## COURT OFAPPEALS SECOND DISTRICTOF TEXAS FORT WORTH NO. 2 - 0 6 - 4 7 2 - CV GE R AL D W . HA DDO CK AP P E L L ANT V . W I L L I AM F . Q UI NN , PAUL E . ROW SEY, I I I , APPE L L EE S J O H N G O F F , T E R R Y N . W O R R E L L , CRESCENT RE AL E STATE E Q UI TI ES C O M PA N Y, CR ESC EN T REA L E STA TE L I M I TE D PARTN ERS HI P AND CRESCE NT R E ALE S T AT E E QUI T I E S , L T D.

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FR O M THE 67TH DI STRI CT CO URT O F TARRA NT CO UN TY

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I. I nt r oduc t i on I n t hi s con so l i dat ed i nt er l ocu t or y a ppe al an d m and am us pr oce edi ng, R e l a to r a n d A p p e l l a n t G e ra l d W . H a d d o c ks e e k s re l i e f fro m th e tri a l c o u rt’s or derst ayi ng ar bi t r at i on pr oceedi ngs t hathe i ni t i at ed agai nstA ppel l ees and Real P a rt i e s i n I n t e r e s tW i l l i a m F . Qu i n n , P a u l E . R o ws e y , I I I , J o h n Go f f , T e r r yN. W o rr e l l , C res c e n t R e a l E sta te E q u i ti e s C o m p a n y( “C E I ”), C res c e n t R e a l E sta te Equ i t i es Li m i t ed Part ner shi p ( “C R EELP ”) , and C r escentReal Est at e Equi t i es, L i m i te d (“C R E E ” ). H add ockr ai se s t hr ee i ss ues . I n hi s f i r sti ss ue, H add ockar gue s t hatt he tr i a l co u rti m p rop e rl yas su m e d j u ri sd i c ti o n b e c a u se the p a rt i e s c o n tr a c ted to hav e a l l i ss ues — i ncl udi ng qu es t i onsofar bi t r abi l i t y— dec i ded by ar bi t r at i on. Secon d, H add ock con t end s t hatev en i ft he t r i al co urtha d j ur i sd i ct i on t o de ci de som e i ssues ofar bi t r abi l i t y, t he m ai n i ssue i n t hi s case— w het herhe r epud i at ed orw ai ved ar bi t r at i on— shoul d be deci ded b yan ar bi t r at or . Thi r d, H addo ck ar gue s t hatt he t r i al co urter r ed and abu se d i t s di sc r et i on byco ncl udi ng t hathe r epud i at ed orw ai ved ar bi t r at i on byengagi ng i n pr i orli ti gat i on t hatw as i nco ns i st entw i t h a r bi t r at i on. R e a l P a rt i es i n I nt er estcont end t hatt he i ssue ofr epud i at i on orw ai ver w as pr oper l y f ort he court t o deci de and t hat t he t r i al court cor r ect l y det er m i ned t h a tH a d d o c kre p u d ia t e d , o rin t h e a lt e r n a t iv e w a iv e d , a r b it r a t io n o fh is c la im s3

by s ubs t ant i al l y i nvok i ng t he j udi ci al pr oce sst o t hei rde t r i m ent . Theyar gue t hatt he tr i al c ourtco r r ec t l y c onc l ude d t hatt he r em ai ni ng c l ai m s as se rt ed by H addo ck, i ndi vi dual l y and der i vat i vel y on beh al fofC EI st ockho l der s and agai nst n o n sign a to ri e s, are n o t w i th i n the sc o p e o f t h e arb i tr a ti o n ag ree m e n t. I I . Fac t ualan d Pr oce dur alBac kgr ound A . Th e Part i es 1. Th e C r escentEnt i t i es C E I i s a p u b l i c l yh e l d rea l e sta te i n v e stm e n t tr u st (co m m o n l yreferred to as a “ R EI T”) or gani zed undert he l aw s oft he st at e ofTexas. C EI i s st r uct ur ed as an U m br el l a Part ner shi p R eal Est at e I nvest m entTr ustw her eby C EI ow ns a m aj or i t y oft he l i m i t ed partne rsh i p i nt er est s i n C R EELP , a D el aw ar e l i m i t ed part ner sh i p. Thi s or gan i z at i ona l st r uct ur e ( r ef er r ed t o as an “ U PREI T”) al l ow s ow ner s ofi nve st m entr ea l es t at e t o s el l t hei rpr ope rt i est o C REELP i n e xch ang e f orC R EELPuni t s, w hi ch t he sel l erm ay l at erconverti nt o C EI co m m on st ock. Th e r e a l e s t a t e o w ne r s i nc urn o i nc om e t a x l i a bi l i t y un t i l t he y s e l l t hes t ock. C R EE, a D el aw ar e cor por at i on, i s a w hol l y ow ned subsi di ar y ofC EI and ser ves a s C R E E L P ’s g e n e ra l p a rtn e r.4 2. Th e I ndi vi dual s I n 1994, H add ockan d t w o c of ounde r s cr ea t ed t he C r es ce ntEnt i t i esan d r e la t e d c o m p a n ie s . P r io rt o 1 9 9 4 , H a d d o c k h a d s e r v e d in v a r io u s c a p a c it ie s in com pani es f or m ed by on e oft he cof oun der s, i ncl udi ng ser vi ng as l ead t r a n s a c t io n a l a t t o r n e ya n d c h ie fn e g o t ia t o r . O ft h e in d iv id u a l R e a l P a rt ie s in I nt er est , John G of f cur r ent l y serves as C EI ’ s C EO and V i ce C hai r m an. W i l l i am Q ui nn, Pau l R ow se y I I I , and T er r y W or r el l s erve asm em ber s ofCEI ’ s Boar d of TrustM anager s. B. Th e C R EELPPart ner shi p A gr eem entand A r bi t r at i on C l ause I n Febr uar y1 9 9 4 , H addo ck, as CE I ’ s Pr esi dent, si gned a l i m i t ed p a rt n e rsh i p ag ree m e n t on b e h a l f o f C E I , C R E E , a n d s e v e ral li m i ted p a rt n e rs to fo rm th e C R E E L Pli m i te d p a rtn e rs h i p . C R E E w a s C R E E L P ’s g e n e ra l p a rtn e r. H add ockbe ca m e a l i m i t ed part neri n C REELP a s w el l asPr es i den tofCEI , an d he bec am e CEO ofCEI i n 199 6 . A s an of f i ce ran d s eni orm ana gem ent em pl oye e, H add ockr ec ei ved opt i onst o pur cha seuni t s i n CR EEL P i n 1995 and 1 9 9 6 , w h i c h w e re e x c h a n g e a b l e for C E I c o m m o n sto c k . T h e o p ti o n s fo r bo th t he C REELP u ni t s and CEI s t oc k w er e c r ea t ed by i nce nt i ve pl ansad opt ed by t hose ent i t i es’ r espect i ve governance com m i t t ees. Th e or i gi nal C R EELPl i m i t ed part ner shi p a g reem entdi d not contai n an a r b it r a t io n a g r e e m e n t . H o w e v e r , in M a y1 9 9 4 , t h e lim it e d p a rt n e r s h ip1 ... Each ofsever al am ended part ner shi p agr eem ent s cont ai n t he i denti cal

ar bi t r at i on pr ovi si on. 5 a g r e e m e n tw a s a m e n d e d t o a d d a n a r b it r a t io n a g r e e m e n tt h a tp r o v id e s , in p e rt i n e n t pa rt : 1 Sect i on 16. 1 A r bi t r at i on N o t w i t h s t a n d in g a n y t h in g t o t h e c o n t r a r yc o n t a in e d in t h is A gr ee m ent , al l cl ai m s, d i sp ut esan d c ont r ove r si esbe t w ee n t he part i es her et o ( i ncl udi ng, w i t hou tl i m i t at i on, any cl ai m s, di sput es, and co nt r ove r si esbe t w ee n t he Part ner sh i p a nd any one or m or e o f t he Part ner s and any cl ai m s, di sp ut es and con t r ove r si es am ong a ny t w o o rm o r e P a rt n e r s ) a r i s i n g o u to fo rin c o n n e c t io n w it h t h is A gr ee m e n to rt h e P a rt n e r s h i p c r e a t e d h e r e b y , r e l a t i n g t o t he val i di t y, co ns t r uct i on, pe r f or m anc e, br ea ch, en f or ce m entor t er m i nat i on t her eof , orot her w i se , s hal l be r es ol ved by bi ndi ng a r bi t r a t i on i n t heSt a t e ofTex a s , i n a c c or da nc e w i t h t hi s Art i c l e 16 and, t o t he ext entnoti ncon si st enther ew i t h, t he Exp edi t ed Pr oc e du r e s a nd Com m e r c i a l Ar bi t r a t i on Ru l e s o ft heAm e r i c an A r bi t r at i on Ass oci at i on. Th e arbi t r at i on agr eem entco nt ai ns ad di t i onal p ar agr aphs ofdet ai l ed pr ocedu r es t o be f ol l ow ed i n any ar bi t r at i on pr oceedi ngs und ert he agr eem ent , i ncl udi ng an exp edi t ed sc hed ul e f or se l ec t i on ofan ar bi t r at i on pa nel , f orco m m enc em entan d com pl et i on oft he ar bi t r at i on pr oce edi ng w i t hi n s i xt y da ys aft ers el ec t i on, an d fo r re n d i ti o n b yth e p a n e l o f i ts a w a rd w i th i n th i rtyd a y s th e re a fte r.6

