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In re Deeb

Court of Appeals of Texas, Third District, Austin

December 15, 2017

In re Joseph Deeb, d/b/a JD Motors

         ORIGINAL PROCEEDING FROM TRAVIS COUNTY

          Before Justices Puryear, Field, and Bourland

          MEMORANDUM OPINION

          DAVID PURYEAR, JUSTICE

         Relator Joseph Deeb, d/b/a JD Motors, has filed a petition for writ of mandamus complaining of the trial court's order granting a motion to lift an abatement filed by the real parties in interest, Kevin and Mickey Pike. See Tex. R. App. P. 52. As explained below, we conditionally grant the petition for writ of mandamus. See id. R. 52.8(c).

         The Pikes entered into a contract to buy a used car from Deeb, and that contract included an arbitration clause. The arbitration clause provided that the buyers could choose an arbitrator, subject to Deeb's approval; that if the buyers demanded arbitration, they would pay one-half of the arbitration fees and Deeb would pay the other half; and that if Deeb demanded arbitration, he would pay the entire fee. After the Pikes became unsatisfied with the car, they sued Deeb, claiming that the car was defective. Deeb filed an answer and a motion to abate the appeal and compel arbitration, and the Pikes responded that they did not object to arbitration.

         On December 9, the Pikes filed a claim with the American Arbitration Association.[1]The trial court signed an order of abatement on January 5, 2017. In early February, AAA sent the parties notice that all parties had to agree to AAA as the arbitrator, asking the parties to sign a document agreeing to AAA's administration of the dispute and asking Deeb to pay his portion of the filing fees. In late March, AAA informed the parties that it was closing the file and withdrawing from the matter because Deeb had not consented to it as arbitrator or paid the filing fees. On May 11, Deeb opened a new case with AAA, paying the filing fees. The Pikes then filed a motion to lift the abatement, arguing that Deeb had breached the arbitration agreement and had waived his right to enforce the arbitration agreement. The trial court agreed and signed an order granting the Pikes' motion. Deeb then filed this petition for writ of mandamus.

         The parties do not dispute whether there was a valid arbitration agreement in place. The only question is whether Deeb by his ignoring AAA's requests for his portion of the fees and his agreement to its conducting the arbitration, which resulted in AAA's closing the file opened by the Pikes, amounted to the implied waiver of his right to invoke arbitration.

         "There is a strong presumption against waiver under the FAA." In re D. Wilson Const. Co., 196 S.W.3d 774, 783 (Tex. 2006); In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 762 (Tex.2006) (per curiam). To show that Deeb impliedly waived his right to arbitration, the Pikes must prove that Deeb has "substantially invoked the judicial process" by engaging in conduct inconsistent with the claimed right to compel arbitration, and that his inconsistent conduct has caused the Pikes to suffer detriment or prejudice. See G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502, 511-12 (Tex. 2015). "Because the law favors and encourages arbitration, 'this hurdle is a high one.'" Id. (quoting Richmont Holdings, Inc. v. Superior Recharge Sys., L.L.C., 455 S.W.3d 573, 575 (Tex. 2014) (per curiam)).

         Whether a party has substantially invoked the judicial process depends on the totality of the circumstances, considering factors such as how long the party waited to compel arbitration, any reasons for his delay, his knowledge of the arbitration agreement before invoking the right, how much and what kind of discovery was conducted before arbitration was sought, whether the party requested the court to dispose of any claims on the merits or asserted affirmative claims for relief, how much merits-related pretrial activity the party engaged in, how much time and expense the parties have expended related to the litigation, whether activity in court would be duplicated in arbitration, and when the case was to be tried. Id. (citing Perry Homes v. Cull, 258 S.W.3d 580, 590-91 (Tex. 2008)). "Merely 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., 192 S.W.3d at 763 (quoting In re Service Corp. Int'l, 85 S.W.3d 171, 174 (Tex. 2002)).

         The record reflects that on November 17, 2016, the same day he filed his original answer, Deeb filed his motion to compel arbitration. The trial court signed its abatement order in early January 2017, and AAA closed its file almost three months later due to Deeb's non-response to its communications. About six weeks after that, in mid-May, Deeb opened a second file at AAA, and the Pikes filed their motion to lift the abatement in late June, at which time Deeb apparently informed them and the trial court that he had opened an arbitration case at AAA. We cannot say on this record that Deeb has "substantially invoked" the judicial process, nor can we say that the Pikes have been prejudiced, although Deeb's conduct has certainly imposed on them a several-month delay in the settlement of their dispute. See, e.g., G.T. Leach Builders, 458 S.W.3d at 511-12.

         We agree with the Pikes that Deeb and his attorney appear to be playing games and shading the facts, both in this Court and below, but based on the relevant case law, we cannot hold that Deeb's behavior has gone so far as to waive his right to arbitration. See id. It is with some reluctance that we conditionally grant mandamus relief and direct the trial court to vacate the order granting the Pikes' motion to lift the abatement. Writ will issue only in the unlikely event that the trial court does not act in accordance with this opinion.

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Notes:

[1] According to Deeb, the Pikes did not ask for Deeb's consent to using AAA before filing the claim or pay one-half of the filing fee, as required by the contract. The Pikes dispute those facts and have provided documents supporting their version of events. Whether the Pikes sought and obtained Deeb's explicit approval or whether they paid the required fees is unimportant to our analysis. We note, however, that we do not approve of the ...


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