Diligent Texas Dedicated D/B/A Diligent Delivery Services v. Richard York ( 2017 )

ACCEPTED
02-17-00416-CV
SECOND COURT OF APPEALS
FORT WORTH, TEXAS
12/21/2017 12:23 PM
DEBRA SPISAK
CLERK
No. 02-17-00416-CV
FILED IN
2nd COURT OF APPEALS
In the Court of Appeals for the Second District in Fort Worth,
FORTTexas
WORTH, TEXAS
12/21/2017 12:23:50 PM
DEBRA SPISAK
Clerk
Diligent Texas Dedicated, LLC d/b/a Diligent Delivery Systems,
Appellant,
v.
Richard York, Elite Parts Group, LLC d/b/a Elite Parts Group
and Principle Distribution, Inc.
Appellees.
On Appeal from the 342nd Judicial District Court, Tarrant County, Texas
BRIEF OF APPELLANT
Maurice Bresenhan, Jr.
State Bar No. 02959000
mbresenhan@zbplaw.com
Pascal Paul Piazza
State Bar No. 15966850
ppp@zbplaw.com
Cynthia Keen Perlman
State Bar No. 11161700
CPerlman@zbplaw.com
Zukowski, Bresenhan & Piazza, L.L.P.
1177 West Loop South, Suite 1100
Houston, Texas 77027
(713) 965-9969/(713) 963-9169 (Fax)
Attorneys for Appellants
Oral Argument Requested
1
IDENTITY OF PARTIES AND COUNSEL
Appellant: Diligent Texas Dedicated, LLC d/b/a Diligent Delivery
Systems
Trial/Appellate
Counsel: Maurice Bresenhan, Jr.
State Bar No. 02959000
mbresenhan@zbplaw.com
Pascal Paul Piazza
State Bar No. 15966850
ppp@zbplaw.com
Cynthia Keen Perlman
State Bar No. 11161700
CPerlman@zbplaw.com
Zukowski, Bresenhan & Piazza, L.L.P.
1177 West Loop South, Suite 1100
Houston, Texas 77027
(713) 965-9969/(713) 963-9169 (Fax)
Appellees: Richard York and Elite Parts Group, LLC d/b/a Elite Parts
Group
Trial/Appellate
Counsel: S. Gary Werley
Law Offices of S. Gary Werley
1840 Acton Highway, Suite 102
Granbury, TX 76049
(817) 573-7700/(817) 573-7710 (Fax)
Appellee: Principle Distribution, Inc.
Trial/Appellate
Counsel: Russell A. Devenport
McDonald Sanders, P.C.
777 Main Street, Suite 1300
Fort Worth, Texas 76102
(817) 336-8651/(817) 334-0271
2
TABLE OF CONTENTS
BRIEF OF APPELLANT ..........................................................................................1
IDENTITY OF PARTIES AND COUNSEL ............................................................2
TABLE OF CONTENTS ...........................................................................................3
INDEX OF AUTHORITIES......................................................................................5
TABLE OF PRINCIPAL ABBREVIATIONS .........................................................8
STATEMENT OF THE CASE ..................................................................................9
STATEMENT REGARDING ORAL ARGUMENT .............................................10
ISSUES PRESENTED.............................................................................................11
BRIEF OF APPELLANT ........................................................................................13
Summary of the Argument ....................................................................................14
Standard of Review ...............................................................................................17
Background Facts/Course of Proceedings ...........................................................20
Analysis Under All Points of Error ......................................................................27
Conclusion and Prayer .........................................................................................53
CERTIFICATE OF SERVICE ................................................................................54
CERTIFICATE OF COMPLIANCE .......................................................................55
3
Appendices:
Appendix 1 Order on Plaintiff’s Motion to Compel and Motion to Abate
entered November 9, 2017
Appendix 2 Temporary Injunction entered on November 9, 2017
Appendix 3 Diligent Delivery Systems Employee Confidentiality and
Business Preservation Agreement
Appendix 4 AAA Commercial Rules, Rule R-7
Appendix 5 Notice of Past Due Findings of Fact and Conclusions of Law
filed December 13, 2017
Appendix 6 Affidavit of Service upon Principle Distribution, LLC
Appendix 7 Affidavit of Service upon Richard York
Appendix 8 Affidavit of Service upon York Elite Parts Group d/b/a Elite
Parts Group
4
INDEX OF AUTHORITIES
Cases
BBVA Compass Inv. Solutions, Inc. v. Brooks,
456 S.W.3d 771,718 (Tex. App. – Fort Worth 2017, no pet.) .............................30
Bryan v. Gordon,
384 S.W.3d 908 (Tex. App. – Houston [14th Dist.] 2012, no pet.) ......................20
Cell Comp, LLC v. Southwestern Bell Wireless, LLC,
2008 Tex. App. LEXIS 4510 (Tex. App. – Corpus Christi 2008, no pet.) ..........52
City of Keller v. Wilson,
168 S.W.3d 802 (Tex. 2004) ................................................................................20
City of The Colony v. N. Tex. Mun. Water Dist.,
272 S.W.3d 699 (Tex. App. – Fort Worth 2008, pet. dism’d) .............................52
CMH Homes v. Perez,
340 S.W.3d 444 (Tex. 2011) ................................................................................17
Dargahi v. Handa,
2017 Tex. App. LEXIS 10373 (Tex. App. – Austin 2017, no pet) ......... 29, 31, 45
Dow Roofing Systems, LLC v. Great Commission Baptist Church
& Chamberlin Dallas, LLC,
2017 Tex. App. LEXIS 7370 ** 7-8, 17-20 (Tex. App. – Fort Worth
2017, pet. for review filed) ...................................................................................28
EMS USA, Inc. v. Shary,
309 S.W.3d 653, 657 (Tex. App. – Dallas 2010, no pet.) ............................ 41, 48
Geo-Tech Foundation Repair v. Leggett,
2017 Tex. App. LEXIS 2765 (Tex. App. – Fort Worth 2017, no pet.). ....... passim
Haddock v. Quinn,
287 S.W.3d 158 (Tex. App. – Fort Worth 2009, pet. denied)...................... passim
5
Holmes v. Graves,
2013 Tex. App. LEXIS 14816 (Tex. App. – Houston [1st Dist.]
2013, no pet) .................................................................................................. 45, 46
In Re Coppola,
61 Tex. Sup. Ct. J. 170 (December 15, 2017) ......................................................18
In Re Merrill Lynch Trust Co., FSB,
235 S.W.3d 185 (Tex. 2007) ............................................................. 19, 32, 44, 50
Joseph Chris Personnel Services, Inc. v. Rossi,
249 Fed. Appx. 988, 991-992 (5th Cir. 2007 ........................................................31
Legoland Discovery Centre (Dallas), LLC v. Superior Builders, LLC,
2017 Tex. App. LEXIS 3843 (Tex. App. – Fort Worth 2017, no pet.) ........ passim
McCullough v. Ferrell,
2005 Tex. App. – Fort Worth 2005, no pet.) ........................................................18
McQueen v. Chevron Corp.,
2017 U.S. Dist. LEXIS 207705 * 4-5 (N.D. Cal. December 18, 2017.) ..............39
Menna v. Romero,
48 S.W.3d 247, 252-253 (Tex. App. San Antonio 2001, no pet.)........................31
Michiana Easy Livin’ Country, Inc. v. Helton,
168 S.W.3d 777 (Tex. 2005) ................................................................................18
Otis Elevator Co. v. Parmelee,
850 S.W.2d 179 (Tex. 1993) ......................................................................... 18, 19
PMS Distributing Co. v. Huber & Suhner, A.G.,
863 F.2d 639, 641-641 (9th Cir. 1988);.................................................................31
Rio Grande Xarin, II, Ltd. v. Wolverine Robstown, LP,
2010 Tex. App. LEXIS 5189 ** 22-23 (Tex. App. – Corpus
Christi 2010, pet. dism’d.). ..................................................................................34
RSL Funding, LLC v. Pippins,
499 S.W.3d 423 (Tex. 2016) ............................................................. 29, 31, 42, 45
6
RSM Prod. Corp. v. Global Petroleum Grp., Ltd.,
507 S.W.3d 383 (Tex. App. – Houston [1st Dist.] 2016, pet. denied) .................52
Rugen v. Interactive Business Svs.,
864 S.W.2d 548 (Tex. App. – Dallas 1993, no pet.) ...........................................52
Super Starr Int’l, LLC v. Fresh Tex Produce, LLC,
2017 Tex. App. LEXIS 8728 ** 6-9 (Tex. App. – Corpus Christi
2017, no pet.) ........................................................................................................28
Tranter, Inc. v. Liss,
2014 Tex. App. LEXIS 3398 * 4 (Tex. App. – Fort Worth 2017, no pet.). .........43
Zep Mfg. Co. v. Harthcock,
824 S.W.2d 642 (Tex. App. – Dallas 1992, no pet.) ...........................................52
Statutes
9 U.S.C.A. § 3 ................................................................................................... 44, 50
TEX. CIV. PRAC. & REM CODE §§ 134A.002, 143A.004, 134A007 .........................52
TEX. CIV. PRAC. AND REM CODE §§ 171.025 and 172.174 .............................. 44, 50
7
TABLE OF PRINCIPAL ABBREVIATIONS
(date xCR y-z) (Date Volume of Clerk’s Record, page(s))
(date RR pp.) (Date Reporter’s Record, page (s))
Diligent Diligent Texas Dedicated, LLC d/b/a Diligent Delivery
Systems
York Richard York
Elite Elite Parts Group, LLC d/b/a Elite Parts Group
PDL Principle Distribution, Inc.