C . The Sev er anc e Agr ee m ent I n June 19 99 , H addo ck res i gned fr om h i s execu t i ve posi t i ons and enter ed i nt o a confi denti al sever ance agr eem entw i t h C EI and C R EELP , w hi ch pr ovi ded fo r hi m to re c e i v e ce rta in c a s h co m p e n sa ti o n an d w h i c h , to g e th e r w i th si m ul t aneou sl y execut ed am ended uni topt i on and st o c ko pt i on agr eem ent s, a c c e l e r a t e d t he ve s t i ng of c e rt a i n of hi s CREE L P un i t op t i on s a nd C EI st ock opt i onst hathe ha d pr evi ous l y r ec ei ved aspa rtofhi s com pen sa t i on. The a g r e e m e n tc a lle d f o rH a d d o c kt o re lin q u is h a ll o fh is re m a in i n g u n v e s t e d u n it opt i onsan d s t ockop t i on s. Par agr aph 13 oft he se ver anc e a gr ee m ent( t he “u nf avo r abl e- com m ent s cl aus e” ) r es t r i ct ed both H add ockan d t he C r es ce nt E n ti ti e s fro m m a k i n g u n fa v o ra b l e c o m m e n ts a b o u t th e o th e r o r a b o u t H a d d o c k ’s j ob pe r f or m ance . The se ver anc e a gr ee m entdi d notco nt ai n a n a r bi t r at i on cl ause. D . T h eP r io rL a w s u it I n M arch 2 0 0 5, H add ockf i l ed a s ui tf ora dec l ar at or y j udgm entan d f or tem p o raryan d p e rm a n e n t i n j u n c ti o n s a g a i n st th e C res c e n t E n ti ti e s i n the 1 7 th D i st r i ctC ourtofTar r antC oun t y , T e x a s. H addo ck pl eaded hi s pr i orst at us as C E O a n d P r e s id e n to fC E I, C R E E , a n d o t h e rre la t e d e n t it ie s re f e r r e d t o i n h is pet i t i on as “t he Em pl oyerG r oup , ” t hathe and t he Em pl oyerG r oup had agr eed t o t er m i nat e hi s em pl oym entrel at i onshi p i n June 19 99 , an d t hatt he part i es had7

ent e r e d i nt o a c on f i de nt i a l s e ve r a nc e a gr e e m e ntt ha th e w ou l d f i l e u nd e rs eal
w i t h t he court . H add ockst at ed t hatas cons i der at i on f orhi s r es i gna t i on f r om al l di r ect or shi ps and of f i ces hel d i n t he Em pl oyer G r oup , th e sever ance agr eem entpr ovi ded t hat , i n addi t i on t o st ock and un i t s i n C EI and C R EELPt hat he al r ea dy o w ned , he w aspr om i se d c ert ai n c as h c om pen sa t i on a s w el l ast he ac ce l er at e d v e s t i n g o fc e rt a i n s t o c ka n d p a rt n e r s h i p u n i to p t i o n s a n d t h a the t her ebybeca m e i m m edi at el y ves t ed i n a l ar ge num berofst ockand uni topt i ons i n bot h CEI an d CR EEL P. I n hi s pet i t i on, H add ockf urt herex pl ai ned t hath e h ad bec om e “concer ned” t hatt he C r esc e n t En t i t i es w er e bei ng m anaged and operat ed a d v er sel y t o i nt er est s ofshar ehol der s and uni t hol der s by of f er i ng execu t i ves exc es si ve com pen sa t i on pa ck age s and r i sk y l oan s t hats er i ous l y j eop ar di z ed t he fi n a n c i a l h e a l th an d sta b i l i ty o f th e e n ti ti e s. H a d d o c kall e g e d tha t he d e sir e d to di scuss t hese concer ns w i t h f el l ow shar ehol der s and uni t hol der s and t o f urt her i nvest i gat e butf ear ed t hatdoi ng so m i ght be const r ued byt he C r escentent i t i es a s a bre a c h o f th e u n fav o rab l e co m m e n ts c l a u se i n the se v e ran c e ag ree m e n t. H a d d o c ka lle g e d t h a th e h a d re c e iv e d t h r e a t s t h a tt h e C r e s c e n tE n t it ie s w o u ld f or f ei t hi s opt i ons as a r es ul t of hi s con duc t i n di sc us si ng t hos e m att ers a nd e x p o s i n g th e i r “ q u e s ti o n a b l e p ra c ti c e s .”8

H add ocks oughtt o c l ar i f y orr ef or m t he se ver anc e a gr ee m entby a decl ar at or y j udg m entt hatthe un f avor abl e com m ent s cl ause oft he sever ance a g r e e m e n tw a s v o id o rlim it e d t o s t a t e m e n t s ris in g t o t h e le v e l o fa c t io n a b le def am at i on. H e al so sough t and obt ai ned a t em por ar y r est r ai ni ng or deragai nst th e C re s c e n t E n ti ti e s fro m “ [t]h re a te n i n g o r ta k i n g a n ya c ti o n to d e c l a re f or f ei t ed ori nt er f er e w i t h” hi s r i ght s i n a ny s har esofCR EE orCR EEL P, al r ea dy o w n e d b yh im o rs h a r e s o ru n it s s u bje c tt o a n u n e x e r c is e d o p t io n h e ld b yh im . Th e r est r ai ni ng or dergr ant ed by t he t r i al courtal so pr ovi d e d thatal l part i es w er e t o abi de by t he unfavorab l e -co m m ent s cl ause. The part i es l at eragr eed t o a n o rd e r e x te n d i n g th e te m p o ra ryre s tra i n i n g o rd e r u n ti l th e d a te o f tri a l, or i gi na l l y s c he du l e d f orAug us t29, 2005 . Th e C r escentEnt i t i es f i l ed a counter cl ai m asserti ng t hatH addo ck had br e a c he d t het e r m s o fb ot h t hes e ve r a nc e a gr e e m e nt a nd a s ub s e qu e nt2001 se t t l em entag r ee m ent , ge ner al r el ea se , an d cov ena nt not t o s ue f orcl ai m s and ca us esofac t i on i n a ny w ay c onnect ed w i t h hi s pr i orem pl oym entor t er m i nat i on. In J u n e 2 0 0 5 , H a d d o c k fi l e d a m o ti o n to c l a ri fyo r m o d i fyth e te m p o ra ry r est r ai ni ng or der , al l egi ng t hat he pr opo sed t o exer ci se hi s r i ghtsas a uni t hol der i n C R EELPand t he r i ght t o have t he val ue ofhi s opt i ons adj ust ed i n accor dance
w i t h “ r e l e v a n ta g r e e m e n t s a n d p l a n s ” u n d e rw h i c h t h e o p t i o n s w e r e c r ea t ed.9

H add ockal l ege d i n t hatm ot i on t hathe ha d r ea so n t o be l i evehe ha d oneor m or e com m on l aw and st at ut or y causes of act i on agai nstt he C r escentEnt i t i es r e la t e d t o m a n a g e m e n ta n d d e s ir e d “ t o a s s e rtt h e s e c la im s in t h is s u it , o rin ano t hers ui t . ” H add ockr equ es t ed i n hi s m ot i on t hatt he courtr em ove al l doub t t hatf i l i ng th o se law sui t s w oul d not vi ol at e t he t er m s oft he sever ance a g ree m e n t a n d th a t i t e i th e r c l a ri fy o r m o d i fy the tem p o rary res tr a i n i n g o rde r t o p e rm i t h i m to fi l e th e l a w s u i ts . H addo ck subsequentl y f i l ed t w o m ot i ons f orsum m ar y j udg m ent , o ne as t o t he enf or ce abi l i t y of the s eve r anc e a gr ee m entan d t he ot herast o t he C r es ce ntEnt i t i es’ count er cl ai m ; t he C r es ce ntEnt i t i esl i ke w i sem ove d f or sum m a ry j u d g m ent . A f t era t w o- day hear i ng, t he t r i al courtsi gned a f i nal j udgm enton Dece m ber1, 2005 , or der i ng t ha tH add ockan d t he C r es ce nt Enti t i es t ake not hi ng on t hei rr espect i ve c l a i m s and counter cl ai m s. H addo ck a p p e a le d t o t h is c o u rtf r o m t h e t a k e -n o t h in g s u m m a r yj u d g m e n ta g a in s th im , bu th e l a t e rm ov e d t o di s m i s s t heap pe a l , an d w e d i s m i s s e d i to n Apr i l 6, 2006 . See Haddock v. Cres centRea l Estate Equiti

esCo. , No. 02- 06- 00096

- CV , 2006 W L9 0 9 4 7 0 , a t * 1 (T e x . A p p .— F o rt W o rth A p r. 6 , 2 0 0 6 , n o p e t.). E. The Ar bit r at i on Dem and O n D ecem ber6, 20 05 , si x days af t ert he tri a l co urtsi gned i t s f i nal j udg m ent , H addo ck w r ot e t o t he C EI C om pensat i on C om m i t t ee, r equest i ng t hat10

i tad j us tt he exe r ci sepr i ce f orhi s opt i onspur su antt o t he ant i di l ut i on pr ovi si ons o f th e s to c ka n d u n i t o p ti o n p l a n s , w h i c h re q u e s t w a s re fu s e d . T h e re a fte r, a c c o rding to H a d d o c k , C R E E L Pan d C E I co n ti n u a l l yrefu se d to a l l o w h i m to exer ci se C R EELPuni topt i ons and t o exchan ge t hem f orC EI st ock. O n J u ly 1 0 , 2 0 0 6 , H a d d o c k f ile d a f o rt y -t h r e e p a g e S t a t e m e n to fC la im s w i t h t he A m er i ca n A r bi t r at i on A ss oci at i on unde r t he ar bi t r at i on provi si on con t ai ned i n t he C REELP l i m i t ed p art ner sh i p a gr ee m ent . I n hi s St at em entof C l ai m s, H addo ck assert ed causes ofact i on agai nstal l oft he C r escentEnt i t i es as w el l as t he i ndi vi dual Real Part i es i n I nt er estforbr each ofcont r act , br each oft he dut y ofgood f ai t h a nd f ai rde al i ng, vi ol ati on ofs ec ur i t i esl aw s, an d b re a c h o f fi d u c i a ry d u ty. A s i n h i s p ri o r su i t, H a d d o c kse t f o rt h the ev e n ts r e g a r d in g h is re s ig n a t io n a s d ir e c t o ra n d o f f ic e rf r o m t h e C r e s c e n tE n t it ie s in 19 99 , and al l eged t hatsi nce t hatti m e, t hose ent i t i es’ oper at i ons had decl i ned and t he ent i t i esha d be gun t o l i qui dat e t hei rr ea l estate p r ope rt i es , us i ng t he pr oce edst o cont i nue t o aw ar d ext r aor di nary di vi den ds t o s t ock hol der s, t her eby di l ut i ng t he val ue ofhi s C R EELPuni topt i ons. H addo ck f urt heral l eged t hatt he Enti t i e s’ C om pensat i on C om m i t t ee r efuse d t o a dj us tt he exe r ci sepr i ce ofhi s opt i onsaspr ovi ded by ant i
- di l ut i on pr ovi si onsi n t he opt i on a gr ee m ent s, pr eve nt ed hi m f r om co nve rt i ng hi s opt i ons t o CEI co m m on s t ock , an d r ef us ed t o al l ow hi m t o exer ci sehi s opt i onsw i t h a11

