in Re: Dennis Williams and Patty Williams, Relators ( 2003 )

NO. 07-03-0499-CV
IN THE COURT OF APPEALS
FOR THE SEVENTH DISTRICT OF TEXAS
AT AMARILLO
PANEL D
DECEMBER 30, 2003
______________________________
IN RE DENNIS WILLIAMS AND PATTY WILLIAMS, RELATORS
_______________________________
Before QUINN and REAVIS and CAMPBELL, JJ.
MEMORANDUM OPINION
Relators Dennis and Patty Williams seek mandamus relief from an order of the
district court abating and requiring arbitration of the underlying action, Cause No. 53,219-
B, 181st District Court of Randall County. The underlying action was initiated by real party
in interest Steamatic of Amarillo, Inc., as a suit on sworn account against the Williams.
After the Williams answered and asserted counterclaims under the Deceptive Trade
Practices Act and for breach of contract, Steamatic asserted that the parties’ disputes were
subject to arbitration under the terms of a written agreement signed by the Williams, and
asked the trial court to compel arbitration. The trial court did so following a hearing,
entering the order that is the subject of the Williams’ petition in this court. We will deny the
petition.1
The trial court made no determination whether the federal2 or Texas3 arbitration
statute governs the written agreement between the parties. Relators’ mandamus petition
and Steamatic’s response both suggest the federal act applies. Neither the Texas nor
federal arbitration statute permits interlocutory appeal from a trial court decision
compelling arbitration; the Williams may seek relief, then, if at all,4 only through
mandamus.
1
Relators’ petition requested oral argument. We decide the case without oral
argument, finding that argument would not significantly aid the court in determining the
issues presented. Tex. R. App. P. 39.8.
2
9 U.S.C.A. §§ 1–16 (1999 & Supp. 2003).
3
Tex. Civ. Prac. & Rem. Code Ann. §§ 171.001-171.098 (Vernon Supp. 2004).
4
The parties do not raise the question whether the availability of court action
following arbitration (and thus an adequate remedy by law) renders an order compelling
arbitration, as opposed to one refusing to compel arbitration, not reviewable by mandamus.
As noted, both the Texas and federal arbitration statutes provide for review by interlocutory
appeal of trial court decisions denying arbitration, but not of decisions ordering arbitration.
Tex. Civ. Prac. & Rem. Code § 171.098; 9 U.S.C.A. § 16; see, e.g., Lipshy Motorcars, Inc.
v. Sovereign Assocs., Inc., 944 S.W.2d 68, 69 (Tex.App.–Dallas 1997, no writ). Although
it appears that the Fifth Circuit will, in a proper case, permit mandamus to correct
erroneous decisions ordering arbitration under the federal statute, see Apache Bohai
Corp., LDC v. Texaco China, B.V., 330 F.3d 307, 310-11 (5th Cir. 2003), at least one Texas
court of appeals has pointed to the availability of appeal following arbitration in denying
mandamus relief. McMullen v. Yates, 697 S.W.2d 500, 502-03 (Tex.App.–San Antonio
1985, no writ); but see Freis v. Canales, 877 S.W.2d 283 (Tex. 1994).
2
One seeking issuance of a writ of mandamus must provide a sufficient record to
establish the right to such relief. Walker v. Packer, 827 S.W.2d 833, 837 (Tex. 1992).
Mandamus issues only to correct a clear abuse of discretion or the violation of a duty
imposed by law when there is no other adequate remedy by law. Johnson v. Fourth Court
of Appeals, 700 S.W.2d 916, 917 (Tex. 1985). The Fifth Circuit has held that the burden
on a party seeking mandamus relief from an order compelling arbitration is particularly
heavy. Apache Bohai Corp., LDC v. Texaco China, B.V., 330 F.3d 307, 310 (5th Cir. 2003).
The parties do not dispute that a valid arbitration agreement exists between
Steamatic and the Williams, nor that the claims asserted by each fall within the scope of
the agreement. The Williams contend, though, that Steamatic waived its right to require
arbitration by initiating the underlying action through its suit on sworn account.