8
STATEMENT OF THE CASE
Nature of the
Case: This is a breach of contract, non-competition, tortious
interference with contract, and misappropriation of trade secrets
case.
Trial Court: Judge Wade Birdwell was the trial judge. He has since
resigned to accept a position on this Court. Judge Dana
Womack has succeeded to Judge Birdwell at this time.
Course of
Proceedings: This is an accelerated, interlocutory appeal because the Trial
Court refused to compel arbitration and to stay all further
proceedings before the Trial Court pending the resolution of the
arbitration.
Trial Court’s
Disposition: Trial Court refused to compel arbitration and to stay all further
proceedings before the Trial Court pending the resolution of the
arbitration. The Trial Court further denied the jurisdictional
plea to allow the arbitrator to decide issues of arbitrability.
Procedural
Posture Pending
Appeal: Diligent has asked the Trial Court to stay the case pending this
appeal. That motion in the Trial Court is scheduled for
December 21, 2017. Diligent timely filed a request for Findings
of Fact and Conclusions of Law and then, on December 13,
2017, Diligent filed a Reminder for Making Findings of Fact
and Conclusions of Law. York, Elite and PDL have scheduled
hearings on their respective summary judgment motions in the
Trial Court on January 18, 2018. This case is set for trial on
January 22, 2018.
9
STATEMENT REGARDING ORAL ARGUMENT
This appeal concerns fundamental issues involving the critical interplay
between the complementary and conflicting roles of arbitration and trial
proceedings. Diligent respectfully submits that oral argument would aid the
Court’s decision-making and protection of fundamental due process principles.
10
ISSUES PRESENTED
1. The Trial Court committed reversible error when it denied Diligent’s
verified motion to compel arbitration and to stay all proceedings and
Diligent’s plea-to-the jurisdiction (App. 1).
a. Under the de novo standard or the abuse of discretion standard, the
Trial Court had to give full effect to, but failed to give such effect to,
the complementary delegation of plenary jurisdiction to the Arbitrator
to decide issues of arbitrability and to the Trial Court to grant
injunctive relief and even to reform the restrictive covenants as part of
the overall arbitration protocols (App. 1).
b. Under the de novo standard or the abuse of discretion standard, the
Trial Court could not decide the issues of arbitrability, including,
without limitation, the question of whether Diligent waived the right
to arbitrate in a manner inconsistent with the right to arbitrate to the
prejudice of York. (App. 1).
c. Alternatively, under the de novo standard or the abuse of discretion
standard, the Trial Court had to give full effect to, but failed to give
such effect to, the plain terms of the arbitration provision which
mandated the arbitration of all claims before the Trial Court between
Diligent and York (App. 1).
d. Alternatively, under the de novo standard or the abuse of discretion
standard, the Trial Court had to give full effect to, but failed to give
such effect to, the presumption against the waiver of the right to
arbitrate, the heightened burden to overcome such presumption, and
the threshold test that waiver of the right to arbitrate requires a
substantial invocation of the judicial process before the Trial Court,
with the express or implied intent to act inconsistently with Diligent’s
right to arbitrate to the prejudice of York (App. 1).
e. Alternatively, under the abuse of discretion standard, the Trial Court
abused its discretion when it found that Diligent had waived the right
to arbitrate (App. 1).
11
f. Alternatively, under the de novo standard or the abuse of discretion
standard, the Trial Court had to stay, but failed to stay, all proceedings
before the Trial Court until the resolution of the arbitration (App. 1).
12
No. 02-17-00416-CV
In the Court of Appeals for the Second District in Fort Worth, Texas
Diligent Texas Dedicated, LLC d/b/a Diligent Delivery Systems,
Appellant,
v.
Richard York, Elite Parts Group, LLC d/b/a Elite Parts Group
and Principle Distribution, Inc.
Appellees.
On Appeal from the 342nd Judicial District Court, Tarrant County, Texas
BRIEF OF APPELLANT
Appellant Diligent Texas Dedicated, LLC d/b/a Diligent Delivery Systems
files this accelerated, interlocutory appeal challenging the Trial Court’s failure to
compel arbitration of the claims between Diligent and York and to stay all further
proceedings in the Trial Court pending the resolution of the arbitration (App. 1).
13
Summary of the Argument
In this protection of trade secrets case, Diligent has to ask this Court to
intervene, now on an accelerated, interlocutory basis or alternative mandamus
basis, to reverse the pre-arbitration and pretrial decision by the Trial Court refusing
to compel arbitration, precluding the arbitrator from deciding all questions of
arbitrability (including, without limitation, any waiver of the right to arbitrate), and
refusing to stay all proceedings in the Trial Court pending a resolution of the
arbitration. The sanctity of the arbitration provision and the value of Diligent’s
vested property rights hang in the balance.
This Court has repeatedly charted the roadmap for the resolution of the
issues in this appeal with distinct features. Arbitration is a creature of contract and
is a favored remedy. Diligent, the former employer, and York, the former
employee, had the freedom to draft the details of the arbitration provision in the
employment agreement. The plain terms of the arbitration provision control so
Diligent and York could dictate that the arbitrator has the jurisdiction to decide
issues of arbitrability (including, without limitation, issues of waiver), Diligent
could ask for a temporary injunction in the Trial Court and also seek thereafter to
arbitrate, and the arbitrator or the Trial Court could amend the restrictions in the
employment agreement if Diligent and York so agreed (as they did so agree).
14
As a result, Diligent could sue, and did sue, York, and later Elite and PDL,
for breach of contract, tortious interference and misappropriation of trade secrets,
respectively, asking for a temporary injunction, but preserving the right to arbitrate
after the issuance or denial of a temporary injunction. Based upon those plain
terms and this Court’s guidance, the Trial Court had to rule on the request for a
temporary injunction, and then compel arbitration and stay all proceedings in the
Trial Court until the arbitration completed.
The Trial Court followed the first required step. It granted a temporary
injunction, but that process lasted almost one year.
The Trial Court then did not follow the next required steps. Rather, it denied
Diligent’s plea-to-the-jurisdiction to allow the arbitrator to decide all issues of
arbitrability as the parties had agreed. It denied Diligent’s motion to compel
arbitration and to stay the remainder of the proceedings in the Trial Court.
The Trial Court decided the jurisdictional plea and the arbitration motion
based solely upon a finding that Diligent had waived the right to arbitrate by
asking for a temporary injunction even though Diligent and York had agreed that
Diligent had the right to seek temporary injunctive relief and then arbitrate as
provided by the plain terms of the arbitration provision. The Trial Court did not
decide the jurisdictional plea or the motion to stay on the respective merits of those
15
claims. Instead, it found a waiver of the right to arbitrate even though it did not
have the power to make that finding.
Alternatively, the Trial Court found that Diligent had waived the right to
arbitrate when the Trial Court could not do so. It failed to cite to or follow the
existing presumption against any such waiver and the equally high burden on
York, Elite and PDL to try to overcome that burden. It failed to follow the
standards established by this Court to meet this heightened burden, York, Elite and
PDL had to show that Diligent unequivocally intended to waive the right to
arbitrate and that Diligent acted inconsistently with the right to arbitrate when it
asked for a temporary injunction.
Based upon its own substituted non-standard, the Trial Court found that
Diligent did not intend to arbitrate even though it acknowledged that Diligent
repeatedly said that it intended to try all arbitrable claims after the Trial Court
ruled on the temporary injunction. It found that the right to ask for a temporary
injunction was not aligned with the right to arbitrate even though it conceded that
both rights were mentioned in the same arbitration provision. It considered facts
without following the established law or the plain text of the arbitration provision.
It cannot explain how there could be waiver under the facts when reviewed under
the presumption against waiver, the higher burden to try to overcome that
presumption or the rulings of this Court.
16
The Trial Court could not rule as it did. It denied Diligent its arbitration
rights. It forces Diligent to try claims without the right to arbitrate or the right to
stay all proceedings in the Trial Court until the completion of the arbitration. The
Court should reverse the Trial Court and/or issue a writ of mandamus as necessary.
Standard of Review
This Court reviews or considers de novo the determination by the Trial
Court whether the courts or the arbitrator has the jurisdiction to decide questions of
1
arbitrability. This Court should consider this issue as part of this accelerated,
interlocutory appeal, but this Court should consider such matter under a mandamus
review if that issue may not be reviewed as part of this accelerated, interlocutory
appeal. 2
The Court applies an abuse of discretion standard of review for any
requested mandamus relief. 3 This Court should grant mandamus relief to correct a
clear abuse of discretion (i.e., when the Trial Court failed to follow established law
and/or acted in a manner that the Trial Court could not so act) and when there is no
adequate remedy by appeal. 4 There is no adequate remedy by appeal when a party
is erroneously denied its contracted-for arbitration rights (compelling arbitration
and staying the lawsuit pending the outcome of the arbitration) since the denial of
1
CMH Homes v. Perez, 340 S.W.3d 444, 447 (Tex. 2011)
2
Id. at 451-453.
3
Id.
4
Id.