rec o u rse p rom i ss o ry n o te a s p rov i d e d b ythe C R E E L Pu n i t op ti o n ag re e m e n t, r es ul t i ng i n dam age s of ove r$8. 2 m i l l i on. Haddoc k a l so as se rt ed a c l ai m , i n a d e ri v a ti v e ca p a c i ty o n b e h a l f of C E I sh a reh o l d e rs, as se rt i n g tha t l o a n s to com pan y i ns i der s vi ol at ed t he Sar ban es - O xl ey A ct , r es ul t i ng i n da m age s t o t he sh ar eho l der s ofatl ea st$39. 7 m i l l i on, i ncl udi ng l os ti nt er es t . He nam ed Q ui nn, Row se y, and W or r el l as part i es bas ed upon t hei r se r vi ce on a Spe ci al Li t i gat i on C om m i t t ee f ort he C r es ce ntEnt i t i es t hatr ef us ed hi s dem and r ega r di ng t he d e r iv a t iv e c la im . F. The Under l yi ng Pr oce edi ng Re a l P a rt i e s i n I n t e r e s t f i l e d t h i s a c t i o n i n t h e 67 t h Di s t r i c t C ourtof T a rra n t C o u n tys e e k i n g a s ta yo f th e a rb i tra ti o n p ro c e e d i n g s a n d a d e c l a ra to ry j udgm entt hatH ad do ckha d r epu di at ed t he C REELP a r bi t r at i on a gr ee m entby f i l i ng h i s M a r c h 2005 s ui ta nd p r oc e e di ng t o a f i na l j ud gm e ntr a t he rt han a r b it r a t in g t h e is s u e s in t h a tc a s e a n d t h a tt h e re m a in in g c la im s w e r e n o tw it h in t he sco p e o f t he ar bi t r at i on agr eem ent . H addo ck answ er ed w i t h a gener al deni al and a pl ea t o t he j ur i sdi ct i on assert i ng t hatt he t r i al courtl acked j ur i sd i ct i on t o de ci de anyi ss uesofar bi t r abi l i t y, i ncl udi ng w ai verorr epu di at i on. A l t er nat i vel y, he as se rt ed t hatev en i ft he cou rtha d j ur i sd i cti on ove rs om e a rbit rab i l i ty i ss u e s, i ts j u ri sd i c ti o n w a s l i m ite d i n sc o p e an d d i d n o t al l o w i t t o deci de t he w ai verorr epud i at i on i ssue.12

A f t era hea r i ng on t he appl i ca t i on t o st ay ar bi t r at i on, t he t r i al co urt
— t he p re s i d i n g j u d g e b e in g th e s a m e j u d g e w h o h a d e a rl i e r e n te re d th e te m p o ra ry res tr a i n i n g o rde r i n the p ri o r su i t, s i tti n g for the reg u l a r j u d g e o f t h e 1 7 th D i st r i ctCourt
— si gne d an or dergr ant i ng t he st ay and pe r m ane nt l y e nj oi ni ng H a d d o c kf r o m p u r s u in g h is a r b it r a t io n d e m a n d . A f t e rH a d d o c kp e r f e c t e d h is appeal i n t hi s case, the t r i al co urtfi l ed f i ndi ngs offactan d concl usi ons ofl aw , f i ndi ng t hatH add ockha d r epu di at ed t he C R EE LP ar bi t r at i on a gr ee m entby l i t i gat i ng t he M ar ch 200 5 su i tt o a f i nal j udgm ent , t hat he w ases t oppe d f r om r el yi ng on t he ar bi t r at i on agr eem ent , t hat R eal Part i es i n I nt er estaccept ed t hat r e p u d ia t io n b yd e f e n d i n g a g a in s tH a d d o c k ’s c la im s a n d f ilin g a c o u n t e r c la im , and t hatReal Part i es i n I nt er estsuf f er ed pr ej udi ce. H a d d o c k s e e k s r e v ie w o f t h e t r ia l c o u rt ’s o r d e rb o t h b yp e t it io n f o rw r it o f m a n d a m u s a n d b yi n terl o c u to ry a p p e a l . W e h a v e co n so l i d a ted the tw o p ro c e e d i n g s fo r a d e c i s i o n d i s p o s i n g o f b o th s i m u l ta n e o u s l y . S e eInreV a lero E n erg yCo rp . , 968 S. W . 2d 916 , 916 –17 ( Tex. 1998 ) ( or i g. pr oce edi ng) . The t r i al co urth ass t aye d a l l pr oce edi ngsi n t hi s ca sepe ndi ng t he out com e o ft he m a n d a m u s p r o c e e d in g a n d in t e r lo c u t o r ya p p e a l.13

I I I . D i sc us si on A . M a n d a m u so rIn t e r lo c u t o ryA p p e a l? The pa rt i esag r ee t hatt he Fed er al A r bi t r at i on Act( “F A A ”) ap pl i est o t he a rb i tra ti o n a g re e m e n t i n th i s c a s e . Se eg en era l ly 9 U . S . C . §§ 1– 16 ( W est 200 9) . A part y s ee ki ng r el i efpur su antt o t he FA A f r om a den i al ors t ay of a rb i tra ti o n m u s t p u rs u e re l i e f b yw a yo f p e t it io n fo r w ri t o f m a n d a m u s . Inre D . W i l so n Constr. Co. , 196 S . W . 3 d 774 , 780 ( Tex. 2006 ) ( or i g. pr oce edi ng) ( “M and am us i s pr ope rt o c or r ec ta cl ea rab us e o fdi sc r et i on w hen t her e i s no ade qua t e r em edy b y appea l , . . . asw hen a part y i s den i ed i t s con t r ac t ed- f or a rb i tra ti o n rig h ts u n d e r th e F A A .” ); I n re Valero Ener

gy Cor p. , 96 8 S . W . 2d at 917 ( hol di ng m and am us av ai l abl e f orde ni al ofar bi t r at i on beca us e part y has no re m e d yb ya p p e a l u n d e r F A A ); Jack B. A ngl i n Co. v. Ti

pps , 842 S. W . 2d 266, 2 7 2 ( T ex . 1 9 9 2 ) ( ori g. pr oc ee din g ); see al soW. D owHam III Cor p. v. Mi l len n i um In c o m eF

un d , L .L .C . , 237 S . W . 3d 745, 751 ( Tex. A pp. — H ous t on [ 1stD i st . ] 20 07 , n o p et . ) ( hol di ng m andam us onl y m eans ofr evi ew i ng or der gr ant i ng s t ay of ar bi t r at i on) . Th er ef or e, w e w i l l di sm i ss t he i nt er l ocutory appeal f orw antofj ur i sd i ct i on and pr oce ed t o det er m i ne w het herH add ockasRel at or i se n ti tl e d to m a n d a m u s re l i e f. S ee T e x . R . A p p . P . 4 2 .3 (a ), 4 3 .2 (f).14

B. S t andar d ofRev i ew M and am us w i l l i ss ue t o cor r ec t a c l ea rab us e o fdi sc r et i on f orw hi ch t he re m e d yb ya p p e a l i s i n a d e q u a te . I nrePru den ti

a l I n s . Co . o f

Am. , 148 S. W . 3d 12 4, 13 5– 36 ( Tex . 20 04 ) . A t r i al court has no di scr et i on i n det er m i ni ng w hat t he l aw i s ori n a ppl yi ng t he l aw t o t he f ac t s, an d a cl ea rf ai l ur e t o a nal yz e o r a p p l yt h e la w c o rre c tl yw i l l c o n s ti tu te a n a b u s e o f d i s c re ti o n . W al ker v. Packer, 82 7 S . W . 2d 83 3, 84 0 ( Tex . 19 92 ) . W hen a m ot i on t o com pel ar bi t r at i on un der t h e F A A h a s b e e n e r r o n e o u s lyd e n i e d o rw h e n a m o t io n t o s t a ya r b it r a t io n is er r one ous l y gr ant ed, t her e i s no ade qua t e r em edy by app ea l , an d m an dam us w i l l i s s u e . InreD . W i l s o nCo n s tr. Co ., 1 9 6 S .W .3 d a t 7 8 0 ; see al so Inre Nexi on Health at Hum ble, I nc . , 173 S . W . 3d 67, 69 ( Tex. 2005 ) ( or i g. p ro c e e d i n g ) (p e r c u ri a m ). A pa rt y s ee ki ng t o e nf or ce an ar bi t r at i on a gr ee m entm us te stabl i sh t he e x i ste n c e o f a v a l i d a rbit rati o n a g ree m e n t a n d s h o w tha t t h e clai m s i n d i sp u te fa l l w i th i n th e s c o p e o f t h a ta g r e e m e n t. I nreBa n kOn e, N. A. , 216 S. W . 3d 8 2 5 , 8 2 6 (T e x . 2 0 0 7 ) (o ri g . p ro c e e d i n g ) (p e r c u ri a m ); I n re Kel logg Brown & Root , I nc ., 1 6 6 S .W .3 d 7 3 2 , 7 3 7 (T e x . 2 0 0 5 ) (o ri g . p ro c e e d i n g ); s e eB W I Co s ., I nc. v. Beck , 910 S . W . 2d 620, 621 ( Tex. A pp. — A us t i n 1995, or i g. pr oce edi ng) . I n de t er m i ni ng t he val i di t y ofar bi t r at i on a gr ee m ent s unde rt he15

FA A , w e g ene r al l y a ppl y s t at e- l aw pr i nci pl esgov er ni ng t he f or m at i on of c o n tra c ts . I

n re Pal m Har bor Hom es, I

nc. , 195 S. W . 3d 672, 676 ( Te x. 2006 ) ( ci t i ng Fi

r stOpti ons of Chicago, I

nc. v. Kapl

an , 5 1 4 U .S . 9 3 8 , 9 4 4 , 1 1 5 S . C t. 1 9 2 0 , 1 9 2 4 (1 9 9 5 )). O ncet he m ovi ng p art y est abl i sh est he exi st enc e o fa val i d a r bi t r at i on a g r e e m e n t , t h e t r ia l c o u rtt h e n d e t e r m in e s w h e t h e rt h e n o n m o v a n t ’s c la im s f a ll
w i t hi n the sco pe of t he arbi t r atio n c l a u s e . I nreF i r s tMer itBa n k, N. A. , 52 S . W . 3d 74 9, 75 3 ( Tex . 20 01 ) ( or i g. pr oceedi ng) . I ft he t r i al courtdet er m i nes t hata val i d a r bi t r at i on a gr ee m entex i st s, t he bur den shi f t s t o t he part y op pos i ng a rb i tra ti o n to p ro v e i ts d e fe n s e s . J. M. D avidson, I nc. v. Webster, 128 S . W . 3d 22 3, 22 7 ( Tex . 20 03 ) . W het hera val i d ar bi t r at i on agr eem entexi st s i s a l egal q u e s ti o n s u bj e c t to d e n o v o re v i e w . I n re D. W

i l so n Constr. Co. , 196 S. W . 3d a t781. C . The Ar bit r at i on Agr ee m ent H a d d o c kc o n te n d s b yh i s fi rs t i s s u e th a t re p u d i a ti o n a n d w a i v e r a re m a t t e r s o fs u b s t a n t iv e a r b it r a b ilit ya n d t h a tt h e p a rt ie s c le a r lya n d u n m is t a k a b ly agr eed t o have al l i ssues, i ncl udi ng qu est i o ns ofar bi t r abi l i t y, deci ded byan ar bi t r at or . Ther ef or e, he as se rt s, t he t r i al courtl ac ke d j ur i sd i ct i on t o deci de t he is s u e s o fre p u d ia t io n a n d w a iv e r . R e a l P a rt ie s in In t e r e s tc o n t e n d t h a tn o v a lid2 ... W hen an a b u se o fdi scr et i on st andar d ofr evi ew appl i es t o a t r i al

cou rt ’ s r ul i ng, f i ndi ngsoff ac tan d c onc l us i onsofl aw ai d us i n r ev i ew i ng t he pr opr i et y oft he r ul i ng bypr ov i di ng us w i t h a n e xpl ana t i on f ort he r ul i ng. Chrysler