A party to an arbitration agreement may waive its right to insist on arbitration as the
means to resolve a dispute if it intentionally chooses to pursue its remedies through the
judicial process. See, e.g., In re Bruce Terminix Co., 988 S.W.2d 702, 704 (Tex. 1998).
The public policy favoring arbitration brings about a strong presumption against such a
waiver, however, and the case law requires a showing that the party against whom waiver
is asserted has substantially invoked the judicial process, and that the opposing party has
suffered prejudice as a result. Id.; EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 89 (Tex.
1996); see Subway Equip. Leasing Corp. v. Forte, 169 F.3d 324, 326 (5th Cir. 1999). Any
3
doubt that waiver has occurred must be resolved in favor of arbitration. Bruce Terminix,
988 S.W.2d at 705.
Steamatic does not deny that it invoked the judicial process by initiating the
litigation, but contends that the Williams have demonstrated no prejudice. The Williams
concede that the requirement of showing prejudice normally applies, but say that the
requirement does not apply when the party seeking arbitration is the plaintiff. Filing suit on
an arbitrable claim, contend the Williams, waives the right to arbitration as a matter of law.
For several reasons, we cannot agree with this broad contention. It finds no support in the
language of the arbitration statute. Section 3 of the federal statute provides for the stay of
litigation pending arbitration on the application of “one of the parties.”5 Secondly, relators’
contention runs counter to the policy favoring arbitration that is reflected in the federal
statute. See, e.g., Bruce Terminix, 988 S.W.2d at 704. Thirdly, we find no case drawing
the distinction relators urge, and we see no reason in logic why a party’s initial invocation
of the judicial process as plaintiff should relieve its opponent of the burden the law
otherwise imposes to demonstrate prejudice.6 This is particularly so, where, as here, the
5
9 U.S.C.A. § 3.
6
The third case relators cite, Miller Brewing Co. v. Fort Worth Distributing Co., 781
F.2d 494 (5th Cir. 1986), does not support relators’ contention. There, the court did find that
Fort Worth Distributing had waived its right to arbitrate through litigation it had filed as
plaintiff, but the court made specific findings concerning prejudice to Miller Brewing caused
by its opponent’s invocation of the judicial process.
4
defendant asserts counterclaims that significantly change the nature of the litigation from
the suit on sworn account initially filed by the plaintiff.7
Relators rely on Bruce Terminix, 988 S.W.2d 702. That opinion cannot be said to
support the proposition that a plaintiff is barred as a matter of law from seeking an order
compelling arbitration following the filing of counterclaims by the defendant and without a
demonstration of prejudice.
Relators’ petition in this court does not argue that they have been prejudiced as a
result of Steamatic’s initially filing suit. The record before us does not demonstrate
prejudice of the type the case law requires to support a finding of waiver of the right to
arbitrate. See Subway, 169 F.3d at 327; Miller Brewing, 781 F.2d at 497–98; Home Club,
Inc. v. Barlow, 818 S.W.2d 192, 193 (Tex.App.–San Antonio 1991, no writ). The litigation
was in its early stages when the trial court abated it and ordered arbitration.8 Doing so
7
In this regard, note the holding of the Fifth Circuit in Subway, a case on which
relators rely, that “a party only invokes the judicial process to the extent it litigates a
specific claim it subsequently seeks to arbitrate.” 169 F.3d at 328. It seems difficult to
argue that Steamatic’s motion to compel arbitration following the filing of the Williams’
counterclaims amounts to an effort to arbitrate the “specific claim” on which it initiated its
suit on sworn account.
8
The appendix to relators’ mandamus petition indicates the following: Steamatic filed
its suit on sworn account on July 15, 2003; it obtained an order for substitute service on
the Williams on August 7, 2003; the Williams answered and counterclaimed on or about
August 26, 2003; Steamatic initiated no discovery; the Williams sent discovery requests
to Steamatic with responses due initially on September 25, 2003; Steamatic first initiated
efforts in the trial court to compel arbitration some time before October 1, 2003; the trial
court’s order to arbitrate is dated November 7, 2003.
5
was not an abuse of the trial court’s discretion. Relators’ petition for a writ of mandamus
is denied.
James T. Campbell
Justice
6