17
those rights would skew the proceedings, potentially affecting the outcome of the
litigation and compromising the presentation of the lawsuit in ways unlikely to be
apparent in the appellate record. 5
Generally, this Court reviews the denial of a motion to compel arbitration
under an abuse of discretion standard as applied to the presumption against waiver
of the right to arbitrate and the accompanying higher burden of proof to show any
such waiver. 6 When, as in this case however, it is undisputed that there is a written
arbitration provision and the claims between Diligent and York fall within the
scope of that provision, this Court conducts a de novo review whether York
established the defense of waiver of the right to arbitrate. 7 The Court also conducts
such a de novo review when, as in this case, the Trial Court considered the motion
and the jurisdictional plea on the Clerk’s Record without the receipt of evidence. 8
In that case, there is no presumption of any fact-findings in favor of the rulings of
the Trial Court in the absence of Findings of Fact and Conclusions of Law. 9 If the
abuse of discretion standard applies, then the Trial Court abused its discretion
5
Id. at 452; In Re Coppola, 61 Tex. Sup. Ct. J. 170, 173 (December 15, 2017).
6
Legoland Discovery Centre (Dallas), LLC v. Superior Builders, LLC, 2017 Tex. App. LEXIS
3843 * 6 (Tex. App. – Fort Worth 2017, no pet.).
7
Legoland Discovery Centre (Dallas), LLC v. Superior Builders, LLC, 2017 Tex. App. LEXIS
3843 * 6 (Tex. App. – Fort Worth 2017, no pet.)
8
Michiana Easy Livin’ Country, Inc. v. Helton, 168 S.W.3d 777, 782 (Tex. 2005); McCullough
v. Ferrell, 2005 Tex. App. – Fort Worth 2005, no pet.)
9
Otis Elevator Co. v. Parmelee, 850 S.W.2d 179, 181 (Tex. 1993).
18
when it refused to compel arbitration under a valid and enforceable arbitration
provision. 10
The Court reviews the refusal to stay the claims between Diligent, on one
hand, and Elite and PDL, on the other hand, under an abuse of discretion
standard.11 This Court conducts a de novo review to determine whether the Trial
Court abused its discretion when it failed to stay these claims when those claims
involve issues to be decided by the arbitrator in the arbitration with York. 12
Alternatively, as noted above, this Court is to decide this appeal based upon
its de novo review without attributing any implied fact-findings to support the
13
rulings of the Trial Court. Nonetheless, Diligent requested the Trial Court to
make Findings of Fact and Conclusions of Law to preclude any argument that this
Court may infer that the Trial Court made favorable findings that the Trial Court
did not make because Diligent did not request the Trial Court to make such fact-
findings and legal-conclusions. 14
Alternatively, if the traditional evidentiary standards of review apply to the
evidence in the Clerk’s Record (which Diligent asserts they do not), then there is
no evidence if a reasonable fact-finder could not find a fact based upon the
10
Geo-Tech Foundation Repair v. Leggett, 2017 Tex. App. LEXIS 2765 * 5 (Tex. App. – Fort
Worth 2017, no pet.).
11
In Re Merrill Lynch Trust Co., FSB, 235 S.W.3d 185, 195-196 (Tex. 2007).
12
Id.
13
See discussion at footnote 8.
14
Parmelee, 850 S.W.2d at 181.
19
undisputed evidence, and the facts supporting the fact-finding as reviewed under
the presumption against waiver of the right to arbitrate and the accompanying
higher burden of proof to show any such waiver. There is insufficient evidence if
the fact-finding is so against the great weight of the credible evidence that it is
manifestly unjust or wrong as reviewed under the presumption against waiver of
the right to arbitrate and the accompanying higher burden of proof to show any
such waiver. 15
Background Facts/Course of Proceedings
The Arbitration Provision in the Agreement Between Diligent and York
Around October 27, 2015, Diligent, as the Employer, and York, as the
Employee, entered into the “Diligent Delivery Systems Employee Confidentiality
and Business Preservation Agreement” (the “Agreement”) (App. 3). The
Agreement defined expansive proprietary “Confidential Information” (¶ 2) which
York was not to divulge or use to the detriment of Diligent (¶ 3) and which York
was to hold in the strictest confidence (¶ 3)(App. 3). Not surprisingly, for two
years after the end of his employment, York further could not solicit Diligent’s
customers (¶ 5), could not associate in any manner with any business venture
offering the same or similar services as Diligent (¶ 5), could not compete with
15
City of Keller v. Wilson, 168 S.W.3d 802, 814-815 (Tex. 2004); Bryan v. Gordon, 384 S.W.3d
908, 912 (Tex. App. – Houston [14th Dist.] 2012, no pet.)
20
Diligent (¶ 5), could not poach employees of Diligent (¶ 5), and had to notify
Diligent of any new employer of York (¶ 11)(App. 3).
The Agreement, in turn, stated:
This Agreement and its interpretation and enforcement shall be
governed by the laws of the State of Texas without the application of
its choice of law rules. If there is any dispute about or involving
[York] and [Diligent], both [York] and [Diligent] agree to personal
jurisdiction and venue in the state and federal courts of the United
States in Harris County, Texas. Either [York] or [Diligent] may
demand any dispute between [York] and [Diligent] must be
settled by arbitration utilizing the dispute resolution procedures
of the American Arbitration Association (AAA) (Commercial
Rules) only in Harris County, Texas; provided, however, that the
foregoing shall not prevent [Diligent] from seeking injunctive
relief in a court of competent jurisdiction ….
(¶ 9)(App. 3)(emphasis added).
The right to arbitrate integrated one of the remedies granted under the
Agreement to enforce the restrictive covenants protecting the Confidential
Information of Diligent, namely, the right to seek a temporary injunction in a court
of competent jurisdiction (¶¶ 6 and 9) (App. 3). The complementary rights of
arbitration and judicial injunction also included the following right of Diligent
under the Agreement: “… [i]f any of the above-noted restrictions are ever
determined as of the date of enforcement [by a temporary injunction] to be
unlawful or unreasonable, then in such event, the covenants hereinabove which
restrict [York’s] activities shall be amended, by the Court or by the Arbitrator
having jurisdiction over the parties’ dispute, to provide that such restrictions shall
21
apply for the maximum time and geographic scope permitted by applicable law.”
(¶6)(App. 3) (emphasis added).
In the Agreement, Diligent and York, as they could as parties to their
arbitration provision, established the jurisdiction of the courts to grant temporary
injunctive relief and to amend the restrictive covenants (¶¶ 6 and 9)(App. 3) and
the jurisdiction of the arbitrator to determine all other issues of arbitrability and the
dispute between Diligent and York (¶ 9)(App.3)(Rule R-7 of the AAA Commercial
Rules)(App. 4). More importantly, they could establish the right to seek a
temporary injunction and to enforce the restrictive covenants as consistent with and
complementary to the right to arbitrate without having to say more than they did.
(Id.)
York was a Party to Other Agreements
Prior to the execution of the Agreement, York had signed written
employment agreements with restrictive covenants protecting trade secrets with
Noble Logistics, Inc. which became NDLI, Inc. (1 CR 489-490, 513-530).
Diligent is the successor to NDLI, Inc. (Id.)
York’s Post-Employment Conduct Requires Diligent to File Suit to Seek
Temporary Injunctive Relief as Part of the Consistent and Complementary
Rights to Seek Temporary Injunctive Relief and the Right to Arbitrate.
On December 8, 2016, Diligent sued York for breach of the restrictive
covenants of the Agreement and the NDLI Contract, and misappropriation of trade
22
secrets in support of the request for the issuance of a temporary injunction (1 CR 8,
11-15). Diligent expressly stated:
 that Diligent filed the petition with its intention not to prejudice Diligent’s
right to assert its claims through arbitration,” (1 CR 8); and
 that Diligent intends to compel arbitration upon entry of a temporary
injunction and will seek to recover all remedies asserted herein, excluding a
temporary injunction, in the arbitration proceedings.” (1 CR 13) (emphasis
added).
Diligent invoked its right to file suit against York consistent with arbitrating the
ultimate claims (¶ 9)(App. 3).
Diligent’s Journey Leading to Entry of the Temporary Injunction Would
Last Almost One Whole Year.
Beginning on December 8, 2016 (1 CR 8) and ending with the entry of the
temporary injunction against York on November 9, 2017 (App. 2), Diligent sought
the entry of that temporary injunction (1 CR 8, 37, 92, 334, 487).