Cor p. v. Bl ackm on , 8 4 1 S .W .2 d 8 4 4 , 8 5 2 (T e x . 1 9 9 2 ); Sam uel so n v. United Hea lthca re of Tex. , I nc ., 7 9 S .W .3 d 7 0 6 , 7 1 0 (T e x . A p p .— F o rtW o rt h 200 2, no p et . ) . Butw hi l e f i ndi ngsoff ac tan d c onc l us i onsofl aw ca n behe l pf ul i n a p p l y i n g th e a b u s e o f d i s c re ti o n s ta n d a rd , th e y a re n o t re q u i re d . Sam uel so n , 7 9 S .W .3 d a t 7 1 0 . T o d e te rm i n e w h e th e r a tri a l c o u rt a b u s e d i ts d i s c re ti o n , w e m us tde ci de w het heri tac t ed w i t houtr ef er enc e t o a ny g ui di ng rul esor p ri n c i p l e s ; in o th e r w o rd s , w h e th e r th e a c t w a s a rb i tra ryo r u n re a s o n a b l e . S ee D owner v. A qua m ar

i ne Oper ator s, I nc ., 7 0 1 S .W .2 d 2 3 8 , 2 4 1

– 4 2 (T e x . 1 9 8 5 ), cert. denied, 4 7 6 U .S . 1 1 5 9 (1 9 8 6 ). A n y fa c tu a l i s s u e s d e c i d e d b y th e c o u rt i n r ea chi ng t he dec i si on un derr evi ew ar e n otrev i ew ed by l ega l
-an d f act ual
- suf f i ci ency st andar ds, al t hou gh w hen t he deci s i on underr evi ew i s based on f ac t s det er m i ned by t he cou rt , t hos e f ac t s m us tha ve so m e s upporti n t he e v i d e n c e . Crouch v. Tenne co, I nc . , 853 S . W . 2d 643, 6 4 9 & n. 2 ( Tex. A pp. — W aco 1 99 3, w r i td e n i ed) ( op. on r eh’ g) . H ow ever , nei t herpart y has chal l enged t he t r i al court ’ s f i ndi ngs off acti n t hi s case. 16 ar bi t r at i on a gr ee m entco nt i nue d t o e xi stbe ca us e Haddoc k “ r epu di at ed”i tby f i l i ng t he pr i orl aw su i t . Theyar gue t hatw hen H add ockco m m enc ed t he pr i or l aw su i t , t he C r es ce ntEnt i t i esw er e put t o a n “ el ec t i on” t o e i t hert er m i nat e o r i ns i st o n pe r f or m anc e o ft he ar bi t r at i on a gr ee m entan d t hat , by f i l i ng a cou nt er cl ai m an d a l l ow i ng t he pr i orl aw su i tt o go t o f i na l j udgm ent , t he C res c e n t E n ti ti e s an d H a d d o c km u tu a l l yterm i n a ted the arb i tr a ti o n ag ree m e n t.

1. The i ss ue i s w aiver ,notr epu di at i on byel ec t i on. I n f i ndi ngs off act 2an d concl usi ons ofl aw t hati tent er ed af t ert he part i es f i l ed t hei r br i ef s i n t hi s cou rtan d t hatha ve notbe en cha l l eng ed by e i t herpa rt y, t he t r i al courtf oun d i n f avorofReal Part i es i n I nt er estt hatH addo ck3 ... The f ac t s i n t hi s ca sear e u ndi sp ut ed. Rel at or ’ s pos i t i on i s t hatt he

tri a l c o u rt m i s a p p l i e d th e l a w to th e fa c ts a n d a b u s e d i ts d i s c re ti o n . S e eInre D i l l ard Dep’tStores, I

nc ., 1 9 8 S .W .3 d 7 7 8 , 7 8 0 (T e x . 2 0 0 6 ).

17 r epu di at ed t he A r bi t r at i on Agr ee m entby f i l i ng a nd pr os ec ut i ng t he Pr i orLaw sui tt o a f i nal j udg m ent . Th e C r escentEnt i t i es accept ed t hatr epu di at i on byde f end i ng agai ns tH add ock ’ s cl ai m s . . . an d by p ros e c u ti n g a c o u n terc l a i m . T h e A rbit rati o n A g ree m e n t c e a se d to e x i st a s b e tw e e n the se p a rt i e s o n o r b e fo re A p ri l 6 , 2 0 0 6 , th e d a te H a d d o c kd i sm i ss e d h i s a p p e a l o f t h e P ri o r La w su i t. 3 To s upportt hei ra r gum entt hatH add ockr epu di at ed t he ar bi t r at i on agr ee m ent , Real Part i esi n I nt er es tr el y on V i reo, P. L. L. C. v. Cates , 953 S. W . 2d 489 , 491 (Te x. A pp. — A us t i n 1997, pe t . de ni ed) . I n V i reo , th e A u s ti n c o u rt hel d t hatw hen a pl ai nt i f ff i l ed sui ton an ar bi t r abl e cl ai m , the defendanth ad an e l e c ti o n to i n sist or n o t on arb i tr a ti o n ; w h e n the d e fen d a n t el e c ted n o t t o a rbit rate , th e p a rt i e s th e refo re m u tu a l l yrep u d i a ted the a rb it rati o n ag ree m e n t. Id. A l t hou gh t he S upr em e C ourto f Texas has notspoken on thi s i ssue, V i reo’ s app r oac h, t hatof“ m ut ual r epu di at i on a nd w ai verba se d on el ec t i on”
w h e n a p la in t if ff ile s s u ita n d t h e n s e e k s a r b it r a t io n , h a s b e e n re je c t e d b yt h is c o u rt o n tw o o c c a s i o n s a s w e l l a s b yo th e r T e x a s c o u rts o f a p p e a l s . See Grand Ho m es, 9 6, L P

v. L o u der

m ilk , 2 0 8 S .W .3 d 6 9 6 , 7 0 4 (T e x . A p p .— F o rtW o rt h 2 0 0 6 , p e t. d e n i e d ) (no ti n g tha t V i reo hol di ng w oul d unde r m i ne pol i cy pr om ot i ng ar bi t r at i on and obser vi ng t hat T G A A w as enact ed t o abr ogate com m on l aw18

“ ri g h t o f e l e c ti o n ” d o c tri n e i n a rb i tra ti o n c o n te x t); see al so Wee To ts Pedi

atr i cs v. Mo ro h un f

o la , 268 S . W . 3d 784, 792 n. 4 ( Tex. A pp. — FortW ort h 2008, no pet . ) ( ag ai n decl i ni ng t o f ol l ow V i reo ); Pra c ti

c eh wy. c o m, I

n c . v. Al

b a n yI VF Ferti l it y and G ynecology, PLLC , N o. 05

- 06

- 00 22 2- C V , 20 06 W L 29 60 83 8, at *3 ( Tex. A pp. — D al l asO ct . 18, 2006 , no p et . ) ( m em . op. ) ( r ej ec t i ng V i reo as c o n f la t in g r e p u d i a t io n a n d w a iv e r ). W e d e c lin e t o re v is itt h is is s u e . W e h o ld t hat t he t r i al cou rt abu se d i t s di sc r et i on by bas i ng i t s or ders t ayi ng a r bi t r at i on on m ut ual r epu di at i on oft he ar bi t r at i on a gr ee m ent . How eve r , thi s i s butt he beg i nni ng ofouri nqui r y. I n addi t i on t o assert i ng r epud i at i on, Real Part i es i n I nt er estcont end t hat H add ockw ai ved t he ar bi t r at i on a gr ee m entby i nco ns i st entco nduc ti n t he pr i or l aw sui ttha t res u l t ed i n pr ej udi ce t o t hem . The t r i al courtm ade addi t i onal fi n d ing s th a t H a d d o c k ’s co n d u c t i n fi l i n g an d p ros e c u ti n g the p ri o r l a w su i t t o f i nal j udgm ents ubs t ant i al l y i nvok ed t he l i t i gat i on pr oce ssan d pr ej udi ce d t he C r es ce ntEnt i t i es . I n Per ry Ho m es v. C ull, h anded dow n af t erbr i ef s w er e f i l ed a n d a f t e rs u b m is s io n in t h is c o u rt , t h e S u p r e m e C o u rto fT e x a s e x t e n s iv e ly add r es se d t he def ens e o fw ai ve rofar bi t r at i on bys ubs t ant i al l y i nvok i ng t he j ud i c i a l pr oc e s s t o t he ot he r pa rt y’ s de t r i m e nt or pr ej ud i c e . 258 S. W . 3d 580, 5 8 9

– 9 0 (T e x . 2 0 0 8 ), cert. denied, 129 S . Ct . 952 ( 200 9) . By po st su bm i ss i on suppl em ent al br i ef s, t he part i es have j oi ned i ssue on w het herH addo ck w ai ved4 ... I nde ed, H add ockha s ar gue d f r om the out se tt hat“ r epu di at i on” an d

“w a i v e r” i n the co n tex t of a p a rt y ’s l i ti g a ti o n co n d u c t t h a t i s i n c o n sisten t w i th ar bi t r at i on hav e no subst ant i ve di f f er ence. 19 hi s r i ght t o ar bi t r at i on byi ncon si st entl i t i gat i on con duct, al t hou gh R eal Part i es i n I nt er es ts t i l l s ay t hi s i s an i ss ue ofbot h w ai veran d r epu di at i on. 4

