IBS Asset Liquidations LLC F/K/A Icon Building Systems, LLC v. Servicios Multiples Del Norte SA De CV ( 2013 )

Fourth Court of Appeals
San Antonio, Texas
OPINION
No. 04-13-00273-CV
IBS ASSET LIQUIDATIONS LLC f/k/a Icon Building Systems, LLC,
Appellant
v.
Multiples Del Norte SA de
SERVICIOS MULTIPLES DEL NORTE SA DE CV,
Appellee
From the 150th Judicial District Court, Bexar County, Texas
Trial Court No. 2012-CI-06095
Honorable Richard Price, Judge Presiding
Opinion by: Sandee Bryan Marion, Justice
Dissenting opinion by: Patricia O. Alvarez, Justice
Sitting: Sandee Bryan Marion, Justice
Marialyn Barnard, Justice
Patricia O. Alvarez, Justice
Delivered and Filed: November 20, 2013
REVERSED AND REMANDED
In this interlocutory appeal, IBS Asset Liquidations LLC, formerly known as Icon Building
Systems, LLC, (“Icon”), appeals the trial court’s denial of its motion to compel arbitration
asserting Servicios Multiples Del Norte SA de CV (“Servicios”) failed to offer any evidence in
support of its defense of waiver. We reverse and remand.
04-13-00273-CV
BACKGROUND
Servicios and Icon entered into a contract under which Icon agreed to design and
manufacture airplane hangars for installation in Mexico. The contract contained an arbitration
clause which provided:
[A]t [Icon’s] sole and exclusive option, all claims, disputes or controversies arising
out of, or in relation to the interpretation, application, or enforcement of this
Contract shall be decided by arbitration utilizing a single arbitrator . . . The parties
acknowledge and agree that this Agreement includes activities in Interstate
Commerce and that the Federal Arbitration Act . . . shall control and apply to any
arbitration conducted hereunder.
On November 1, 2010, Servicios filed suit in McLennan County against Icon asserting
breach of contract, DTPA claims, conversion, negligence, gross negligence, and fraud claims. Icon
filed an answer, participated in discovery, and, in April of 2012, the parties filed a joint motion to
transfer to Bexar County. The case was set for a jury trial in Bexar County on August 19, 2013.
On March 22, 2013, nearly two and one-half years after the suit was initiated and approximately
five months before trial was set to commence, Icon filed a motion to compel arbitration pursuant
to the contract between the parties. Servicios filed a response, asserting waiver of arbitration. On
April 9, 2013, the trial court denied Icon’s motion to compel arbitration and this interlocutory
appeal followed.
WAIVER OF ARBITRATION
“There is a strong presumption against waiver of arbitration, but it is not irrebuttable . . . .”
Perry Homes v. Cull, 258 S.W.3d 580, 584 (Tex. 2008). Waiver of arbitration is a question of law.
In re Medallion, Ltd., 70 S.W.3d 284, 288 (Tex. App.—San Antonio 2002, orig. proceeding). We
review whether a party has waived its right to arbitration de novo, giving no deference to the trial
court’s ruling. Perry Homes v. Cull, 258 S.W.3d 580, 598 (Tex. 2008). A party waives arbitration
by substantially invoking the judicial process to the other party’s detriment. Perry Homes, 258
-2-
04-13-00273-CV
S.W.3d at 589-90; J.B. Hunt Transport, Inc. v. Hartman, 307 S.W.3d 804, 810 (Tex. App.—San
Antonio 2010, orig. proceeding). “Due to the strong presumption against waiver of arbitration,
this hurdle is a high one.” Perry Homes, 258 S.W.3d at 590. The test for determining waiver
requires us to ask (1) whether the party seeking arbitration substantially invoked the judicial
process; and (2) whether the opposing party proved it suffered prejudice as a result. Medallion,
79 S.W.3d at 288. This test requires us to look at the totality of the circumstances. Perry Homes,
258 S.W.3d at 591.
We agree with the dissent’s analysis and conclusion that Icon’s participation amounted to
Icon “substantially invoking the judicial process.” However, we must conclude Servicios did not
carry its burden to prove the second requirement, i.e., that it would suffer prejudice if compelled
to arbitration. In its response to Icon’s motion to compel arbitration, Servicios asserted:
By substantially invoking the judicial process, [Icon] has prejudiced [Servicios].