During that time:
1. Diligent amended its petition four times, ultimately adding Elite and PDL (1
CR 40-4, 96-100, 343-349, 487, 341-349, 495-504). In each petition,
Diligent reaffirmed that Diligent acted without prejudice to the right to
arbitrate and that Diligent would move to compel after entry of a
temporary injunction (1 CR 37-43, 92, 98-99, 334, 343-345, 347, 487,
495-504);
2. Diligent pursued the temporary injunction (e.g. Id.; 1 CR 17, 24, 35-37, 43,
109, 129, 139-174, 205, 209, 216-307, 379, 394-395);
3. Diligent deposed York (1 CR 88-91). A representative of Diligent was
deposed (1 CR 67-90). Disclosure requests and written discovery were
exchanged between Diligent and York (2 CR 595; 3 CR 1022-1023);
23
4. The parties agreed to a form of an agreed protective order (1 CR 24, 35, 36);
5. York, Elite and PDL answered and repeatedly challenged the issuance of the
temporary injunction and even the form of the temporary injunction before,
during and after each hearing before the Trial Court (e.g. 1 CR 16, 18, 21,
50, 67-91, 107, 126, 203, 322, 325; 2CR 560);
6. On March 23, 2017, the Trial Court conducted a hearing on the application
for a temporary injunction, received arguments and evidence, orally notified
all counsel of the Trial Court’s evaluation of the evidence, took the decision
under advisement, and allowed the parties to try to reach some agreement (3-
23-17 2 RR 1-93 and 89-93);
7. Thereafter, York, Elite and PDL filed respective repeated motions for
summary judgment challenging the claims which underpinned the
application for temporary injunction (1 CR 96, 192; 2 CR 542; 585, 611,
618). Diligent responded (e.g. 1 CR 379, 394; 2 CR 825, 1005);
8. On June 23, 2017, the Court convened a hearing on the application for
issuance of a temporary injunction (6-23-17 3 RR 1-23). The Court made a
rendition of a temporary injunction on the record and asked for a written
form of the order to sign. (6-23-17 3 RR at 4-10);
9. On July 12, 2017, July 14, 2017, July 21, 2017 and August 15, 2017,
respectively, York, Elite and PDL would not agree to the form of a written
temporary injunction order (2 CR 566-584, 590-592, 616-618). York, Elite
and PDL, on one hand, and Diligent, on the other hand, filed competing
forms of a written temporary injunction order (Id.) Both sides respectively
objected, in writing, to the proposed form of written temporary injunction
submitted by the opposing side (Id.);
10. The proceedings were interrupted between August 25, 2017 and most of
September, 2017, due to the impact of Hurricane Harvey shutting down the
offices of counsel for Diligent (2 CR 846); and
11. Diligent set a hearing for October 26, 2017 for the Trial Court to resolve the
differences over the form of the written temporary injunction order (10-26-
17 4 RR 1.)
24
On October 10, 2017, Diligent moved to compel arbitration as it stated it
would do once the entry of the temporary judgment was imminent and as York,
Elite and PDL started to push their summary judgment motions (2 CR 714; 1 CR
37, 43, 92,98, 334, 346, 487, 501). Diligent moved to compel arbitration of the
claims between Diligent and York. (2 CR 714-725). Diligent also moved to abate
the claims between Diligent, on one hand, and Elite and PDL, on the other hand,
pending the resolution of the arbitration (2 CR 726-728). In an amended summary
judgment response, on October 19, 2017, Diligent again moved to abate the Trial
Court’s consideration of any summary judgment motions until the completion of
the arbitration (2 CR 848).
On October 24, 2017, Diligent filed a verified plea-to-the-jurisdiction (2
CR 987). Diligent asked the Trial Court to follow the allocation of jurisdiction that
Diligent and York had crafted in the arbitration, temporary injunction and
restrictive covenant provisions in the Agreement (2CR 987, ¶¶ 6 and 9 at 993-994).
On October 25, 2017, York and Elite responded to the motion to compel
arbitration and to abate and the jurisdictional plea (3 CR 1018). York and Elite
claimed that Diligent had waived the right to arbitrate (3 CR 1018-1021). On the
same day, Diligent replied to York and Elite’s response (3 CR 1024-1028).
25
On October 26, 2017, the Court deferred the hearing on the pending motions
for summary judgment until it ruled on the motion to compel and abate and the
jurisdictional plea. (10-26-17 4 RR 20-25).
Between October 31, 2017 and November 9, 2017, Elite moved to sever the
claims between Diligent and Elite from the claims between Diligent and York
which are covered by the arbitration provisions, and PDL moved to dismiss or
sever the claims between Diligent and PDL (3 CR 1072). The parties exchanged
pleadings on the pending motions and jurisdictional plea (2 CR 987; 3 CR 1018,
1024, 1029, 1041, 1072, 1081, 1089).
On November 9, 2017, the Trial Court convened a hearing. (11-9-17 5 RR 4-
45). The Trial Court signed the temporary injunction for entry (App. 2; 3 CR
1094-1096). It denied the motions and the jurisdictional plea solely based upon its
finding that Diligent waived the right to arbitrate (10-26-17 RR at 30). The Trial
Court also signed an order denying the motion to compel arbitration and to abate
and the jurisdictional plea (App. 1; 3 CR 1097).
This Accelerated, Interlocutory Appeal Ensued
On November 20, 2017, Diligent filed a Request for Findings of Fact and
Conclusions of Law (3 CR 1106). On December 13, 2017, Diligent filed a
Reminder for Making Findings of Fact and Conclusions of Law. (App. 5.)
26
On November 22, 2017, Diligent perfected this accelerated, interlocutory
appeal (3 CR 1110-1117). This appeal ensued.
On November 16, 2017, Diligent posted the bond for the temporary
injunction. On November 29, 2017, Diligent requested the issuance of a precept so
that the entered temporary injunction could be served on all parties. On December
1, 2017, December 7, 2017, and December 7, 2017, the precept and the temporary
injunction were respectively served on PDL, York and Elite, as Diligent seeks to
enforce the temporary injunction as signed by the Trial Court. (App. 6, 7 and 8.)
Analysis Under All Points of Error
Introduction
Under its review, this Court is to apply tenured principles which this Court
has been in the forefront in developing. This Court is not writing on a blank slate.
Based upon those principles, this Court must reverse the Trial Court.
Legal Framework
Jurisdiction
The Court has to first determine whether it (or the Trial Court) or the
16
arbitrator has jurisdiction to consider all issues of arbitrability. As in this case,
the parties by contract can allocate the jurisdiction between the courts and the
16
Haddock v. Quinn, 287 S.W.3d 158, 171-173 (Tex. App. – Fort Worth 2009, pet. denied).
27
17
arbitrator, and did so. As in this case, this can be accomplished by the terms of
the Agreement containing the arbitration provision and the incorporation of the
Commercial Rules of the American Arbitration Association. 18
Arbitrability Issue One (if the Courts Have Jurisdiction): Enforceable
Arbitration Provision
Diligent, as the party seeking to arbitrate, had to establish the existence of a
written arbitration provision and that the disputes to be arbitrated fall within the
scope of that provision.19 Texas law determines the plain meaning of the arbitration
provision. 20
Arbitrability Issue Two (if the Courts Have Jurisdiction): Defenses Including
Waiver
Once Diligent shows that there are claims subject to the arbitration
provision, then York has to show a defense to arbitration. 21 Waiver of the right to
22
arbitrate is such a defense. In this case, Diligent is not seeking to compel Elite
and PDL to arbitrate since their dispute is not subject to arbitration, as opposed to
its dispute with York. Therefore, whatever conduct Diligent took regarding its
17
Id.
18
Id.; Dow Roofing Systems, LLC v. Great Commission Baptist Church & Chamberlin Dallas,
LLC, 2017 Tex. App. LEXIS 7370 ** 7-8, 17-20 (Tex. App. – Fort Worth 2017, pet. for review
filed); Super Starr Int’l, LLC v. Fresh Tex Produce, LLC, 2017 Tex. App. LEXIS 8728 ** 6-9
(Tex. App. – Corpus Christi 2017, no pet.)
19
Haddock, 287 S.W.3d at 169.
20
Id.
21
Id.
22
Legoland, 2017 Tex. App. LEXIS 3843 at * 7.
28
dispute with Elite and PDL is not relevant to the question of whether Diligent
waived its arbitration rights with York. 23
When, as in this case, York, Elite and PDL claim waiver based upon
Diligent’s participation in the lawsuit, York alone has to show that Diligent with
regard to York “(1) … substantially invoked the judicial process – engaged in
conduct inconsistent with a claimed right to compel arbitration and (2) the
inconsistent conduct caused York to suffer detriment or prejudice.”24 Prejudice,
in turn, means inherent unfairness in terms of delay, expense or damage to a
party’s legal position that occurs when the party’s opponent forces it to litigate an
25
issue and later seeks to arbitrate that same issue. Waiver may only be based
upon unequivocal conduct with the actual intention to waive the right to
arbitrate. 26
“Because the law strongly favors arbitration, [the burden of York] to prove
the defense is a high one.” 27 “So high, in fact, that appellate courts seldom find an
23
RSL Funding, LLC v. Pippins, 499 S.W.3d 423, 431 (Tex. 2016).
24
Legoland, 2017 Tex. App. LEXIS 3843 at * 7 (emphasis added); Leggett, 2017 Tex. App.
LEXIS 2765 at **12-13.
25
Leggett, 2017 Tex. App. LEXIS 2765 at **13-14.
26
Dargahi v. Handa, 2017 Tex. App. LEXIS 10373 ** 13-14 (Tex. App. – Austin 2017, no pet).
27
Legoland, 2017 Tex. App. LEXIS 3843 at * 7.
29
28
implied waiver through litigation conduct.” Consequently, there is a strong
presumption against waiver of the right to arbitrate. 29
Giving effect to this presumption and the heightened burden of proof, this
Court is to consider the totality of the circumstances. 30 This consideration may be
guided by several factors, 31 but none of the factors is dispositive. 32
It must be noted that the parties try to conflate Diligent’s litigation conduct
with respect to York with Diligent’s litigation conduct with respect to Elite and
PDL; however, Diligent’s conduct with Elite and PDL is not relevant as these
disputes are non-arbitrable disputes. Again, whatever conduct Diligent took
regarding its dispute with Elite and PDL is not relevant to the question of whether
Diligent waived its arbitration rights with York.
