Al Jones and Al Jones Architect, AIA, LLC v. Brent L. Mainwaring and Tatayana Mainwaring ( 2012 )


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  •                                                  In The
    Court of Appeals
    Ninth District of Texas at Beaumont
    _________________
    NO. 09-12-00324-CV
    _________________
    AL JONES AND AL JONES ARCHITECT, AIA, LLC, Appellants
    V.
    BRENT L. MAINWARING AND TATAYANA MAINWARING, Appellees
    ______________________________________________________________________
    On Appeal from the 172nd District Court
    Jefferson County, Texas
    Trial Cause No. E-185,627
    ________________________________________________________________________
    MEMORANDUM OPINION
    In this interlocutory appeal, we are asked to determine whether the trial court erred
    in refusing Al Jones’s and Al Jones Architect, AIA, LLC’s1 motion to compel arbitration.
    Brent and Tatayana Mainwaring hired architects to design and supervise the construction
    of their new home. The architectural agreement between the architects and the
    Mainwarings provides that “[a]ny claim, dispute or other matter in question arising out of
    or related to this Agreement shall be subject to arbitration.”
    1
    For convenience, we refer to the appellants together as the architects.
    1
    After they became aware of various problems with their home during its
    construction, the Mainwarings sued the architects and several other defendants, seeking
    to recover actual damages, punitive damages, attorney’s fees, interest, and costs. In
    response to the lawsuit, the architects filed a motion asking the trial court to enforce the
    arbitration provision in the parties’ architectural agreement. The Mainwarings resisted
    arbitration, arguing that the arbitration agreement was not enforceable because Al Jones,
    when the parties entered the architectural agreement, was not a licensed architect in the
    State of Texas. The Mainwarings also argued that the choice-of-law provision in the
    architectural agreement, which provided that Louisiana law governed the agreement, was
    unconscionable.
    We conclude that the defenses the Mainwarings have raised concern the validity of
    the architectural agreement as a whole. Consequently, the defenses that the Mainwarings
    have asserted are matters for the arbitrator, as the defenses do not prevent the contract’s
    arbitration clause from being enforced. The Mainwarings have also argued, in the
    alternative, that if the arbitration clause is enforceable that the architects waived their
    right to arbitrate. We disagree, because we hold the architects’ litigation conduct has not
    resulted in a waiver of their right to enforce the arbitration provision at issue. Because
    the Mainwarings failed to establish in the trial court that the dispute was not arbitrable,
    we conclude the trial court abused its discretion in denying the architects’ motion to
    compel arbitration. We reverse the trial court’s order denying the motion to compel
    2
    arbitration, and we remand the case to the trial court, requiring it to order the dispute with
    the architects to arbitration.
    Standard of Review
    We review the denial of a motion to compel arbitration under an abuse of
    discretion standard. See Okorafor v. Uncle Sam & Assocs., Inc., 
    295 S.W.3d 27
    , 38 (Tex.
    App.—Houston [1st Dist.] 2009, pet. denied.). “A party attempting to compel arbitration
    must first establish that the dispute in question falls within the scope of a valid arbitration
    agreement.” J.M. Davidson, Inc. v. Webster, 
    128 S.W.3d 223
    , 227 (Tex. 2003) (citing In
    re Oakwood Mobile Homes, Inc., 
    987 S.W.2d 571
    , 573 (Tex.1999)). “If the other party
    resists arbitration, the trial court must determine whether a valid agreement to arbitrate
    exists.” Id.; Tex. Civ. Prac. & Rem. Code Ann. § 171.021 (West 2011). “Whether a given
    arbitration clause imposes a duty to arbitrate is a matter of contract interpretation and a
    question of law for the court.” Tex. Petrochemicals LP v. ISP Water Mgmt. Servs, LLC,
    
