Ins.,
383 F.3d at 1346 (“[W]here the pretrial activity was related
to all of the parties’ claims, including those that were con-
ceded to be arbitrable, arbitration would result in preju-
dice.” (citing Price,
791 F.2d at 1159)). Indeed, BESCO
allowed litigation and trial to proceed on the merits of all
issues instead of seeking to limit the proceedings to the
threshold question of whether a valid agreement existed.
And even prior to October 2017, Cajun incurred costs for
pleadings, discovery, and motions practice in Cajun I for
claims that BESCO subsequently sought to arbitrate.
We also find unpersuasive BESCO’s assertion that Ca-
jun’s litigation expenses do not provide a cognizable basis
for prejudice. See Appellant’s Br. 35–36 (citing Gen. Guar.,
427 F.2d at 929). BESCO’s cited cases do not stand for
such a broad proposition. The court in General Guaranty,
on which BESCO principally relies, stated that “the factors
of delay and possible double expense, arising from the
court’s determination of the initial issue, is not a basis for
denying the arbitration otherwise available by reason of
that determination.”
427 F.2d at 929. The reference to de-
termination of “the initial issue” in General Guaranty re-
fers to whether arbitration was available at all in that case.
See
id. (“Initial determination was to be given the issue of
abandonment [of the contract], and the issues of whether
the indemnitors were to be bound by an arbitration award
and whether arbitration had been waived were reserved.”).
Contrary to BESCO’s suggestion, General Guaranty did
not hold that expenses incurred in litigation to resolve the
merits of claims that a party later argues are subject to ar-
bitration are irrelevant to the prejudice determination.
Accordingly, the district court did not clearly err in con-
cluding that BESCO’s conduct prejudiced Cajun.
Case: 20-1367 Document: 53 Page: 17 Filed: 03/12/2021
CAJUN SERVS. UNLIMITED, LLC v. BENTON ENERGY SERV. CO. 17
CONCLUSION
We have considered BESCO’s remaining arguments
and do not find them persuasive. For the foregoing rea-
sons, we affirm the district court’s denial of BESCO’s mo-
tion to compel arbitration.
AFFIRMED