When determining whether litigation conduct is indeed inconsistent with the
right to arbitrate, the courts have found that the following conduct is not
inconsistent with the right to arbitrate:
 Filing suit; 33
28
Legoland, 2017 Tex. App. LEXIS 3843 at * 7.
29
Legoland, 2017 Tex. App. LEXIS 3843 at * 7; Leggett, 2017 Tex. App. LEXIS 2765 at * 11;
BBVA Compass Inv. Solutions, Inc. v. Brooks, 456 S.W.3d 771,718 (Tex. App. – Fort Worth
2017, no pet.)
30
Legoland, 2017 Tex. App. LEXIS 3843 at * 8.
31
Is Diligent the plaintiff or a defendant? How long did Diligent wait before seeking arbitration?
How much discovery or pretrial activity did Diligent conduct before seeking arbitration? Did
Diligent ask the Trial Court to dispose of its affirmative claims on the merits? How much time
and expense have the parties incurred? Is the discovery conducted unavailable or useful in
arbitration?
32
Legoland, 2017 Tex. App. LEXIS 3843 at * 8.
30
 Serving requests for disclosure of facts; 34
 Serving basic written discovery; 35
 Noticing or taking depositions; 36
 Pursuing settlement; 37
 Agreeing to a scheduling order; 38
 Requesting discovery, noticing depositions and agreeing to a trial setting; 39
 Incurring attorney’s fees to pursue claims against the party asserting
arbitration; 40
 Seeking discovery sanctions or motions to compel discovery; 41
 Seeking a temporary or preliminary injunction; 42
 Self-inflicted costs, expenses and fees incurred by the parties because a party
opposing arbitration filed a motion for summary judgment and there was
resulting discovery, motions, responses and other proceedings; 43
 Evidence just of attorney’s fees incurred by a party opposing arbitration; 44
 Mere delay; 45
33
Leggett, 2017 Tex. App. LEXIS 2765 at ** 11-12.
34
Legoland, 2017 Tex. App. LEXIS 3843 at * 8.
35
Legoland, 2017 Tex. App. LEXIS 3843 at * 8.
36
Leggett, 2017 Tex. App. LEXIS 2765 at **11-12.
37
Legoland, 2017 Tex. App. LEXIS 3843 at * 9.
38
Legoland, 2017 Tex. App. LEXIS 3843 at * 9.
39
Pippins, 499 S.W.3d at 430-431.
40
Legoland, 2017 Tex. App. LEXIS 3843 at ** 9-10.
41
Handa, 2017 Tex. App. LEXIS at **17-20.
42
Id.; Joseph Chris Personnel Services, Inc. v. Rossi, 249 Fed. Appx. 988, 991-992 (5th Cir.
2007); PMS Distributing Co. v. Huber & Suhner, A.G., 863 F.2d 639, 641-641 (9th Cir. 1988);
Menna v. Romero, 48 S.W.3d 247, 252-253 (Tex. App. San Antonio 2001, no pet.)
43
Id.
44
Id.
31
 Delays of eight months or even two years. 46
When, as in this case, the Federal Arbitration Act and the Texas General
Arbitration Act may apply, this Court looks to both Texas and federal decisions. 47
Any doubts regarding waiver are resolved in favor of arbitration. 48
Stay of Interrelated Non-Arbitrated Claims
Once the Court finds that there has been no waiver, then the Court has to
decide whether the claims between Diligent, on one hand, and Elite and PDL, on
the other hand, have to be stayed pending the resolution of the arbitration of the
arbitrated claims between Diligent and York. 49 The Court has to stay the Diligent-
Elite/PDL claims when those claims involve issues that will be decided in the
50
Diligent-York arbitration. Moreover, the exercise of the stay is an exercise of
the judicial power to determine when a lawsuit is tried and does not equate to
prejudice to Elite or PDL. 51
Application of the Law to the Facts
Introduction
The Trial Court stated,
45
Leggett, 2017 Tex. App. LEXIS 2765 at ** 12-13.
46
Leggett, 2017 Tex. App. LEXIS 2765 at **11-12.
47
Legoland, 2017 Tex. App. LEXIS 3843 at * 5 at fn. 4.
48
Leggett, 2017 Tex. App. LEXIS 2765 at **13-14.
49
Merrill Lynch, 235 S.W.3d at 195-196.
50
Id.
51
Id.
32
… [a]nd so the Court’s going to deny the motion to compel arbitration
[which included the motion to stay] and the plea to the jurisdiction on
the grounds that Diligent has substantially invoked the judicial
process by seeking a temporary injunction against Mr. York and
obtaining, at least, from a verbal order from the Court’s bench, subject
to the entry of a written order, injunctive relief and doing so before it
ever sought to invoke the right to arbitration under the circumstances,
even though from the very beginning, it clearly knew it had the right
to arbitration at that point. So it does look like you are trying to get a
second bite at the apple, and the Court is going to find that that is
inappropriate under the circumstances. So, I’ll deny both the motion
to compel [which included the motion to stay] and the plea to the
jurisdiction under those circumstances (11-9-17 5 RR at 30-31).
In doing so, the Trial Court identified the pervasive reversible errors underpinning
this ruling. It did not consider the jurisdictional plea and the motion to stay on
their respective merits. It found a waiver of the right to arbitrate that could not
exist under the legal framework. It ignored Diligent’s straightforward statement in
its Original Petition at § 7.06, and in each amended petition, that it would seek to
compel arbitration once it had obtained a temporary injunction, and that it would
not seek temporary injunctive relief in the arbitration; this is exactly what Diligent
did in the first instance and will not do in the second. (1 CR 13.) Two bites at the
apple is specifically disclaimed by Diligent.
Jurisdiction and the Motion to Compel Arbitration
52
The Trial Court had to determine its jurisdiction relative to the arbitrator.
The public policy supporting and favoring arbitration vested Diligent and York
52
Haddock, 287 S.W.3d at 171-173.
33
with the vested right to allocate in the Agreement the respective jurisdiction among
the courts and the arbitrator relative to the arbitration proceedings. 53
To give effect to those plain terms, the Trial Court had to determine whether
there was an arbitration provision that covered the claims between Diligent and
54
York. Having made that determination, then the Trial Court had to determine
what issues it could still determine, if any, and what issues the arbitrator was to
decide. 55
The Trial Court found that there was an arbitration provision that covered
the claims between Diligent and York. It had to do so, as there is no dispute that
such a provision exists.
The Trial Court then did not directly determine its jurisdiction relative to the
arbitrator’s jurisdiction. (11-9-17 5 RR 21-31). There is no discussion in the
record by the Trial Court in this regard. (Id.) The Trial Court simply denied the
arbitration jurisdictional plea because the Trial Court found that Diligent had
waived the right to arbitrate, even though the Trial Court lacked the jurisdiction to
make that finding (11-9-17 5 RR at 30-31).
53
Id; Rio Grande Xarin, II, Ltd. v. Wolverine Robstown, LP, 2010 Tex. App. LEXIS 5189 ** 22-
23 (Tex. App. – Corpus Christi 2010, pet. dism’d.).
54
Id.
55
Id.
34
The Trial Court, thus, abused its discretion when it did not give effect to
those plain terms. 56 It failed to follow established law. 57 It acted in a manner that
it could not act for which there is no available appeal.58
Had the Trial Court not so abused its discretion, then the Trial Court would
have given effect to the allocation of jurisdiction established by Diligent and York.
The Court could decide whether to issue a temporary injunction and amend the
restrictive covenants in the Agreement. The arbitrator would, as vested under Rule
R-7 of the AAA Commercial Arbitration Rules, decide all issues of arbitrability
and the merits of these claims unless the arbitrator finds that Diligent had waived
the right to arbitrate.
The Trial Court had no choice but to grant the jurisdictional plea after the
Trial Court issued the temporary injunction. The Trial Court should have
compelled arbitration so the arbitrator could decide all issues of arbitrability and
the merits of the claims unless the arbitrator would find that Diligent had waived
the right to arbitrate. However, this was the arbitrator’s call. The Trial Court
trampled on the arbitrator’s agreed-to jurisdiction, and thus, reversibly erred.
There Could Be No Waiver if the Trial Court Could Consider that Issue
56
See cases at footnotes 1-5, 13-14.
57
Id.
58
Id.
35
Alternatively, the Trial Court reversibly erred when it denied the motion to
compel arbitration after it was conceded that there was an arbitration provision that
covered the claims between Diligent and York. Diligent and York agreed that the
arbitrator was to decide waiver and the Trial Court was not authorized to make the
waiver call. Instead, the Trial Court decided waiver, thus impermissibly thwarting
York and Diligent’s contract. It must be kept in mind at all times that arbitration
and its scope is reserved to the parties to the contract containing the arbitration
provision.
Arbitration is a favored remedy. 59 Public policy mandates that arbitration be
compelled when, as in this case, there is an arbitration provision that admittedly
covers the claims between Diligent and York. 60
The Trial Court, however, found that Diligent had waived the right to
arbitrate. There are several reasons for this reversible error.
First, the Trial Court did not explain how it followed the basic legal
framework for finding a waiver of the right to arbitrate. (11-9-17 5 RR at 21-31).
The Trial Court did not reference the presumption against waiver and the
heightened burden to try to overcome that presumption. (Id.) It did not determine
or explain how it removed from the exclusive jurisdiction of the arbitrator the right
to determine waiver. It did not follow established law (Id.)
59
Legoland, 2017 Tex. App. LEXIS 3843 at **6-7; Haddock, 287 S.W.3d at 169.