    301 S.W.3d 879
    , 884 (Tex. App.—Beaumont 2009, no pet.). As that is a question of
    contract interpretation, it is a question that is reviewed de novo. 
    Id. (citing McReynolds
    v.
    Elston, 
    222 S.W.3d 731
    , 740 (Tex. App. —Houston [14th Dist.] 2007, no pet.). If the trial
    court finds that a valid arbitration agreement exists, the burden then shifts to the party
    opposing arbitration to raise an affirmative defense to enforcing arbitration. J.M.
    Davidson, 
    Inc., 128 S.W.3d at 227
    .
    3
    In its order denying the architects’ motion to compel, the trial court did not state
    why it refused to compel the Mainwarings and the architects to arbitrate their dispute.
    Additionally, no party requested findings of fact, and the trial court did not issue findings
    of fact or conclusions of law. Because this appeal proceeds without the benefit of the trial
    court’s express findings, the trial court is presumed to have made all findings that are
    necessary to support its judgment. See Tex. R. Civ. P. 299.
    Existence of a valid arbitration agreement
    In issue one, the architects contend that the architectural agreement contains a
    valid arbitration agreement and that the Mainwarings’ claims are arbitrable under the
    parties’ agreement. The Mainwarings’ suit is based, in large part, on the architects’
    alleged acts and omissions under the architectural agreement. The arbitration clause in
    the architectural agreement is broad, providing that the parties were required to arbitrate
    “[a]ny claim, dispute or other matter in question arising out of or related to this
    Agreement[.]” The record demonstrates that the architects established that an arbitration
    agreement exists and that, if valid, the Mainwarings’ claims fall within the scope of the
    matters to be arbitrated. See J.M. Davidson, 
    Inc., 128 S.W.3d at 227
    .
    In the trial court, the Mainwarings raised four defenses to the architects’ motion to
    compel, arguing:
    The architectural agreement could not be enforced because Al Jones did not
    have a Texas architect’s license when the contract was performed;
    4
    The architects expressly waived any right to arbitration by agreeing to
    litigate the case in the 172nd District Court;
    The architects waived their right to arbitrate by substantially invoking the
    litigation process, to the Mainwarings prejudice; and
    The arbitration provision could not be enforced because it is
    unconscionable.
    First, we address whether Al Jones’s failure to register with the Texas Board of
    Architectural Examiners is a defense to the arbitration provision in the architectural
    agreement. To practice architecture in Texas, architects are generally required to be
    registered with the Texas Board of Architectural Examiners. See Tex. Occ. Code Ann. §
    1051.701 (West 2012) (prohibiting practice of architecture without registering with the
    Texas Board of Architectural Examiners). According to the Mainwarings, because Al
    Jones was not registered with the Texas Board of Architectural Examiners, their
    architectural agreement with Jones is void and unenforceable.
    In response, the architects contend that the arbitration provision in the agreement
    remains enforceable, even if it is later determined by the arbitrator that the agreement is
    unenforceable.2 In summary, the architects contend that the arbitration provision is
    severable from the remaining agreement, making it enforceable even if the remainder of
    the agreement proves later to be unenforceable.
    The United States Supreme Court has held that for purposes of determining the
    validity of an arbitration provision within an otherwise unenforceable agreement, the
    2
    We express no opinion on the validity of the agreement as a whole.
    5
    contract’s arbitration provision is severable from the remainder of the contract. Buckeye
    Check Cashing, Inc. v. Cardegna, 
    546 U.S. 440
    , 444-45, 
    126 S. Ct. 1204
    , 
    163 L. Ed. 2d 1038
    (2006); see also Esecuritel Holdings, LLC v. Youghiogheny Commc’ns-Tex., LLC,
    2012 Tex. App. LEXIS 10017, at *19 (Tex. App.—San Antonio Dec. 5, 2012, no pet. h.)
    (mem. op.) (claim that agreement was unenforceable because a party was not licensed in
    Texas did not defeat arbitration). In Buckeye, the Supreme Court held that “regardless of
    whether the challenge is brought in federal or state court, a challenge to the validity of a
    contract as a whole, and not specifically to the arbitration clause, must go to the
    arbitrator.” 
    Id. at 449.
    The Supreme Court explained that when a party “challenge[s] the
    Agreement, but not specifically its arbitration provisions, those provisions are
    enforceable apart from the remainder of the contract. The challenge should therefore be
    considered by an arbitrator, not a court.”3 
    Id. at 446.
    We hold that the arbitration clause in the architectural agreement is severable from
    the remainder of the agreement. In the trial court, and on appeal, the Mainwarings have
    also argued that enforcing the arbitration agreement would be unconscionable. According
    to the Mainwarings, the agreement is unconscionable because it contains a Louisiana
    3
    The Texas Supreme Court followed Buckeye’s reasoning when presented with
    similar issues in the following cases: In re Olshan Found. Repair Co., LLC, 
    328 S.W.3d 883
    , 898 (Tex. 2010); In re Morgan Stanley & Co., 
    293 S.W.3d 182
    , 186 (Tex. 2009); In
    re Labatt Food Serv., L.P., 
    279 S.W.3d 640
    , 647-48 (Tex. 2009); Perry Homes v. Cull,
    