2 . T h e tri a l c o u rt h a s j u ri s d i c ti o n to d e c i d e w a i v e r. A s a t hr eshol d i ssue, H addo ck ar gues t hatt he t r i al courtl acked subj ect m att erj ur i sd i ct i on t o dec i de t he i ss ue ofw ai ver . Fe der al an d s t at e c ourt s hav e c o n c u rre n t j u ri s d i c ti o n to e n fo rc e t h e F A A . Inre Pal aci os , 221 S. W . 3d 564, 5 6 5 ( T ex . 2 0 0 6 ) ( ori g. pr oc ee di n g ); I n re Kel

loggBrown & Ro ot

, I nc. , 166 S. W . 3d at739 ( ci t i ng Mos esH. Cone Mem ’ l Hosp. v. Mercury Constr. Cor p. , 460 U . S. 1, 26 n. 32, 103 S . Ct . 927, 9 42 n. 32 ( 198 3) ) . W ai veri n t he con t ext oft hi s case i s a quest i on of ar bi t r abi l i t y, and w ho deci des ar bi t r abi l i t y i s a m a tter o f c o n tr a c t i n terp reta ti o n re g a rding th e d i v i sion o f l a b o r or r e sp o n sibi l i ty b e tw e e n th e c o u rt a n d th e a rb i tra to r, n o t j u ri s d i c ti o n . S ee Howsa m v. D e an W itter Reynolds, I

nc. , 537 U. S . 7 9, 83, 123 S. Ct . 588, 592 ( 2002) ( char act er i zi ng pr esum pt i on t hatquest i ons ofar bi t rab i l i t y ar e t o be pr esent ed t o cour tun l ess part i es have cl ear l y and un m i st akabl y agr eed ot her w i se as

“ i n te rp re tiv e ru le ” ); Ma ri ev. A l l i e d Ho m eM tg . Co rp ., 4 0 2 F .3 d 1 , 3 (1 s t C i r.5 ... A l t hough t he t r i al co urtdi d notm ak e a n e xpl i ci tf i ndi ng orco ncl us i on

a s t o w h e t h e ri tp o s s e s s e d t h e p o w e rt o d e t e r m in e t h e is s u e o fw a iv e r , it i m p l i ci t l y so concl uded because i tpr oceeded t o det er m i ne t he essent i al el em ent s ofw ai veragai nstH addo ck.

6 ... T he l i m i t ed part ner shi p agr eem entrequi r es t hatD el aw ar e l aw b e used w h e n co n st ru in g th e a g re e m e n t, s p e c ific a ll yin c lu d in g th e a rb i tr a ti o n ag ree m e n t. Th e part i es agr ee t hat , to t he ext entt hatany st at e subst ant i ve l aw appl i es, D el aw ar e l aw “m i r r or s f eder al l aw . ” W hen appl yi ng t he FA A , T exas court s al so lo o kto fe d e ra l l a w to d e c i d e s u b s ta n ti v e i s s u e s . Ja ckB. A ngl i nCo ., 842 S . W . 2d at27 1– 72 . W e t hus l ook t o f eder al l aw t o det er m i ne t hi s i ssue. 20 2 0 0 5 ) (n o ti n g q u e s ti o n o f w h o d e c i d e s w a i v e r i s o n e o f“ d iv i s i o n o f l a b o r” b e tw e e n c o u rts a n d a rb i tra to rs ). W e r ecent l y deci ded t hi s ver y i ssue agai nstH addo ck’ s posi t i on i n another c a s e . N w. Co n s tr. Co . v. O a kPa rtn e rs, L .P., 248 S. W . 3d 837, 847 ( Tex. A pp. — Fort W ort h 2008, pe t . de ni ed) ( hol di ng qu es t i on ofw ho de ci desi ss ue of
w ai verofar bi t r at i on no t one ofs ubj ec tm att erj ur i sd i ct i on) . W e h ol d t hatt he tri a l c o u rt h a d j u ri s d i c ti o n to d e c i d e th e i s s u e o f w a i v e r. 5

3 . W h o d e c i d e s th eq u e sti o n o f w a i v e r b yi n c o n sisten t co n d u c t? H addo ck nextar gues t hatw ho deci des the quest i on of w ai veri s a m at t er ofco nt r ac tan d t hatt he part i est o t hi s arbi t r at i on a gr ee m entcl ea r l y a nd u n m is t a k a b ly r e f e r r e d a ll q u e s t io n s o f a r b it r a b ilit yt o a n a r b it r a t io n p a n e l. 6W e agr ee that“ar bi t r at i on i s a m at t erofcont r act . ” Howsam , 537 U. S. a t83, 123 S. Ct . at591. The que st i on of“ ‘ w ho has t he pr i m ary po w ert o de ci de21

ar bi t r abi l i t y’ t ur ns upon w hatt he part i es agr eed abou tt hatm at t er . ” Fi r st Opti ons, 514 U. S. a t944, 115 S. Ct . a t1923 . Ther e i s a “ qua l i f i ca t i on” t o t hatge ner al r ul e, w hi ch i s al so an ex ce pt i on to t h e li b e ra l p o l i c yf a v o ri n g a rb i tra ti o n a g re e m e n ts . Howsam , 537 U. S. a t83, 123 S. Ct . at591. “ The qu es t i on w het hert he part i esha ve su bm i t t ed a p a rti c u l a r d i s p u te to a rb i tra ti o n , i .e ., th equ esti o no f arb itra b i

l ity , i s ‘ an i ss ue f or j udi ci al det er m i nat i on [ u] nl es s t he part i es cl ea r l y and unm i st ak abl y p r ovi de ot her w i se. ’ ” Id. ( quot i ng A T & T Te ch s ., In c . v. Co m m c ’n sWo rkers , 475 U. S. 6 4 3 , 6 4 9 , 1 0 6 S . C t. 1 4 1 5 , 1 4 1 8 (1 9 8 6 )); se e al soFi r st Opti ons , 51 4 U . S . at 9 4 4 , 1 1 5 S . C t. a t 1 9 2 4 ; In re We ekle y Ho m es, L .P., 180 S . W . 3d 127, 130 ( Tex. 2 0 0 5 ) ( “[ A ] bs entunm i st ak abl e e vi den ce t hatt he part i esi nt end ed t he contr ar y, i t i s t he court s r at her t han t he ar bi t r at or s t hat m ustdeci de ‘ gat ew ay m a tte rs ,’ su c h a s w h e th e r a v a l i d a rb i tra ti o n a g re e m e n t e x i s ts .” ). I n Fi r st Opti ons , t he Supr em e C ourtnot ed, i n di sc us si ng t he “c l ea ran d u n m i sta k a b l e ev i d e n c e ” req u i rem e n t, th a t “ th e law trea ts sil e n c e o r am b i g u i ty abo ut t he que st i on ‘ who ( pr i m ar i l y) shoul d deci de ar bi t r abi l i t y’ di f f er ent l y f r om t he w ay i tt r ea t s si l enc e oram bi gui t y a boutt he que st i on whether a part i cul ar m e r it s -r e la t e d d is p u t e is a r b it r a b le b e c a u s e itis w it h in t h e s c o p e o fa v a lid ar bi t r at i on agr eem ent , ’ ” so ast o not “f or ce unw i l l i ng par t i es t o ar bi t r at e a22

m a t t e rt h e yre a s o n a b lyw o u ld h a v e t h o u g h ta ju d g e , n o ta n a r b it r a t o r , w o u ld de c i de . ” 514U. S. a t944– 45, 115 S. Ct . a t1924 –25.

a . N o “c l e a r an d u n m i sta k a b l e ” ev i d e n c e o f a g ree m e n t t o del ega t e q ues t i onsofar bit r abi l i ty t o a r bit r at or H a d d o c k a r g u e s t h a tt h e a r b it r a t io n a g r e e m e n to ft h e lim it e d p a rt n e r s h ip agr ee m ent “c l ea r l y and unm i st ak abl y” del ega t es ar bi t r abi l i t y i ss ues , i nc l udi ng w ai ver , t o an ar bi t r at i on pan el by expr essl y i n c o r por at i ng t he C om m er ci al A r bi t r at i on R ul esoft he A m er i ca n Ar bi t r at i on Ass oci at i on ( “AA A ”) . Spec i f i ca l l y, H add ockr el i esupon Rul e 7( a) oft hos e r ul es , w hi ch pr ovi des t hat t he ar bi t r at or “s hal l ha ve t he pow ert o r ul e o n hi s orhe row n j ur i sd i ct i on, i ncl udi ng a ny obj ec t i on s w i t h r es pec tt o t he exi st enc e, s cop e, orva l i di t y oft he ar bi t r at i on agr eem ent . ” A m er i can A r bi t r at i on A ssoci at i on, C om m er ci al A r bi t r at i on R ul es and M edi at i on P r ocedu r es, R7 , ht t p: // w w w . adr . or g/ sp. asp?i d= 22 44 0# R 7 ( l ast a c c e s s e d F e b ru a ry2 5 , 2 0 0 9 ). Real Part i esi n I nter es tr es pond t hatt he su pr em e c ourti n Per ry Hom es hasnow de ci ded , co nt r ary t o Haddoc k’ s pos i t i on, t hatt he i ss ue of w ai veri n a case gover ned byt he FA A i s f ort he cour t , notan ar bi t r at or . 25 8 S . W . 3d at 587 . Al t hough w e a gr ee t hatt hi s w ast he hol di ng i n PerryHo m es, t he a r b i t r a t i o n a g r e e me n ta ti s s u e i n t h a tc a s e c o n t a i n e d n o r e f e r e n c e t o t h e AAA rules . A n d the su p rem e co u rti n tha t ca se n o ted , a l b e i t i n an o th e r se c ti o n o f i ts23

opi ni on, t hatt her e w as no i ndi c a ti on i n t hatcont r actt hatt he part i es had “c l ea r l y a nd un m i st ak abl y agr ee d” t hat t he ar bi t r at ors houl d de ci de ar bi t r abi l i t y. Id. at5 8 7 , n . 15 ( ci t i ng Fi r st Opti ons , 51 4 U . S . at94 7– 48 , 11 5 S . C t . at 192 4) . Ther ef or e, w e d o notr ea d Per ry Hom es asab and oni ng t he “c l ea ran d unm i st akabl e” qual i f i cat i on t o t he pr esum pt i on t hat t he court i s t o deci de i ssues ofar bi t r abi l i t y. Th e m aj or i t y ofcourt s have co ncl uded thatex pr ess i ncor por at i on of r ul es em pow er i ng t he ar bi t r at ort o deci de ar bi t r abi l i t y ( i ncl udi ng r ul i ng upon hi s orher o w n j u ri sd i c ti o n ) c l e a rl yan d u n m istak a b l yev i d e n c e s th e p a rt i e s’ i n ten t t o d e l e g a te i s s u e s o f a rb i tra b i l i tyto th e a rb i tra to r. See, e. g. , Q ual com m I nc. v. No ki aCo rp ., 466 F. 3d 136 6, 1 372 –73 ( Fed . Ci r . 2006 ) ( hol di ng i nco r por at i on of A A A r ul es, i ncl udi ng Rul e 7( a) , cl ear l y and unm i st akabl y show e d p a rt i es’ i n te n t to d e l e g a te i s s u e o f a rb i tra b i l i tyto a rb i tr a to r); Co n tecCo rp. v. Rem o te Soluti on Co. , 398 F. 3d 205, 208 ( 2nd C i r . 2 005 ) ( hol di ng t hati nco r por at i on of A A A Rul es , i ncl udi ng Rul e 7( a) , cl ea r l y a nd un m i st ak abl y e vi nce d i nt entf or arbi t r at ort o de ci de w het hernons i gna t or y pa rt y bo und b y a r bi t r at i on a g re e m e n t); Ter

m in ixIn t ’

l C o . , L .P. v. Pa lm er Ra n chL td. P ’sh ip , 432 F. 3d 1 3 2 7 , 1 3 3 2

– 3 3 ( 1 1 th C i r. 2 0 0 5 ) (ho l d i n g b yi n c o rpo rati n g A A A R u l e s i n to agr ee m ent , pa rt i escl ear l y a nd un m i st ak abl y a gr ee d a r bi t r at ors houl d de ci de
w h e th e ra r b i tra ti o n c l a u s e w a s v a l i d ); Citif i nan ci al , I nc. v. New ton , 35924