[Servicios] invested a significant amount of time and expense into litigating this
case over the past 2 ½ years. [Servicios] has incurred significant attorney’s fees
and costs associated with litigation preparation.
However, showing prejudice is generally an evidentiary burden. Williams Indus., Inc. v. Earth
Dev. Sys. Corp., 110 S.W.3d 131, 135 (Tex. App.—Houston [1st Dist.] 2003, no pet.). Here, no
evidentiary hearing was held on the motion to compel and Servicios did not attach any evidence
to its response to support its general allegations. Generalized complaints about delay and expense,
without evidentiary support, are insufficient to establish prejudice. Pennzoil Co. v. Arnold Oil Co.,
Inc., 30 S.W.3d 494, 499 (Tex. App.—San Antonio 2000, orig. proceeding); see also Williams
Indus., 110 S.W.3d at 135 (Tex. App.—Houston [1st Dist.] 2003, no pet.) (“to show prejudice . . .
EDS would have had to show how the delay, its fees and costs, the volume of discovery, or the
information that Williams obtained in discovery had prejudiced EDS. EDS did not do so.”); Lyda
Swinerton Builders, Inc. v. Pools by Blue Haven, Inc., No. 04-10-00631-CV, 2011 WL 721469,
-3-
04-13-00273-CV
*6 (Tex. App.—San Antonio March 2, 2011, no pet.) (concluding no waiver of right to arbitrate
and stating, “[a]bsent from the record . . . is any evidence detailing the time and resources allegedly
expended by Blue Haven in connection with this matter”).
In Perry Homes, the Supreme Court considered several factors, including when the movant
knew about the arbitration clause, how much discovery has been conducted, who initiated the
discovery, whether the discovery related to the merits rather than arbitrability, how much of the
discovery would be useful in arbitration, and whether the movant sought judgment on the merits.
258 S.W.2d at 592. Here, the arbitration clause is contained in the parties’ contract; therefore;
Icon either knew or should have known about the clause before it was sued on November 1, 2010.
Icon did not move for arbitration until March 22, 2013. But, “[w]e do not consider the length of
any delay separate from the totality of the circumstances.” In re ADM Investor Serv., Inc., 304
S.W.3d 371, 374 (Tex. 2010) (citing to Perry Homes, 258 S.W.3d at 595-97).
As the dissent notes, the arbitration clause provides that “[e]xcept for the exchange of
relevant, material and non-privileged documents between the Parties and a reasonable number of
depositions, there shall be no interrogatories or other discovery in any arbitration hereunder.” We
disagree with the dissent’s conclusion that Icon obtained the benefits of discovery. Our review is
limited to the record before the trial court. Perry Homes, 258 S.W.3d at 596, n.89. Because there
was no evidentiary hearing, because Servicios did not attach evidence to its response to the motion
to compel arbitration, and because Servicios did not ask the trial court to take judicial notice of its
files, the only record before the court was Servicios’s response. Its response listed a number of
pleadings allegedly filed by both parties. However, a close examination of this list reveals all of
Icon’s “discovery” consisted only of its designation of fact and expert witnesses and Icon’s
responses to discovery requested by Servicios. “[A] party who requests lots of discovery is not
prejudiced by getting it and taking it to arbitration in the same way that a party who produces lots
-4-
04-13-00273-CV
of discovery outside the stricter discovery limits in arbitration.” Id. at 600. The record before the
trial court does not show whether any of the requested discovery went to the merits rather than to
arbitrability, how much of the discovery would be useful in arbitration, or, as allowed by the
arbitration clause, whether any of the discovery involved “relevant, material and non-privileged
documents.” Finally, Icon did not seek judgment on the merits, and all requests for trial settings
were filed by Servicios.
CONCLUSION
After examining the totality of the circumstances on this sparse record, we conclude
Servicios did not satisfy the “high hurdle” of demonstrating “the fact of prejudice.” Perry Homes,
258 S.W.3d at 584, 599. Therefore, the trial court erred in denying Icon’s motion to compel
arbitration. We reverse the trial court’s order and remand the case to the trial court for further
proceedings.
Sandee Bryan Marion, Justice
-5-