    258 S.W.3d 580
    , 589 (Tex. 2008); In re Kaplan Higher Educ. Corp., 
    235 S.W.3d 206
    ,
    210 (Tex. 2007); and In re Merrill Lynch Trust Co. FSB, 
    235 S.W.3d 185
    , 190 (Tex.
    2007).
    6
    choice-of-law provision, allowing Jones, a Louisiana resident, advantages that he would
    not otherwise have under Texas law. Also, the Mainwarings argue that the agreement is
    unconscionable because it “attempts to take away [the Mainwarings’] substantive rights
    and remedies provided under Texas law.”
    In Texas, choice-of-law provisions in contracts as well as arbitration agreements
    are generally enforceable. See In re Palm Harbor Homes, Inc., 
    195 S.W.3d 672
    , 678
    (Tex.   2006)     (“There       is    nothing    inherently unconscionable       about   arbitration
    agreements[.]”); Autonation Direct.Com, Inc. v. Thomas A. Moorhead, Inc., 
    278 S.W.3d 470
    , 472 (Tex. App.—Houston [14th Dist.] 2009, no pet.) (stating that where the parties
    contractually agreed to apply the law of Virginia to their contract, “Texas courts will
    respect that choice and apply the law the parties chose”). The choice-of-law provision at
    issue is not located in the agreement’s arbitration provision; rather, it is located in the
    miscellaneous provisions that pertain to the parties’ architectural agreement as a whole.
    Also, the choice-of-law provision does not specifically relate to the arbitration clause.
    The Texas Supreme Court, explaining how unconscionability can impact an
    agreement    to    arbitrate,        has   stated:   “[I]n   considering   an   arbitration   clause,
    unconscionability ‘must specifically relate to the [arbitration clause] itself, not the
    contract as a whole, if [unconscionability is] to defeat arbitration.’” In re Odyssey
    Healthcare, Inc., 
    310 S.W.3d 419
    , 422 n.1 (Tex. 2010) (quoting In re FirstMerit Bank,
    N.A., 
    52 S.W.3d 749
    , 756 (Tex. 2001)). We conclude that the Mainwarings’
    7
    unconscionability argument relates to the contract as a whole, and not specifically to the
    arbitration clause. We express no opinion on whether the contract as a whole is
    unconscionable, as the parties’ agreement is sufficiently broad to indicate they intended
    to arbitrate the issue of unconscionability. See 
    id. In conclusion,
    we are not persuaded that the arbitration provision in the
    architectural agreement is unenforceable. We hold that the architects met their burden to
    demonstrate in the trial court that the parties’ agreement contained a valid arbitration
    provision. See J.M. Davidson, 
    Inc., 128 S.W.3d at 227
    .
    Waiver of right to arbitrate
    In issue two, the architects address the issue of waiver, which the Mainwarings
    raised as an affirmative defense to the enforcement of the arbitration provision.
    According to the Mainwarings, the architects waived their right to arbitrate by agreeing to
    litigate the case in the trial court, by agreeing to reinstate the case following an abatement
    required by the Texas Residential Construction Liability Act,4 by agreeing to a
    4
    See Tex. Prop. Code Ann. § 27.004 (West Supp. 2012) (Texas Residential
    Construction Liability Act). In 2011, another defendant in this case petitioned for
    mandamus relief from the trial court, arguing that the trial court abused its discretion by
    compelling discovery while the case was abated by operation of law. See In re Anderson
    Const. Co., 
    338 S.W.3d 190
    , 192 (Tex. App.—Beaumont 2011, orig. proceeding). We
    conditionally granted relief, abating the case to allow the Mainwarings to comply with
    the notice and inspection requirements of the Texas Residential Construction Liability
    Act. 
    Id. at 197.
    We ordered the trial court to refrain from proceeding with the case until
    the Mainwarings complied with the Residential Construction Liability Act’s notice and
    inspection requirements. 
    Id. 8 continuance
    of an April 2012 trial setting, and by engaging in discovery, all of which the
    Mainwarings contend substantially invoked the litigation process.
    The standards required to establish a claim of waiver with respect to an arbitration
    provision are clearly established. “[A] party waives an arbitration clause by substantially
    invoking the judicial process to the other party’s detriment or prejudice.” Perry 
    Homes, 258 S.W.3d at 589-90
    . Whether a party has participated in the litigation process to the
    extent that it will be held to have waived the right to arbitrate is a question of law for the
    court. See 
    id. at 587.
    “There is a strong presumption against waiver of arbitration, but it is
    not irrebuttable[.]” 
    Id. at 584.
    In considering whether a party has waived its rights to
    arbitrate, the Texas Supreme Court has considered the following factors:
    when the movant knew of the arbitration clause;
    how much discovery has been conducted;
    who initiated the discovery;
    whether the discovery related to the merits rather than arbitrability or
    standing;
    how much of the discovery would be useful in arbitration; and
    whether the movant sought judgment on the merits.
    