60
Id.
36
Second, the Trial Court substituted its own test for the existing legal
framework. (11-9-17 5 RR at 21-31). The fundamental concept of the legal
framework is that Diligent had to act unequivocally with the intent to waive the
right to arbitrate by acting in a manner inconsistent with the right to arbitrate such
that any such inconsistent conduct was prejudicial to York. 61 The Trial Court does
not cite these concepts and discuss how Diligent acted unequivocally, with intent,
inconsistently and with prejudice. (Id.) Rather, the Trial Court simply looked to
find whether Diligent participated in the litigation. (Id.) It did not follow
established law. (Id.)
Third, the Trial Court could not show that Diligent acted with some intent to
waive the right to arbitrate when Diligent stated in its Original Petition and the
subsequent amended petitions that Diligent filed the petitions without prejudice to
the right to arbitrate and with the intent to move to compel to arbitrate once the
Trial Court issued a temporary injunction. (11-9-17 5 RR at 21-31). The Trial
Court could not dispute that this is exactly what Diligent did. (Id.) The Trial Court
does not show and cannot show how Diligent intended to waive the right to
arbitrate when Diligent expressed the exact opposite intent not to do so. (Id.)
Fourth, the Trial Court could not demonstrate that Diligent’s seeking the
issuance of a temporary injunction was inconsistent with the right to arbitrate when
Legoland, 2017 Tex. App. LEXIS 3843 at * 7 (emphasis added); Leggett, 2017 Tex. App.
61
LEXIS 2765 at **12-13.
37
the parties’ contract contained qualifying language expressly providing that
Diligent could seek such a temporary injunction, and having done so, proceed to
arbitration. (11-9-17 5 RR at 21-31). The Trial Court had to give effect to the plain
terms of the Agreement which created consistent temporary injunction and
arbitration rights.62 The Trial Court noted that the text of the arbitration provision
even contemplated Diligent asking for a temporary injunction. (10-23-17 RR at
25). It never explained why these rights are not consistent when Diligent and York
agreed that they were. (10-23-17 RR at 21-31). The Trial Court noted that it could
be implied that the right to arbitrate and the right to seek a temporary injunction
were consistent, but then never explained and cannot explain how the Trial Court
found them to be incompatible under the presumption against waiver and the
higher burden to overcome that presumption. (11-9-17 5 RR at 25 and 23-25). The
Trial Court could not separate the right to seek injunctive relief from the text of the
arbitration provision which provided for explicit consistent remedies. (11-9-17 5
RR 21-31)
Fifth, the Trial Court gave controlling weight to the fact that the plain terms
of the Agreement did not expressly state that the right to seek a temporary
injunction was not a waiver of the right to arbitrate. (11-9-17 5 RR at 22-25). The
Trial Court did not explain, though, how that could exist when the injunctive
62
Haddock, 287 S.W.3d at 171-173.
38
qualifying language was interposed into the middle of the arbitration provision and
in light of the strong presumption against waiving the right to arbitrate and the
higher burden of proof. (Id.) It cannot. The issue is whether the temporary
injunction and arbitration rights may be consistently pursued and not whether the
word “waiver” is found in the arbitration provision when providing for the
complementary right to seek a temporary injunction.
Sixth, the Trial Court gave equally controlling weight to the fact that the
Texas General Arbitration Act provides limited relief by temporary injunction. (11-
9-17 5 RR at 23-24). The Trial Court does not address the Federal Arbitration Act
which equally applies to the arbitration provision and permits a party seeking
63
arbitration to seek temporary injunctive relief. (Id.) The Trial Court’s ruling
wholly conflicts with the federal decisions allowing Diligent to seek a temporary
injunction and not waive the right to arbitrate. 64 There should be no conflict with
these federal decisions which like the Texas decisions should form a seamless
body of law.65 It also ignores that the parties have the freedom of contract to craft
consistent or complementary arbitration and temporary injunction remedies as
Diligent and York did in the Agreement. (Id.) It did not follow established law.
(Id.)
63
See footnote 42.
64
Id.
65
McQueen v. Chevron Corp., 2017 U.S. Dist. LEXIS 207705 * 4-5 (N.D. Cal. December 18,
2017.)
39
Seventh, the Trial Court expressed concern that Diligent sought two bites at
the apple. (11-9-17 5 RR at 29-31). The Trial Court issued a temporary injunction
which Diligent then served and seeks to enforce. (App. 2, 7, 8, 9). The Trial Court
cited to no evidence that Diligent will ask the arbitrator to reverse or modify the
same temporary injunction that Diligent seeks to enforce. (11-9-17 5 RR 21-31).
The evidence is to the contrary. (App. 2, 7, 8, 9). First, it cannot be ignored that if
there was some concern over Diligent’s getting two bites at the apple, there was a
simple and time-tested means to see if that was Diligent’s intent, namely, to ask its
trial counsel who was standing before him. Trial judges do that every day. Second,
there is the specific disclaimer in all its petitions and amended petitions where
Diligent represents to the court that it has no intention of trying to obtain a
different temporary injunction from the arbitrator.
Eighth, the Trial Court correctly notes that filing the lawsuit was not a
waiver of the right to arbitrate (11-9-17 5 RR at 21), but it nonetheless infers that
somehow filing a lawsuit acknowledging the existence of the right to arbitrate
should be held against Diligent since Diligent did not invoke the right to arbitrate
until October 10, 2017. (10-23-17 RR at 21, 26). The Trial Court does not explain
and cannot explain how it reached its inference when even the Trial Court
acknowledged that the arbitration provision contained qualifying language that
permitted asking for a temporary injunction, and that Diligent invoked the right to
40
arbitrate when it filed its Original Petition and repeated on multiple occasions that
it would arbitrate the merits of the claims once the temporary injunction was
entered. (11-9-17 5 RR at 25 – 26). There is no basis under the presumption against
waiver of the right to arbitrate and the higher burden to overcome it to make the
inference that the Trial Court did. That is especially true when the text of the
arbitration provision permitted Diligent to file its petitions with its statement of
intent ultimately to arbitrate.
Ninth, the Trial Court assumed that the temporary injunction is an
adjudication on the merits. (11-9-17 5 RR at 27). That is legally wrong. The
issuance of a temporary injunction is not an adjudication on the merits.66 Diligent
also stated in all of its petitions that it would ask the arbitrator to decide the merits
of the claims (1 CR 37-43, 92, 98-99, 334, 343-345, 347, 487, 495-504) The Trial
Court did not follow the law. (Id.)
The Trial Court also surmised that the discovery went to the merits of the
claims, yet the Trial Court also conceded that it had to decide whether Diligent
could prevail on the merits in order to grant the temporary injunction. (11-9-17 5
RR at 27-29). The Trial Court does not explain and cannot explain how its ruling
on the temporary injunction represents a ruling on the merits when it only had to
66
EMS USA, Inc. v. Shary, 309 S.W.3d 653, 657 (Tex. App. – Dallas 2010, no pet.)
41
find, and did find, that Diligent probably could prevail on the merits at arbitration.
(Id.)
In addition, the Trial Court suggests that none of the discovery pertained to
questions of arbitrability or jurisdiction and therefore represents discovery on the
merits, crossing the line and comprising evidence of a waiver of the right to
arbitrate. (11-9-17 5 RR at 27). The Trial Court does not explain and cannot
explain a basis for this suggestion. The Trial Court admits that the discovery
related to the claims which formed the basis of the requested temporary injunction
which the arbitration provision contemplated could be sought consistently with the
right to arbitrate. (11-9-17 5 RR at 27-29). Thus, that discovery is consistent with
the right to arbitrate. The Trial Court did not discuss this point. (Id.) Moreover,
discovery even on the merits, as a matter of law, is not a waiver if the discovery
relates to discovery that would be conducted in the arbitration. The Trial Court did
not address this legal point. (Id.) Nor did it make a distinction regarding discovery
that occurred between Diligent and York, which is the only pertinent discovery in
this case, and that between Diligent and Elite/PDL, which is not relevant to the
alleged waiver of the arbitration with York.67
Tenth, the Trial Court suggests that its reformation of the restrictive
covenants is inconsistent with the powers of the arbitration. (11-9-17 5 RR at 21-
67
Pippins, 499 S.W.3d at 431
42
22, 29-31). It does not explain and cannot explain how that can be the case when
the plain terms of the Agreement vest the Trial Court with such a power consistent
with the powers granted to the arbitrator and the Covenants Not to Compete statute
requires reformation, if deemed necessary. (¶6)(App. 3)
The Trial Court may have impliedly adopted the suggestion from York, Elite
and PDL that asking for statutory reformation of a non-competition covenant is a
final adjudication even when it is done as part of a temporary injunction
proceeding. (e.g. 3 CR 1030). This Court has rejected that very argument. 68 The
Trial Court did not follow established law if it accepted the suggestion from York,
Elite and PDL.
Eleventh, the Trial Court mistakenly avers that Diligent did not invoke the
right to arbitrate until October 10, 2017. (11-9-17 5 at 21). It does not discuss that
Diligent noted that it would move to compel arbitration after the issuance of a
temporary injunction in the very first filed petition and in each subsequent petition.
(11-9-17 5 RR at 21-31)(1 CR 37-43, 92, 98-99, 334, 343-345, 347, 487, 495-504).
