Archer Western Construction, LLC v. Beaird Drilling Services, Inc., and South Texas Innovations

Citation: Not availableDocket: 05-18-00140-CV

Court: Court of Appeals of Texas; May 21, 2018; Texas; State Appellate Court

Original Court Document: View Document

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

Case No. 05-18-00140-CV involves Archer Western Construction, LLC (Appellant) appealing against South Texas Innovations, LLC (Appellee) in the Fifth Court of Appeals in Dallas, Texas. The appeal arises from the 193rd Judicial District Court of Dallas County, presided over by Honorable Carl Ginsberg. The document outlines the identities of parties and their respective counsel, with Archer Western represented by Paulo Flores, Timothy D. Matheny, and Tracey L. Williams from Peckar Abramson P.C., and South Texas Innovations represented by Seth I. Rubinson and others.

The Appellant's Reply Brief addresses several key points:

1. **Standard of Review**: Establishes the framework for the court's evaluation of the case.
  
2. **Evidence Submission**: Argues that Appellee cannot introduce evidence not presented in the trial court, asserting such evidence should be disregarded by the appellate court.

3. **Express Waiver of Arbitration Clause**: Contends there is no evidence supporting Appellee's claim that Archer expressly waived the arbitration clause, detailing the absence of any express waiver by Archer or evidence to substantiate Appellee's claims.

4. **Judicial Process and Implied Waiver**: Asserts that Archer did not substantially invoke the judicial process to imply a waiver of the arbitration clause and challenges the Appellee's claims of legal prejudice necessary for implied waiver.

5. **Withdrawal of Issue**: Archer Western withdraws its first issue regarding the trial court's denial of its motion to stay proceedings and compel arbitration, arguing that the arbitration clause prohibits waiver.

The brief includes a prayer for relief, a certificate of service, and a certificate of compliance.

The document includes a detailed index of authorities, listing various case citations relevant to the legal issues at hand, primarily from Texas courts. Key cases include Apollo Theater Found. Inc. v. W. Int'l Syndication, In re Bruce Terminix Co., and Perry Homes v. Cull, among others, indicating significant precedents and legal principles that may inform the court's decision.

The section on the standard of review emphasizes that while a reviewing court defers to a trial court's factual findings when supported by evidence, it will assess legal questions, such as waiver, de novo. The trial court's lack of factual findings in the Motion to Compel Arbitration is noted, leading the appellate court to review the matter as a question of law for potential abuse of discretion.

Additionally, it is stated that the appellate court will not consider evidence not presented to the trial court, including additional exhibits and testimony introduced by South Texas Innovations, LLC. Any evidence outside the trial court record is to be disregarded in the appellate review process.

Appellee lacks valid grounds to argue that Archer waived the arbitration clause. No evidence of express waiver was presented to the Trial Court, nor was the issue of express waiver raised at that level. Appellee's own cited case law defines express waiver as an affirmative indication by a party to resolve a case in court instead of arbitration. For instance, express waiver occurred when a party explicitly stated its intention to settle outside of arbitration, as illustrated in cases such as Okorafor v. Uncle Sam. Assocs. Inc. and Garcia v. Huerta. In contrast, the Texas Supreme Court’s decision in Perry Homes v. Cull demonstrated that even extensive objections to arbitration do not constitute express waiver. In the current case, Appellee failed to present any evidence or arguments regarding express waiver to the trial court. Furthermore, Appellee's claim that Archer waived its right to contest express waiver is unfounded, as Appellee also did not raise this argument in its trial court submissions. The Texas Supreme Court has emphasized that waiver of arbitration rights is only found in unequivocal circumstances, supporting the conclusion that no waiver occurred in this situation.

The Texas Supreme Court has only recognized waiver of the right to arbitrate in a single case. Appellee's argument centered on implied waiver, specifically focusing on two elements: substantial invocation of the judicial process and prejudice to Appellee. Appellee has not asserted express waiver, which is crucial as issues not presented to the trial court cannot be grounds for appeal. The trial court judge indicated that the discussion was limited to implied waiver. Appellant is contesting the trial court's brief denial of its Motion to Compel Arbitration without needing to differentiate between types of waiver. Notably, the term "express" does not appear in Appellee's response, which primarily references "substantial invocation" and "prejudice." Appellee's evidence for express waiver is weak and consists of discussions regarding two lawsuits initiated by Appellee, where there was an informal agreement to avoid arbitration for consolidation purposes. This does not constitute an express waiver of the arbitration clause. Additionally, Appellant contends that Appellee's claim that Archer substantially invoked the judicial process is unfounded, particularly regarding the timing of Archer's motion for arbitration in relation to trial court proceedings.

The mediation date of January 9, 2018, was pivotal as it resulted in the settlement of Beaird's claims, leaving only the claims between Archer Western and STI for court resolution. Following this, on January 22, 2018, Archer Western filed a Motion to Stay Proceedings and Compel Arbitration. The trial court then signed an Agreed Order to Dismiss Certain Claims and Parties with Prejudice on February 27, 2018, indicating that only claims subject to the arbitration clause remained.