    Id. at 591-92
    (footnotes omitted). Additionally, a party’s “[w]aiver of arbitration rights
    may be express or implied.” 
    Okorafor, 295 S.W.3d at 39
    . “Express waiver arises when a
    party affirmatively indicates that it wishes to resolve the case in the judicial forum, rather
    9
    than arbitration.” 
    Id. Implied waiver
    arises when a party acts inconsistently with the right
    to arbitrate and prejudices the opposing party. 
    Id. According to
    the Mainwarings, the architects expressly waived their arbitration
    rights by agreeing to reinstate the case and by agreeing to continue the case. In their
    brief, the Mainwarings contend that the situation here is similar to the facts at issue in In
    re Citigroup Global Mkts., Inc., 
    202 S.W.3d 477
    (Tex. App.—Dallas 2006, orig.
    proceeding), mand. granted, 
    258 S.W.3d 623
    (Tex. 2008). In Citigroup, the Dallas Court
    of Appeals concluded that Citigroup had expressly waived its right to arbitrate by
    removing the case to federal court, where it was transferred to a federal multidistrict
    litigation court. 
    Citigroup, 202 S.W.3d at 484
    . The Dallas Court of Appeals, in reaching
    its conclusion, relied primarily on Citigroup’s federal court pleadings that stated it
    desired to pursue the case in a judicial forum to explain why it had removed the case to
    federal court and sought to have it transferred. 
    Id. However, the
    Texas Supreme Court
    disagreed with the Dallas Court’s conclusion that Citigroup expressly waived arbitration,
    stating that Citigroup never expressly waived or objected to arbitration and that
    Citigroup’s statements in various transfer pleadings were required by statute to justify the
    transfer. See In re Citigroup Global Mkts., Inc., 
    258 S.W.3d 623
    , 626 (Tex. 2008) (orig.
    proceeding).
    In this case, it is not necessary to decide whether statements in pleadings related to
    a parties’ desire to have a court resolve a dispute might suffice to establish an express
    10
    waiver of a right to arbitrate. The architects have filed no pleadings like those filed in
    Citigroup. Nothing in the agreed order reinstating the case following its abatement or in
    the parties’ agreed motion to continue reflects that the architects expressly waived any of
    their rights under the architectural agreement, including their right to arbitrate. See In re
    Fleetwood Homes of Tex., L.P., 
    257 S.W.3d 692
    , 694 (Tex. 2008) (holding that several
    letters that concerned an impending trial and an offer to request an agreed trial setting did
    not amount to an express waiver). We conclude that the architects have not expressly
    waived their right to arbitrate by agreeing to reinstate the case following abatement or by
    agreeing to a continuance.
    The Mainwarings also argue that the architects’ conduct amounts to an implied
    waiver of their right to arbitrate. According to the Mainwarings, implied waiver arises
    because the architects substantially invoked the litigation process by filing an answer,
    engaging in pre-trial discovery, participating in a deposition, joining in an agreed motion
    to reinstate the case, and joining in an agreed motion to continue the case.
    It is undisputed that the architects filed an answer, the parties exchanged written
    discovery, and that the architects participated in a single deposition taken at the
    Mainwarings’ request. However, in the agreed motion to continue the case, the parties
    stated that discovery was not complete. In April 2012, the Mainwarings filed a Second
    Amended Petition, adding two additional defendants to the multiple individuals and
    entities being sued. Approximately one week later, the architects asked the trial court to
    11
    compel arbitration. In July 2012, by filing a third amended petition, the Mainwarings
    added four more defendants to their suit. In light of the number of parties and issues
    involved in the dispute, as well as the comparatively small amount of discovery done
    given the number of parties involved, we conclude that the architects have not
    substantially invoked the judicial process.
    The Texas Supreme Court has stated that “[m]erely taking part in litigation is not
    enough unless a party ‘has substantially invoked the judicial process to its opponent’s
    detriment.’” In re Vesta Ins. Grp., Inc., 
    192 S.W.3d 759
    , 763 (Tex. 2006) (quoting In re
    Serv. Corp. Int’l, 
    85 S.W.3d 171
    , 174 (Tex. 2002)). In Perry Homes, the Supreme Court
    held that “‘allowing a party to conduct full discovery, file motions going to the merits,
    and seek arbitration only on the eve of trial’” is sufficient to show 
    waiver. 258 S.W.3d at 590
    (quoting Vesta Ins. 
    Grp., 192 S.W.3d at 764
    ). However, “requesting an initial round
    of discovery, noticing (but not taking) a single deposition, and agreeing to a trial
    resetting[]” is not sufficient to show waiver. 
    Id. at 590
    (citing EZ Pawn Corp. v. Mancias,
    