F . S u p p .2 d 5 4 5 , 5 4 9

– 5 2 (S .D . M i s s . 2 0 0 5 ) (sa m e ); s e ea ls o Bur ling to nRes . O il & Gas C o . L .P. v. San Juan Basi n Royalt y Trust, 249 S . W . 3d 34, 40 ( Tex. A p p .— H o u s to n [1 s t D i s t.] 2 0 0 7 , p e t. d e n i e d ) (c o l l e c ti n g c a s e s ). Butt he m aj or i t y vi ew doe s not“ m and at e t hatar bi t r at or s dec i de a rb i tra b i l i ty i n a l l c a s e s w h e re a n a rb i tra ti o n c l a u s e i n c o rp o ra te s th e A A A ru l e s .” Sa nJua nBa si

n, 249 S. W . 3 d at42 ( quot i ng Ja m es& Ja cks o n, L L Cv. W illie Ga ry, L L C, 9 0 6 A .2 d 7 6 , 7 8 , 8 0 ( D e l . 2 0 0 6 )) . H a d d o c kp o in t s o u tt h a t , in Jam es& Ja ckso n , t he D el aw ar e Su pr em e C ourtadopted t he m aj or i t y f eder al rule th a t i n c o rpo rati o n o f A A A rul e s re q u i res su b m i ss i o n o f i ss u e s o f arb i tr a b i l i ty t o t he ar bi t r at orr at hert han t he cou rt . 9 0 6 A . 2d at80–8 1. How eve r , t he c ou rti n t ha t c a s e a l s o he l d t ha t t hi s r ul e w ou l d on l y a pp l y i n c a s e s w he r e ( 1) an ar bi t r at i on cl ause gener al l y pr ovi des f orar bi t r at i on o f a ll di sput es and al so ( 2) i nco r por at esa se tofarbi t r at i on r ul est hatem pow er s ar bi t r at or s t o de ci de a rb i tra b i l i ty . Id . B e c a u s e t h e a r b i t r a t io n a g r e e m e n tt h e r e d id n o tg e n e r a lly pr ovi de f orar bi t r at i on of al l di sput es but expr essl y al l ow ed t he part i es t o seek i n j u n c t i ve r el i efand speci f i c per f or m ance i n t he cour t s, t he cour thel d t hat som et hi ng othert han m er e i ncor por at i on of A A A r ul es w oul d be needed i n or der to es tab l i sh clea r an d u n m i sta k a b l e i n ten t t o d e l e g a te i ss u e s o f arb i tr a b i l i ty to th e a rb i tra to r. Id . a t81.25

I n Ma ri ev. A l l i e d Ho m eMo rtgag eCo rp ., the a rbit rati o n clau se referred to b i n d i n g arb i tr a ti o n “a n yan d a ll d is p u tes , c l a i m s (w h e th e r i n tort, co n tr a c t, st at ut ory, orot her w i se ) , an d di sa gr ee m ent s con ce r ni ng t he i nt er pr et at i on or a p p l i c a ti o n o f th i s A g re e m e n t . . . i ncludi ng the ar

bitrabi l it y of an y such c o n tro vers yo r cl

a im . ” 4 0 2 F. 3d at14
- 15 . The Fi r stC i r cui ti n t hatcase a c k n o w le d g e d t h a t , w h ile t h e is s u e o f w a iv e r b y lit ig a t io n c o n d u c tis pr esum pt i vel y f or t he court , t he part i es m ay by agr eem ent shi f t t he w ai ver i ss ue t o a n a r bi t r at orby cl ea ran d unm i st ak abl e e xpr es si on ofi nt enti n t he a g re e m e n t. Id. a t1 4 ( c i t i ng Fi rst Opti ons , 51 4 U . S . at94 5, 11 5 S . C t . at 192 5) . B utt he courthel d i n t hatcas e t hatexpr es s del ega t i on of“ ar bi t r abi l i t y” i ssues t o t he ar bi t r at or i n t he ar bi t r at i on agr eem ent at i ssue t her e di d not evi nce “cl ear and unm i st akabl e” i nt ent f or t he ar bi t r at ort o deci de t he i ssue ofw ai ver b yl i ti g a ti o n c o n d u c t. Id. at15. The cou rti n Mar i e not ed t hatt he ar bi t r at i on agr ee m entati ss ue t her e a l so i nco r por at ed t he A A A r ul es but t hat i tw ass i l ent r ega r di ng w het hert he i ss ue ofw ai verorany si m i l ari ss ue w asi nt end ed t o be re fe rre d to a n a rb i tra to r. Id. The c ourti n Mar

i e di d not exp r es sl y dec i de t he ef f ec toft he i nco r por at i on oft he A A A r ul es butbr oadl y hel d as f ol l ow s:

W e c a n n o ts a yth a t th e u s e o f th e te rm [a rb i tra b i l i ty ] h e re evi nces a cl earand unm i st akabl e i nt entt o have w a i v e ri ssues dec i d e d b y t h e a r b i t r a t o r . Th e r e a r e n o r e f e r e n c e s t o w ai veror26

sim i l a r t e rm s a n y w h e re i n th e arb i tr a ti o n ag ree m e n t. N e i th e r pa rt y shoul d bef or c e d t o a r bi t r a t e t hei s s ueo fw a i ve rb y c on duct w i t hou ta cl ear eri ndi cat i on i n t he agr eem entt hatt hey have ag r eed t o do so. The i ss u e o f w ho w oul d deci de such a quest i on i s an ‘ ar cane’ one t hatem pl oyees ar e u nl i kel y t o have con si der ed unl ess c l e a rl ys p e l l e d o u t b yth e e m p l o y e r. Id. The Thi r d Ci r cui tha s f ol l ow ed Ma r iein E hleiter v. Grapetree Shores, I nc. , h o ld in g t h a tw a iv e rb ylit ig a t io n c o n d u c tin c o n s is t e n tw it h a r b it r a t io n is p re s u m p t iv e ly a n is s u e fo r th e c o u rt . 4 8 2 F .3 d 2 0 7 , 2 2 2 (3 rd C ir. 2 0 0 7 ). It a d d it io n a llyh e ld t h a t , e v e n t h o u g h t h e a r b i t r a t io n a g r e e m e n tt h e r e e x p r e s s ly st at ed t hatal l cl ai m s orm att er s ar i si ng ou tof orr el at i ng i n a ny f as hi on t o t he a g ree m e n t “sh a l l b e co n side red arb i tr a b l e ” i n c l u d i n g “th e i ss u e o f arb i tr a b i l i ty ofan y c l ai m ordi sp ut e, ” t he agr ee m entdi d not m ani f es ta cl ea ran d unm i st ak abl e i nt entt o ha ve an ar bi t r at orde ci de t he i ss ue of w ai ver bas ed on l i ti g a ti o n c o n d u c t. Id . at221. The cou rtr ea so ned :

[ W ] e do not bel i eve t hatt hi s provi si on . . . evi dences a cl ear and un m i st akabl e i nt entt o have an ar bi t r at ord e c i de pr ocedu r al que st i onsof a r bi t r abi l i t y t hatar i seonl y a f t ert he part i esha ve bypa ss ed a g at ew ay det er m i nat i on o fs ubs t ant i ve ar bi t r abi l i t y by th e arb i tr a to r an d ac ti v e l yl i ti g a ted the u n d e rl y i n g d i sp u te i n co u rt . Id. at2 2 2 . T he c ourti n Ehleiter also n o ted tha t t h e re w a s n o refere n c e to w a i v e r o f a rb i tra ti o n i n th e a g re e m e n t. Id . Thatcourtr ef us ed t o i nt er pr ett he agr ee m ent ’ s “s i l enc e r ega r di ng w ho de ci dest he w ai veri ss ue”asgi vi ng7 ... H a d d o c kd o e s n o t disc u ss the d i fferen c e s b e tw e e n o r attem p t t o

di st i ngui sh Ehleiter

o r Jam es& Ja ckso nf r om t hi s case.

27 a rbit rato rs tha t po w e r “‘f o r do i n g so . . . [w o u l d ] fo rce [an ] u n w i l l i n g p a rt [y] to a rb i tra te a m a tte r [h e ] re a s o n a b l yw o u l d h a v e th o u g h t a j u d g e , n o t a n a rb i tra to r, w oul d deci de. ’ ” Id. ( quot i ng Fi r st Opti ons , 5 1 4 U .S . a t 9 4 5 , 1 1 5 S . C t. 1 9 2 0 ); s e eal s o Sa nJua nBa si

n, 249 S. W . 3d at41–4 2 ( r ea so ni ng t hat , al t hough r ef er enc e t o AA A rul esm i ghtot her w i sebe co ns t r ued as“ cl ea ran d unm i st ak abl e i nt ent ” t o r ef erar bi t r abi l i t y i ss uest o a r bi t r at or , l ang uag e o f agr ee m entw ass i l entast o r ef er r al o f“ ar bi t r abi l i t y” i ss uest o a r bi t r at oran d l i m i ti n g l a n g u a g e o f a g re e m e n t n e g a te d s u c h i n te n t); I n re F ord Motor