Regarding the counterclaim mentioned by Appellee, case law cited indicates that defensive pleadings, including counterclaims, do not inherently waive the right to arbitration. The trial court had granted Appellant relief to stop Appellee's serial lien filings that were disrupting project funding, countering Appellee's claim of waiver based on Appellant's defensive actions.

Appellee's assertion that Appellant sought extensive merits-based discovery from STI is refuted by the record, which shows the discovery was primarily defensive and related to Beaird Drilling's claims. Appellee's timing calculation of a 5-112 month delay from the filing date is incorrect; the relevant timeline should start from Appellant's appearance on August 28, 2017, with the Motion to Compel Arbitration filed less than five months later. While delays can be a factor, courts have found that longer delays do not necessarily prejudice a case, referencing various cases where delays of over a year did not result in prejudice.

A review of the Court of Appeal cases cited by the Appellee indicates that there has not been a substantial invocation of the judicial process by the Appellant, nor sufficient prejudice to the Appellee to establish an implied waiver of the arbitration clause. The Hogg opinion, which has been extensively referenced, emphasizes that the filing of defensive pleadings does not necessarily constitute a waiver of arbitration. In cases where more extensive discovery was conducted, courts found no waiver, even with discovery periods lasting from six to nineteen months. 

The determination of waiver should not solely rely on the duration between litigation initiation and the request for arbitration, but rather on the extent of discovery in relation to the case's specifics. In the Hogg case, the Appellant’s attorney acknowledged that much of the discovery pertained to the enforceability of the contingent fee agreement, directly affecting the case's merits. Although not all discovery was completed, a significant amount had been conducted, and the parties were nearing the end of the discovery process when the motion to compel arbitration was filed.

A critical factor in assessing whether Ms. Hogg invoked the judicial process relates to her active participation in litigation until an adverse ruling was issued. The Hogg case highlighted that Ms. Hogg's engagement in litigation was primarily motivated by the avoidance of impending sanctions after she provided misleading testimony regarding the existence of recordings. Her attempt to switch to arbitration after facing an unfavorable ruling indicates a strategic maneuver to regain advantage in the discovery dispute.

The Hogg Court determined that Ms. Hogg suffered prejudice due to her litigation conduct, which ultimately led to her waiver of the right to arbitration. In contrast, the El Paso Court of Appeals found insufficient evidence of prejudice regarding costs incurred by LCA, noting that LCA did not adequately demonstrate the extent of costs or the substantiality of the discovery requests made by Ms. Hogg. The court concluded that LCA would not face significant financial detriment if the dispute was sent to arbitration. It was established that Ms. Hogg could not retract her waiver after participating in litigation and facing an adverse ruling, coupled with the impending sanctions order. Her attempt to seek arbitration came too late, as she had manipulated her right to arbitration to her benefit and to LCA's detriment. The court distinguished her case from other appellate decisions cited, which generally involved significant delays and extensive discovery by the movants before seeking arbitration. Specific cases referenced illustrated various degrees of delay and adverse rulings, reinforcing the conclusion that Ms. Hogg's actions were particularly manipulative and unjustifiable in comparison.

The trial court suspended the hearing on the motion to compel arbitration to allow the Okorafors to respond to discovery, which they failed to do adequately. Consequently, the court denied their motion, noting that the Okorafors sought to compel arbitration while not complying with Uncle Sam's discovery requests, potentially disadvantaging Uncle Sam. The trial court granted the Okorafors an extension to provide discovery responses, but found those responses to be incomplete and deficient. The Houston Court of Appeals upheld the trial court's decision, asserting that forcing Uncle Sam to arbitrate without sufficient discovery would grant the Okorafors an unfair advantage. The court ruled that Uncle Sam had not demonstrated sufficient legal prejudice to imply waiver of the arbitration clause, as costs incurred in obtaining discovery do not factor into the prejudice analysis. The evidence presented by Uncle Sam regarding attorney's fees was deemed insufficiently detailed to support a finding of prejudice. Additionally, the Appellant withdrew its first issue regarding alleged error in denying the motion to stay proceedings and compel arbitration, acknowledging that the arbitration clause prohibits waiver and conceding that the Appellee's interpretation of the clause regarding forum objections was more logical.

Archer Western Construction, LLC requests the Court to reverse the Trial Court's order, stay the underlying proceedings, and compel arbitration among the remaining parties involved in the case. The company also seeks any additional legal and equitable relief to which it may be entitled. The document is submitted by attorneys Paulo Flores, Timothy D. Matheny, and Tracey L. Williams from Peckar Abramson, P.C. A certificate of service confirms that a copy of this document was provided to all counsel of record on May 21, 2018, in accordance with Texas appellate procedures. Additionally, a certificate of compliance states that the document contains 5,138 words, adhering to the Texas Rules of Appellate Procedure.