    934 S.W.2d 87
    , 90 (Tex. 1996) (concluding no waiver where party had answered the suit,
    sent interrogatories and request for production, and entered into an agreed order resetting
    the case for a later trial date)). The Supreme Court has also held that litigating for two
    years in the trial court, participating in discovery, and noticing four depositions did not
    waive arbitration. See Vesta Ins. 
    Grp., 192 S.W.3d at 763
    .
    12
    The record before us shows:
    The parties recognized in their March 2012 correspondence regarding an
    agreed continuance that discovery was not substantially complete.
    The architects’ discovery consisted of written discovery to the
    Mainwarings; however, because the discovery is not in the record before
    us, we are unable to determine whether the architects conducted significant
    discovery on the merits as the Mainwarings contend in their brief
    The architects did not seek to compel arbitration on the eve of trial, as the
    parties had recently agreed to continue the case to complete discovery.
    The architects did not file motions in the trial court addressing the merits
    of the Mainwarings’ claims.
    The architects first appeared as parties in December 2010, and the case was
    abated less than three months later.
    The case was abated between March 2011 and October 2011, based on the
    requirements of the Texas Residential Construction Liability Act. See Tex.
    Prop. Code Ann. § 27.004(d).
    Although the Mainwarings incurred attorney’s fees, they did not
    demonstrate in the trial court that the fees they incurred were significantly
    related to the architects’ written discovery, nor did they establish that the
    architects’ written discovery was extensive or addressed the merits of the
    dispute.
    The architects first asked the trial court to compel arbitration on April 18,
    2012, approximately six months after the case was reinstated; therefore,
    the record shows a nine month delay before asking the trial court to
    compel arbitration.
    We conclude that the activities of the architects did not substantially invoke the
    litigation process. See Perry 
    Homes, 258 S.W.3d at 591-92
    ; Vesta Ins. 
    Grp., 192 S.W.3d at 763
    -64. Instead, the record shows that the architects were merely taking part in the
    13
    litigation process. See Vesta Ins. 
    Grp., 192 S.W.3d at 763
    -64. We hold the conduct
    shown in this case does not establish implied waiver. See Fleetwood 
    Homes, 257 S.W.3d at 694-95
    (concluding that eight months delay not sufficient to overcome the strong
    presumption against waiver); Vesta Ins. 
    Grp., 192 S.W.3d at 763
    (concluding that two
    years delay not sufficient to overcome the strong presumption against waiver); EZ 
    Pawn, 934 S.W.2d at 89-90
    (concluding that ten months delay not sufficient to overcome the
    strong presumption against waiver).
    Because a valid arbitration clause exists and the architects have not waived their
    right to arbitration, we hold that the trial court abused its discretion in denying the
    architects’ motion to compel arbitration. We reverse the trial court’s order, remand this
    case to the trial court, and instruct the trial court to enter an order compelling the
    arbitration of the dispute between the architects and the Mainwarings.
    REVERSED AND REMANDED.
    ___________________________
    HOLLIS HORTON
    Justice
    Submitted on October 17, 2012
    Opinion Delivered December 20, 2012
    Before McKeithen, C.J., Gaultney and Horton, JJ.
    14
    