It does not explain and cannot explain how that is a delay in noting Diligent’s
intentions. (Id.) It also does not discuss the details of what happened regarding the
temporary injunction. (Id.) It cannot dispute that it took almost one full year for the
Trial Court to sign the temporary injunction. (Id.) During that time, there were
68
Tranter, Inc. v. Liss, 2014 Tex. App. LEXIS 3398 * 4 (Tex. App. – Fort Worth 2017, no pet.).
43
hearings devoted to granting the temporary injunction, to the form of the
injunction, and finally, hearings on getting the temporary injunction signed and to
compel arbitration. Diligent said that it would move to compel arbitration after the
process would lead to the issuance of a temporary injunction (1 CR 37-43, 92, 98-
99, 334, 343-345, 347, 487, 495-504). That is what happened.
Twelfth, the Trial Court does not explain how Elite or PDL can claim any
prejudice from any alleged conduct by Diligent that is inconsistent with York’s
right to arbitrate. (11-9-17 5 RR at 21-31). The claims between Diligent, on one
hand, and Elite and PDL, on the other hand, are not covered by the arbitration
provision. Those claims are to be tried after the arbitration with York. Thusly,
Elite and PDL cannot complain about discovery, pleadings, motions or attorney’s
fees incurred in the lawsuit which they would have had to participate in or incur as
parties to that same lawsuit. Elite and PDL can only complain that the lawsuit will
be stayed, but that is a result that is statutorily mandated for judicial economy and
cannot be prejudice.69
Thirteenth, the Trial Court does not address that York, Elite and PDL cannot
file motions for summary judgment, conduct discovery or otherwise engage in the
69
Merrill Lynch, 235 S.W.3d at 195-196; 9 U.S.C.A. § 3; TEX. CIV. PRAC. AND REM CODE §§
171.025 and 172.174.
44
lawsuit, and then claim that they have been injured by their own self-inflicted
wounds. (11-9-17 5 RR at 21-31).70
Fourteenth, the Trial Court does not explain and cannot explain why the
conduct by Diligent in the lawsuit can constitute a waiver of the right to arbitrate
when the same conduct has already been found not to be such a waiver. (11-9-17-
5 RR at 21-31). 71
Fifteenth, the Trial Court does not explain and cannot explain why all of the
disclosure requests and discovery served on York could prejudice York when it
would be available in the arbitration and will be used in the arbitration. (11-9-17 5
RR at 21-31).72
Sixteenth, the Trial Court relied almost exclusively on the decision in
Holmes v. Graves 73 to support its finding of waiver. (11-9-17 5 RR at 25-31). The
Trial Court does not explain and cannot explain how it overlooked the
distinguishing facts and law of that case. It could not do so.
The arbitration provision in Holmes did not contain the qualifying language
found in the Agreement that York agreed to that permitted Diligent to consistently
pursue arbitration and a temporary injunction. Holmes was based upon a different
text, and this key difference underpinned the holding that “… [w]e reject [the]
70
Handa, 2017 Tex. App. LEXIS at **17-20
71
See discussion at footnotes 33-46.
72
Pippins, 499 S.W.3d at 430-431.
73
2013 Tex. App. LEXIS 14816 (Tex. App. – Houston [1st Dist.] 2013, no pet).
45
contention that requesting injunctive relief from the trial court was not a specific or
deliberate act that was inconsistent with the right to arbitrate because injunctive
relief is not permitted under the applicable rules of arbitration.” 74 Diligent did not
first mention arbitration until after an adverse ruling. Holmes was based upon such
a change in position when Holmes stated that “… [t]hey moved to compel
arbitration only after being denied merit-based injunctive relief.” 75 Diligent is not
trying to re-adjudicate or modify the temporary injunction. Holmes was based
76
upon such an attempt. The Trial Court wrongly followed Holmes because the
Trial Court failed to apply the basic legal framework. Had it done so, it would not
have followed Holmes.
The arbitration agreement in Diligent’s contract with York had qualifying
language reserving to the Trial Court jurisdiction to rule on the request for a
temporary injunction. The Trial Court stood that limited reservation on its head by
saying it had the effect of waiving the arbitration provision.
There Are No Additional Bases to Support the Trial Court’s Rulings
The foregoing analysis demonstrates the reversible errors underpinning the
ruling that Diligent waived the right to arbitrate based upon the Trial Court’s stated
74
Id. at ** 15-16.
75
Id. at * 15.
76
Id. at * 17.
46
bases for that ruling. There are no other bases pleaded by York, Elite or PDL that
supports that ruling.
The Trial Court’s stated bases for its ruling on waiver tracks the pleaded
arguments made by York, Elite or PDL. (e.g. 3 CR 1018, 1029, 1089). York and
Elite, however, also allege that Diligent’s motions to quash the depositions of
corporate representatives regarding trade secrets constituted prejudice. (e.g. 3 CR
1023). York and Elite do not explain and cannot explain under the presumption
against waiver of the right to arbitrate and the higher burden to try to overcome
that presumption how not being able to depose Diligent’s corporate
representative(s) can overcome that presumption and meet their burden. (Id.)
They further do not show that they will not get any missing depositions as part of
the arbitration or as part of the trial against Elite and PDL once the arbitration is
completed. (Id.)
York, Elite and PDL surmise that Diligent only moved to compel arbitration
when Diligent was faced with summary judgment motions. (e.g. 3 CR 1032). Yet,
they do not explain and cannot explain that Diligent stated that it would move to
compel arbitration on the merits of the claims to be arbitrated once there was a
ruling on the requested temporary injunction long before any summary judgment
motion was filed, and Diligent did what it said it would do. (1 CR 37-43, 92, 98-
99, 334, 343-345, 347, 487, 495-504). They further do not explain why Diligent
47
should be so afraid when the Trial Court found that Diligent would likely prevail
on the same merits challenged by the summary judgment motions by granting the
77
temporary injunction. York, Elite and PDL do not explain and cannot explain
under the presumption against waiver of the right to arbitrate and the higher burden
to try to overcome that presumption how Diligent doing what it said it would do
from the start of the case can overcome that presumption and meet their burden of
proof.
There is a pervasive error in the arguments of York, Elite and PDL.
Significantly, York, Elite and PDL fail to address that presumption and their
burden of proof. (e.g. 3 CR 1018, 1029, 1089). They do so, because they cannot
do either. (Id.)
The preceding analysis showing the errors made by the Trial Court and in
the arguments of York, Elite and PDL provides the actual answers to the several
78
questions to be asked regarding waiver of the right to arbitrate when viewed
under the legal framework. They also show how the Trial Court, York, Elite and
PDL did not correctly answer those questions.
Taken together or separately, that prior analysis demonstrates reversible
error. When this Court conducts a de novo review based upon the Clerk’s Record,
the presumption against the right to arbitrate, and the heightened burden imposed
77
Shary, 309 S.W.3d at 657.
78
See questions at footnote 31.
48
upon York, Elite and PDL to try to overcome that presumption, then this Court will
rule that Diligent did not waive the right to arbitrate by conduct inconsistent with
79
that right with the unequivocal intent to do so. Alternatively, when this Court
conducts an abuse of discretion review, then this Court will find that the Trial
Court did not follow established law, did not do what a trial court could have done,
and failed to give effect to Diligent’s vested substantive arbitration rights in a
manner for which there is no adequate appeal. 80 Alternatively, no reasonable fact-
finder could find waiver of the right to arbitrate under the presumption against such
waiver and the heightened burden to try to overcome that presumption. There is no
81
evidence of such a waiver. Alternatively, any finding of waiver under the
presumption against such waiver and the heightened burden to try to overcome that
presumption is so against the great weight of the credible evidence to be manifestly
unjust and wrong. 82
The Stay is Mandatory
Alternatively, the Trial Court reversibly erred when it denied the motion to
stay the claims between Diligent, on one hand, and Elite and PDL, on the other
hand, pending the resolution of the arbitration of the claims between Diligent and
79
See cases cited at footnotes 6-14, 19-48.
80
See cases cited at footnotes 3-14, 19-48.
81
See cases cited at 15.
82
Id.
49
York. The Trial Court had to stay the Diligent-Elite/PDL claims, but failed to do
so.
Arbitration is a favored remedy. 83 It is implemented through the terms of the
arbitration provision in the Agreement. 84 The public policy favoring arbitration is
undermined if the issues to be decided by the arbitrator are also tried by the Trial
Court. 85 The stay is statutorily mandated by both federal and state law.86
As a result, when issues to be decided by the arbitrator to resolve the claims
of Diligent and York are also involved in the resolution of the claims between
Diligent, on one hand, and Elite and PDL, on the other hand, outside of arbitration,
then the Diligent-Elite/PDL claims must be stayed pending resolution of the
Diligent/York claims in arbitration. 87 Otherwise, Diligent and York will be denied
their protected and vested right to have the arbitrator decide the issues involved in
88
the arbitration. The stay is a proper application of the Trial Court’s power and
89
judicial economy to decide when the Diligent-Elite/PDL claims are resolved.
The Trial Court did not mention this mandatory law. (11-7-17 5 RR 1-45). It
did not mention the interconnected issues involved in the resolution of the claims
83
Legoland, 2017 Tex. App. LEXIS 3843 at **6-7; Haddock, 287 S.W.3d at 169.
84
Id.
85
Merrill Lynch, 235 S.W.3d at 195-196.; 9 U.S.C.A. § 3; TEX. CIV. PRAC. AND REM CODE §§
171.025 and 172.174.
86
Id.