Co. , 220 S. W . 3d 21, 23 ( Tex. A pp. — San Ant oni o 2006, o r i g. pr oce edi ng) ( hol di ng, d e s p it e re f e r e n c e t o A A A r u le s , th a t a g r e e m e n td id n o tc le a r lya n d u n m is t a k a b ly evi den ce i nt entt hati ss ue ofw het hera nonpa rt y w asboun d by a r bi t r at i on a g re e m e n t b e d e c i d e d b ya rb i tra to r). H add ocks ee kst o di st i ngui sh Mar i e o n t he basi s t hatt he cond uct c o n sti tu ti n g w a i v e r a ros e in th e s a m e li ti g a ti o n in th a t ca se , a s c o n tr a ste d w i th th e p ri o r l i ti g a ti o n ins ti tu ted b yH a d d o c ki n a d i fferen t co u rt . 7 W e di sagr ee. T h e c o n d u c tf o u n d t o c o n s t it u t e w a iv e rin Mar i e w as i n a s epa r at e p r oce edi ng i n a d i ffe re n t l i ti g a ti o n fo ru m , th e E E O C . Ma r ie , 402 F. 3d . a t14.28

H addo ck al so ar gues t hatt he F i rst C i r cui thel d t hatsendi ng t he w ai ver i ss ue t o t he ar bi t r at ori n Ma r ie w oul d be “except i onal l y i nef f i ci ent ” gi ven t hat t he ca ses t art ed i n c ourt , w her ea s H add ockcl ai m s t hi s m att erbe gan w i t h a dem and f orar bi t r at i on so t hatthe i ssue of w ai verco ul d m or e easi l y be r esol ved in t h a tf o r u m . T o t h e c o n t r a r y , t h e c o n d u c tc o m p l a i n e d o fb yR e a l P a rt ie s in I nt er est st art ed w hen H addo ck i nst i t ut ed and pur sued hi s pr i or l i t i gat i on t o an adv er sede ci si on i n c ourt . As t he cou rti n Ma r ier ec ogni z ed, “ [ i ] ft he ar bi t r at or w er e t o f i nd t hatt he def end antha d w ai ved i t s r i ghtt o a r bi t r at [ i on] , t hen t he case w oul d i nevi t abl y end up b a c kin court . ” Id . at13. The sa m e w oul d be t r ue her e. F i n a l l y , H a d d o c karg u e s th a t Mar i e di d notad dr es s t he i nco r por at i on of t he A A A r ul es i nt o t he ar bi t r at i on agr eem ent . But t he cour tcl ear l y consi der ed t hatl ang uag e, be ca us e i tspec i f i ca l l y poi nt ed outt hatt he agr ee m ents o s t at ed; yett he cou rtf ound no c l eara nd u nm i st ak abl e e vi den ce ofi nt enti n t he a g re e m e n t to s h i ft th e i s s u e o f w a i v e r to th e a rb i tra to r. Id . a t14. A ddi t i onal l y, as i n t he Sa nJua nBa sinan d Jam es& Ja ckso nca se s, t he ar bi t r at i on a gr ee m enthe r e i s notune qui voc al butco nt ai ns l i m i t i ng l ang uag e w i th reg a rd t o th e i n c o rpo rati o n o f th e A A A rul e s, i n c o rpo rati n g tho se rul e s “ to t he ext entnoti nco ns i st ent ” w i t h t he r em ai nde roft he det ai l ed pr ovi si onsoft he29

ar bi t r at i on a gr ee m ent , w hi ch con t ai ns f i ve se ct i onsan d t en par agr ap hs of i nf or m at i on pr es cr i bi ng t he pr oce dur e a nd s cop e o fan y a r bi t r at i on. W e a l so not e t ha tther e i s no de si gna t i on i n t he ar bi t r at i on a gr ee m ent her e as t o w hi ch ver si on of t he A A A r ul es i s t o appl y, t he ver si on i n exi st ence w hen t he agr eem ent w as m ade or t hati n exi st ence att he t i m e oft he di sput e. H addo ck acknow l edges t hatt he r ul e now d esi gnated as R ul e 7 ( a) , upon w hi ch he r el i es, d i d not exi stw hen t he ar bi t r at i on agr eem entw as added t o t he l i m i t ed part ner sh i p ag r ee m en ti n 1994. Al t hough , asH add ockpoi nt s out , t he part ner sh i p a gr ee m entha s bee n a m end ed se ver al t i m ess i ncei t s i nce pt i on w i t houtch ang e t o t he ar bi t r at i on a gr ee m entl ang uag e, w e c ann otas su m e f r om si l enc e i n t he agr ee m entas t o t he i ss ue ofar bi t r abi l i t y orast o w hi ch ver si on o f th e A A A ru l e s i s to a p p l y , th a t th e p a rti e s i n te n d e d to i n c o rp o ra te R u l e 7 (a ),
w h i c h d i d n o t e x i s t w h e n th e a rb i tra ti o n a g re e m e n t w a s a d d e d . S e eMa r ie , 402 F .3 d a t 1 5 ; see al

so Ehleiter, 482 F. 3d a t222. Si l enc e i s not“ cl ea ran d unm i st ak abl e e vi den ce” of i nt ent . The agr ee m enti s si l entas t o w het hert he part i esi nt end ed t o i nco r por at e t he cur r ent ru l e s , s i l e n t a s to w h e th e r th e a rb i tra to r i s to d e c i d e i s s u e s o f “ a rb i tra b i l i ty ,” and si l entspeci f i cal l y r egar di ng w ho i s t o deci de w ai ver , r epud i at i on, orsi m i l ar m att er s. W e hol d t hatt he gen er al r ef er enc e i n t he ar bi t r at i on a gr ee m entt o t he30

A A A r ul es, w i t hou tm or e, does notcl ear l y and un m i st akabl y m ani f est t hese p a rti e s ’ i n te n t to re fe r th e is s u e o f w a i v e r b yl i ti g a ti o n c o n d u c t to th e a rb i tra to r.

b. S ubst ant i ali nvocati on of t he l i t i gat i on pr ocess st i l lan i s s u efo r th ec o u rt a fte r Howsam B yp a rt o f h i s s e c o n d i s s u e , H a d d o c ka rg u e s th a t , e v e n if th i s c o u rt concl udes t hatt he t r i al court had pow er t o consi der som e ar bi t r abi l i t y i ssues, t he t r i al co urtl ac ke d pow ers pec i f i ca l l y t o deci de t he w ai veri ss ue, base d upo n la n g u a g e c o n t a in e d in t h e U n it e d S t a t e s S u p r e m e C o u rt ’s d e c is io n in Howsam v. D e a n W

itter Re yn o ldsIn c ., w hi ch st at ed t hatt he “p r es um pt i on i s t hatt he a rbit rato r sh o u l d d e c i d e ‘ a ll e g a ti o n [s] o f w a i v e r, d e l a y , o r a l i k e d e fen se to ar bi t r abi l i t y. ’ ” 537 U . S. at84, 123 S . Ct . at592 ( quot i ng Mos esH. Cone Mem ’ l Hosp. , 460 U . S. at2 4

– 2 5, 103 S . Ct . at941) . I n Per ry Hom es, t he C ul l s m ade t he i denti cal ar gum entm ade her e by H ad d o c k , a ssert i ng t hat
w het hera part y has w ai ved t he r i ght t o a rbit r at e by l i t i gat i on con duct i s an i ss ue t o bede ci ded by t he ar bi t r at or , r at hert han t he court , ba se d upo n t he s a me l a n g u a g e f r o m Howsam . 2 5 8 S .W .3 d a t5 8 8

– 9 0 . T h e s u p r e m e c o u rtin Per ry Hom esr ej ec t ed t hatar gum ent , f l at l y s t at i ng, Ever y f eder al court t hat has addr essed t hi s i ssue si nce Ho ws a m has con t i nue d t o h ol d t hats ubs t ant i al i nvoc at i on oft he l i t i gat i on pr oce ssi s a q ues t i on f or theco urtr at hert han t he ar bi t r at or — i ncl udi ng t he Fi r st , Th i r d, Fi f t h, and Ei ghth Ci r cui t . Legal com m ent at or s appeart o agr ee. So d o w e.31

Id. a t 5 8 9 ; se e JPD, I nc. v. Chroni

m ed Holdi

ngs, I nc . , 539 F. 3d 388, 393– 94 ( 6t h C i r . 200 8) ( hol di ng Ho ws a m l i m i t ed t o c ont r ac t ual l y ba se d w ai ver , not w a i v e r b yl i ti g a ti o n c o n d u c t i n c o n s i s te n t w i th a rb i tra ti o n ); Ehleiter, 48 2 F. 3d at 2 1 7 ; Ma ri

e, 4 0 2 F .3 d a t 1 3

– 1 4 ; Repub l i c I ns. Co. v. PA IC OReceivables, LLC , 383 F . 3d 341, 344– 47 ( 5t h Ci r . 2004 ) ;Tr i star Fi n. I ns . A gen cy, I

nc. v. Equi cre d it Co rp . o f A m ., 9 7 F e d . A p p x . 4 6 2 , 4 6 4 (5 t h C ir . 2 0 0 4 ). W e o v e r r u le t hatport i on of H addo ck’ s second i ssue.

c . T h e“ N o -W a iv e r ” R u le H a d d o c kalso arg u e s th a t R u l e 4 8 -( a ) o f th e A A A rules i n c o rpo rate d i n to t h e a r b it r a t io n a g r e e m e n tis a f a c t o rt o b e t a k e n i n t o c o n s id e r a t io n in det er m i ni ng w het herhe w ai ved t he agr eem ent . T hatrul e p r ovi des, “N o j udi ci al pr oce edi ng bya part y r el at i ng t o t he su bj ec tm att eroft he ar bi t r at i on s hal l be dee m ed a w ai verofa part y’ s r i ghtt o a r bi t r at e. ” A m er i ca n Ar bi t r at i on Ass oc i a t i on , Com m e r c i a l Ar bi t r a t i on R ul e s a nd M e di a t i on Pr oc e du r e s , R48, h ttp ://w w w . ad r . org/sp. asp ?i d= 2 2 4 4 0 # R 4 8 ( l ast acc ess ed Fe bru a ry2 5 , 2 0 0 9 ). H add ockac kno w l edg est hatt hi s r ul e d oesnotpr ec l ude a f i ndi ng ofw ai verbut ar gue s t hatt hi s r ul e, asi nco r por at ed i nt o t he agr ee m ent , i s f urt heri ndi ca t i on o f th e p a rti e s ’ i n te n t to fa v o r a rb i tra ti o n , sp e c i fi c a l l yw i th re g a rd to w a i v e r. The pr es enc e o fs uch a “n o w ai ver ” cl aus e i n a n a r bi t r at i on a gr ee m ent does not al t ert he or di nar y anal ysi s undert aken t o det er m i ne ifa part y has8 ... W e al so over r ul e t he second parto fH addo ck’ s second i ssue, i n w hi ch