Document Info

Docket Number: 09-12-00324-CV

Filed Date: 12/20/2012

Precedential Status: Precedential

Modified Date: 10/16/2015

Authorities (20)

Buckeye Check Cashing, Inc. v. Cardegna , 126 S. Ct. 1204 ( 2006 )

In Re Kaplan Higher Education Corp. , 50 Tex. Sup. Ct. J. 1058 ( 2007 )

In Re Palm Harbor Homes, Inc. , 49 Tex. Sup. Ct. J. 711 ( 2006 )

In Re Odyssey Healthcare, Inc. , 53 Tex. Sup. Ct. J. 717 ( 2010 )

In Re Oakwood Mobile Homes, Inc. , 42 Tex. Sup. Ct. J. 377 ( 1999 )

Texas Petrochemicals LP v. ISP Water Management Services LLC , 2009 Tex. App. LEXIS 9378 ( 2009 )

EZ Pawn Corp. v. Mancias , 40 Tex. Sup. Ct. J. 104 ( 1996 )

In Re Fleetwood Homes of Texas, L.P. , 51 Tex. Sup. Ct. J. 1066 ( 2008 )

In Re Vesta Insurance Group, Inc. , 192 S.W.3d 759 ( 2006 )

In Re Citigroup Global Markets, Inc. , 51 Tex. Sup. Ct. J. 909 ( 2008 )

In Re Citigroup Global Markets, Inc. , 2006 Tex. App. LEXIS 8735 ( 2006 )

Autonation Direct. Com, Inc. v. Thomas A. Moorehead, Inc. , 2009 Tex. App. LEXIS 357 ( 2009 )

McReynolds v. Elston , 2007 Tex. App. LEXIS 2337 ( 2007 )

Okorafor v. UNCLE SAM & ASSOCIATES, INC. , 295 S.W.3d 27 ( 2009 )

In Re Firstmerit Bank, N.A. , 44 Tex. Sup. Ct. J. 900 ( 2001 )

In Re Labatt Food Service, L.P. , 52 Tex. Sup. Ct. J. 352 ( 2009 )

In Re Service Corporation Intern. , 45 Tex. Sup. Ct. J. 1241 ( 2002 )

In Re Merrill Lynch Trust Co. FSB , 50 Tex. Sup. Ct. J. 1030 ( 2007 )

In Re Morgan Stanley & Co., Inc. , 52 Tex. Sup. Ct. J. 1072 ( 2009 )

In Re Anderson Construction Co. , 2011 Tex. App. LEXIS 2538 ( 2011 )

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