87
Id.
88
Id.
89
Id.
50
of Diligent-York claims and the Diligent-Elite/PDL claims. (Id.) The Trial Court
had to consider both the law and the relevant issues. Its failure to do so is
reversible error.
Had the Trial Court reviewed those issues under the law, then the Trial
Court would have no choice but to grant the motion to stay. The stay inescapably
flows from a review of the issues in the Diligent-York arbitration and the Diligent-
Elite/PDL lawsuit.
Diligent claims that York breached the restrictive covenants in the
Agreement and the NDLI Contract, that Elite and PDL tortiously interfered with
the Agreement or the NDLI Contract by directing York to breach these restrictive
covenants and by poaching customers of Diligent, and that York, Elite and PDL
jointly or severally misappropriated Diligent’s trade secrets. (e.g. 1 CR 8, 37, 92,
109, 334, 379, 487; 2 CR 825; 3CR 1005). These are the claims that Diligent stated
would be resolved in arbitration from the filing of the original petition. (1 CR 37-
43, 92, 98-99, 334, 343-345, 347, 487, 495-504).
York, Elite and PDL dispute just about every element of Diligent’s
respective claims. (1 CR 18, 21, 47, 50, 193, 325, 375; 2 CR 542, 585, 611, 518,
960; 3 CR 1099). York, Elite and PDL further have raised denials, defense issues,
affirmative defenses and affirmative claims that question the existence of any trade
secrets of Diligent, that question the enforceability of the Agreement or the NDLI
51
Contract, that question the conduct of York to breach the restrictive covenants or to
misappropriate Diligent’s trade secrets, that question whether Elite or PDL directed
York to breach the Agreement or the NDLI Contract, that question whether York,
Elite or PDL misappropriated trade secrets of Diligent, and whether they conspired
to do so. (Id.) These are elements of the claims between Diligent and York which
will be decided by the arbitrator.90
If the stay is not imposed, then the arbitrator and the Trial Court will decide
some of the very same issues. Without the stay, then it would be possible for the
arbitrator to reach different results on the very same issue. The stay is designed to
prevent that from happening.
The Trial Court, thus, abused its discretion when it did not give effect to
those plain terms. 91 It failed to follow established law. 92 It acted in a manner that
it could not act for which there is no available appeal.93
90
TEX. CIV. PRAC. & REM CODE §§ 134A.002, 143A.004, 134A007; City of The Colony v. N.
Tex. Mun. Water Dist., 272 S.W.3d 699, 738 (Tex. App. – Fort Worth 2008, pet. dism’d); RSM
Prod. Corp. v. Global Petroleum Grp., Ltd., 507 S.W.3d 383, 393 (Tex. App. – Houston [1st
Dist.] 2016, pet. denied); Zep Mfg. Co. v. Harthcock, 824 S.W.2d 642, 662 (Tex. App. – Dallas
1992, no pet.); Rugen v. Interactive Business Svs., 864 S.W.2d 548, 551 (Tex. App. – Dallas
1993, no pet.); Cell Comp, LLC v. Southwestern Bell Wireless, LLC, 2008 Tex. App. LEXIS
4510 * 20 (Tex. App. – Corpus Christi 2008, no pet.)
91
See cases at footnotes 1-5, 11-14.
92
Id.
93
Id.
52
Conclusion and Prayer
Based on the foregoing, the Trial Court failed to follow the law and
misapplied the law to the facts. Therefore, the Trial Court abused its discretion
when it found that Diligent had waived the right to arbitrate its claims with York.
The Trial Court reversibly erred for the above stated reasons. The Court
should reverse the Trial Court. The Court should compel arbitration of the claims
between Diligent and York. The Court should stay all proceedings in the Trial
Court between Diligent, on one hand, and Elite and PDL, on the other hand. The
Court should grant Diligent all other whole, partial, general, specific or other relief
which is requested or to which it is justly entitled.
Respectfully submitted,
Zukowski, Bresenhan & Piazza, L.L.P.
/s/Maurice Bresenhan, Jr.
Maurice Bresenhan, Jr.
State Bar No. 02959000
mbresenhan@zbplaw.com
Pascal Paul Piazza
State Bar No. 15966850
ppp@zbplaw.com
Cynthia Keen Perlman
State Bar No. 11161700
CPerlman@zbplaw.com
1177 West Loop South, Suite 1100
Houston, Texas 77027
(713) 965-9969/(713) 963-9169 (Fax)
Attorneys for Appellants
53
CERTIFICATE OF SERVICE
On December 21, 2017, I electronically filed this Brief of Appellant with the
Clerk of the Court using the ECF filing system which will send notification of such
filing to the following:
Russell A. Devenport
McDonald Sanders, P.C.
777 Main Street, Suite 1300
Fort Worth, Texas 76102
ECF and Email: rdevenport@mcdonaldlaw.com
S. Gary Werley
Law Offices of S. Gary Werley
1840 Acton Highway, Suite 102
Granbury, TX 76049
ECF and Email: sgwerley@werleylaw.com
/s/ Maurice Bresenhan, Jr.
54
CERTIFICATE OF COMPLIANCE
Based upon the word count run in Microsoft Word 2013, this brief contains
11467 words inclusive of all sections.
/s/ Maurice Bresenhan, Jr.
55
No. 02-17-00416-CV
In the Court of Appeals for the Second District in Fort Worth, Texas
Diligent Texas Dedicated, LLC d/b/a Diligent Delivery Systems,
Appellant,
v.
Richard York, Elite Parts Group, LLC d/b/a Elite Parts Group
and Principle Distribution, Inc.
Appellees.
On Appeal from the 342nd Judicial District Court, Tarrant County, Texas
APPENDIX
Maurice Bresenhan, Jr.
State Bar No. 02959000
mbresenhan@zbplaw.com
Pascal Paul Piazza
State Bar No. 15966850
ppp@zbplaw.com
Cynthia Keen Perlman
State Bar No. 11161700
CPerlman@zbplaw.com
Zukowski, Bresenhan & Piazza, L.L.P.
1177 West Loop South, Suite 1100
Houston, Texas 77027
(713) 965-9969/(713) 963-9169 (Fax)
Attorneys for Appellants
1
Commercial
Arbitration Rules and Mediation Procedures
Including Procedures for Large, Complex Commercial Disputes
Available online at adr.org/commercial
Rules Amended and Effective October 1, 2013
Fee Schedule Amended and Effective October 1, 2017
Rules Amended and Effective October 1, 2013. Fee Schedule Amended and Effective October 1, 2017. COMMERCIAL RULES 1
(b) A respondent may file a counterclaim at any time after notice of the filing of the
Demand is sent by the AAA, subject to the limitations set forth in Rule R-6. The
respondent shall send a copy of the counterclaim to the claimant and all other
parties to the arbitration. If a counterclaim is asserted, it shall include a statement
setting forth the nature of the counterclaim including the relief sought and the
amount involved. The filing fee as specified in the applicable AAA Fee Schedule
must be paid at the time of the filing of any counterclaim.
(c) If the respondent alleges that a different arbitration provision is controlling, the
matter will be administered in accordance with the arbitration provision submitted
by the initiating party subject to a final determination by the arbitrator.
(d) If the counterclaim does not meet the requirements for filing a claim and the
deficiency is not cured by the date specified by the AAA, it may be returned to the
filing party.
R-6. Changes of Claim
(a) A party may at any time prior to the close of the hearing or by the date
established by the arbitrator increase or decrease the amount of its claim or
counterclaim. Written notice of the change of claim amount must be provided to
the AAA and all parties. If the change of claim amount results in an increase in
administrative fee, the balance of the fee is due before the change of claim
amount may be accepted by the arbitrator.
(b) Any new or different claim or counterclaim, as opposed to an increase or decrease
in the amount of a pending claim or counterclaim, shall be made in writing and
filed with the AAA, and a copy shall be provided to the other party, who shall have
a period of 14 calendar days from the date of such transmittal within which to file
an answer to the proposed change of claim or counterclaim with the AAA. After
the arbitrator is appointed, however, no new or different claim may be submitted
except with the arbitrator’s consent.
R-7. Jurisdiction
(a) The arbitrator shall have the power to rule on his or her own jurisdiction, including
any objections with respect to the existence, scope, or validity of the arbitration
agreement or to the arbitrability of any claim or counterclaim.
(b) The arbitrator shall have the power to determine the existence or validity of a
contract of which an arbitration clause forms a part. Such an arbitration clause
shall be treated as an agreement independent of the other terms of the contract.
A decision by the arbitrator that the contract is null and void shall not for that
reason alone render invalid the arbitration clause.
(c) A party must object to the jurisdiction of the arbitrator or to the arbitrability of a
claim or counterclaim no later than the filing of the answering statement to the
claim or counterclaim that gives rise to the objection. The arbitrator may rule on
such objections as a preliminary matter or as part of the final award.
Rules Amended and Effective October 1, 2013. Fee Schedule Amended and Effective October 1, 2017. COMMERCIAL RULES 13
FILED
TARRANT COUNTY
342-289368-16 12/14/2017 3:13 PM
THOMAS A. WILDER
DISTRICT CLERK
FILED
342-289368-16 TARRANT COUNTY
12/14/2017 3:13 PM
THOMAS A. WILDER
DISTRICT CLERK
FILED
TARRANT COUNTY
342-289368-16 12/14/2017 3:13 PM
THOMAS A. WILDER
DISTRICT CLERK