he ar gues t hatw het hert he ar bi t r at i on agr eem entf or bi ds hi s Sar banes- O xl ey 32 w a i v e d i ts ri g h t to a rb i tra ti o n b yli ti g a ti o n c o n d u c t. P A IC O, 383 F . 3d a t348. Th e Fi f t h C i r cui ti n t hatcase a g ree d w i t h t hose cour t s t hathave i nt er pr et ed such a “no w ai ver ” cl ause as i n ten d e d to per m i tpart i es t o seek pr ovi si onal r em edi es orot herj ud i c i a l p r oceedi ngs t hatw oul d not f uncti on t o di spl ace a rb i tra ti o n o n th e u n d e rl y i n g d i s p u te . Id . S pe ci f i ca l l y, t he cou rti n P AICO st at ed, “ ‘ [ T] he f ac tt hatan ar bi t r at i on agr ee m enti nco r por at ess uch a pr ovi si on w oul d notpr eve nta cou rtf r om f i nd i ng t hata part y w ai ved ar bi t r at i on by pr ot r act ed l i t i gat i on of an ar bi t r abl e di sput e. ’ ” Id. ( quot i ng S & R Co. v. La tona Trucki ng, I nc. , 1 5 9 F .3 d 8 0 , 8 5 (2 n d C i r. 1 9 9 8 ), c ert. d i sm ’d, 528 U. S. 1058 (1 9 9 9 )); see al

so Hom e Gas Cor

p. v. W alter ’ s of Hadley, I

nc. , 403 M a s s . 772, 532 N . E. 2d 681, 684– 85 ( 198 9) ( hol di ng “no w ai ver ” cl aus e di d notpr eve nt fi n d i n g o f w a i v e r b yl i ti g a ti o n c o n d u c t); S eid m a n& S ei

d m a nv. Wo lfs o n, 50 C al . A pp. 3d 826, 835, 123 C al . Rpt r . 873 ( C al . C t . A pp. 1975 ) ( st at i ng pur pose behi nd “ no w ai ver ” r ul e i s not t o al l ow a part y t o seek j udi ci al r el i ef o f a c o n tro v e rs y“ a n d l a te r to s w i tc h c o u rs e a n d d e m a n d a rb i tra ti o n ” ). W e hol d t hatt he t r i al courtpr oper l y det er m i ned t hat it , rat hert han an ar bi t r at or , shoul d deci de w het herH add ockw ai ved t he ar bi t r at i on agr ee m entby f i l i ng and pr osecut i ng t he pr i orl aw sui t . W e over r ul e H addo ck’ s f i r sti ssue. 8d e ri v at i ve cl ai m i s f ort he ar bi t r at ort o deci de, nott he cour t , si m i l art o a l i ke

i s s u e re g a rd i n g c l a s s a rb i tra ti o n u n d e r Gre en T re e F in a n cia l Co r

p . v. Bazzle , 539 U . S . 44 4, 4 49 , 1 23 S . C t . 2 40 2, 24 05 ( 20 03 ) ( hol di ng qu est i on of w het heran ar bi t r at i on a gr ee m entf or bad e cl ass ar bi t r at i on w asf ort he ar bi t r at or , nott he c o u r t , b e c a u s e i t i n v o l v e d c o n tra c t i n te rp re ta ti o n a n d a rb i tra ti o n p ro c e d u re s ). The t r i al courtdi d notdet er m i ne t hatt he der i vat i ve cl ai m w asf or bi dde n byt he ar bi t r at i on a gr ee m ent ; r at her , i tde t er m i ned t hatt he cl ai m w asout si de t he sc ope oft he ar bi t r at i on agr ee m entbe ca us e m os tCEI s t ock hol der s w er e n ot part i est o t he part ner sh i p a gr ee m ent . H add ockha s notch al l en ged t hatr ul i ng o r t h e fi n d i n g s o f t h e co u rtto th a t effec t. 33 D . W aiverby Pr i orLit i gat i on Conduc tI nco ns i st entw i t h Ar bit r at i on H a v in g d e a ltw it h t h e p r e lim in a r ya r g u m e n t s t h a t c o n s u m e d t h e v a s tb u lk oft he br i e f i ng bybot h si des, w e now addr ess t he m ai n i ssue. H addo ck con t end s t hatt he t r i al courtabus ed i t s di sc r et i on and m i sa ppl i ed t he l aw t o t he f ac t s by c onc l udi ng t hathe w ai ved ar bi t r at i on byhi s con duc ti n i ni t i at i ng a nd pr os ec ut i ng t he pr i or l aw su i t . H add ock m ai nt ai ns t hat hi s pr i or l aw su i tdi d not as se rtt he sa m e i ss uesr ai se d by hi s dem and f or ar bi t r at i on a nd t hatt he i ss ue i n t he pr i orl aw sui tdi d not “ar i s[ e] outofo r i n c o n n ect i on w i t h t h[ e] [P a rt n e r s h ip ] A g r e e m e n to rt h e P a rt n e r s h ip ” b u t , in s t e a d , a r o s e f r o m a n e n t ir e ly se p a rate co n tr a c t— th e se v e ran c e ag re e m e n t— w h i c h w a s n o t su bj e c t t o ar bi t r at i on. R eal Part i esi n I nt er es tdo n otco nt es tt he val i di t y oft he ar bi t r at i on agr ee m enti n t he l i m i t ed pa r t ne r sh i p a gr ee m ent . Thei rpos i t i on i s t hatt he sever anc e a gr ee m enti s su bj ec tt o t he ar bi t r at i on a gr ee m entco nt ai ned i n t he34

l i m i t ed part ner shi p a gr ee m entt hatH add ockr ai se d a nd l i t i gat ed i n t he pr i or l i t i gat i on, t hathi s con duc ti n t he pr i orl i t i gat i on w asi nco ns i st entw i t h a n i nt ent t o ar bi t r at e t hatcl ai m , and t hatt hey suf f er ed pr ej udi ce; t hus, t hey ar gue, H addo ck w ai ved hi s r i ght t o ar bi t r at e hi s cur r entcl ai m s. W het hera part y ha s w ai ved i t s ar bi t r at i on r i gh t s unde rt he FA A by i nco ns i st entl i t i gat i on c onduc ti s a ques t i on ofl aw t hatw e r evi ew de nov o. Per ry Hom es , 258 S. W . 3d a t598 & n . 102; s e e al so I n re Citi

group Global Mkts, I nc. , 2 5 8 S .W .3 d 6 2 3 , 6 2 5 (T e x . 2 0 0 8 ) (o ri g . p ro c e e d i n g ) (p e r c u ri a m ); InreS erv. Co rp . I

n t’l, 8 5 S . W . 3d 1 71 , 1 74 ( Tex . 20 02 ) ( or i g. pr oceedi ng) ( per cur i am ) . Beca us e p ubl i c p ol i cy f avo r s ar bi t r at i on, t her e i s a s t r ong p r es um pt i on aga i ns tw ai verofar bi t r at i on. Mo s esH. Co n eMem ’l Ho sp ., 460 U. S. a t24–2 5, 1 0 3 S . C t. a t 9 4 1 ; I n re D. W

i l so n Constr. Co. , 196 S. W . 3d a t783. T h e p a rtya s s e rti n g w a i v e r b e a rs a h e a v yb u rd e n o f p ro o f, a n d th e c o u rt m u s t re s o l v e a l l d o u b ts i n fa v o r o f a rb i tra ti o n . In reBru c eTerm i n i xCo ., 988 S .W .2 d 7 0 2 , 7 0 4 (T e x . 1 9 9 8 ). W a i v e r m u s t b e i n te n ti o n a l . I n re Ban k O ne, N. A. , 2 1 6 S .W .3 d a t 8 2 7 . W a i v e r m a yb e e x p re s s o r i m p lie d f r o m a p a rty ’s c o n d u c t, b u t th a t c o n d u c t m u s t b e u n e q u i v o c a l . Id. A ddi t i ona l l y, w ai veri n t he c o n t e x to fa r b it r a t io n a g r e e m e n t s s u bje c tt o t h e F A A re q u ir e s m o r e t h a n is r equi r ed f orgener al w ai ver — i trequi r es prooft hatt he part y assert i ng w ai veras35

a d e fe n s e to a rb i tra ti o n h a s s u ffe re d p rej u d i c e . Per ry Hom es , 25 8 S . W . 3d at 5 9 4

– 9 5 & n .8 0 (re a ffir m i n g re q u i re m e n t o f p rej u d i c e a n d c o l l e c ti n g c a s e s ). U n d e r t h e F A A , “ [a ] p a rt y w a iv e s a n a r b it r a t io n c la u s e b ys u b s t a n t ia lly i nvoki ng t he j udi ci al pr ocess t o t he oth e r p a rt y’ s det r i m ent . ” I n re Citi

group Global Mkts. , I

nc. , 258 S . W . 3d at625 ( quot i ng Per ry Hom es , 25 8 S . W . 3d at 5 9 4 ). T o d e m o n strate w a i v e r, the p a rt y opp osi ng ar b i tr a ti o n m u st e sta b l i sh b o th t hat ( 1) t he part y seeki ng ar bi t r at i on subst ant i al l y i nvoked t he j udi ci al pr ocess a n d (2 ) t h e p a rtyo p p o s i n g a rb i tra ti o n s u ffe re d p rej u d i c e th e re b y . I n re Bruce Ter m in ix , 9 8 8 S .W .2 d a t 7 0 4 . T o i n v o k e th e j u d i c i a l p roc e ss , a p a rt y“m u st, a t th e v e ry le a st, en g a g e i n so m e o v e rtac t i n co u rttha t ev i n c e s a d e sir e to re s o l v e th e a rb i tra b l e d i s p u te th ro u g h l i ti g a ti o n ra th e r th a n a rb i tra ti o n .” P AICO , 383 F. 3d at344 ( quot i ng S ub wa yEqui p . L e a singCo rp. v. F o rte , 169 F. 3d 324, 3 2 6 (5 th C i r. 1 9 9 9 )).

1. Th e pr i orsuitsubst ant i al l y i nvoked t he j udi ci alpr ocess H add ockcont end s t hatw ai vercoul d nothave occ ur r ed bec aus e t he pr i or sui t concer ned onl y t he unfavor abl e- com m ent s cl ause i n t he sev er ance agr ee m ent , w hi ch had no ar bi t r at i on agr ee m ent , and t hathi s cur r entar bi t r at i on d e m a n d as se rt s e n ti rel yd i ffe re n t c lai m s th a t ari se o n l yo u t of a se p a rate con t r act , i . e. , t he part ner sh i p a gr ee m ent . Ther ef or e, w e f i r stde t er m i ne36

w het her

— as Real Part i es i n I nt er estcont end— t he pr i or sui t i nvoked t he j udi ci al p ro c e s s re g a rd i n g t h e s a m e c l a i m s t h a t H a d d o c kn o w s e e k s to a rb i tra te . S ee i d. at344– 47 ( hol di ng w ai verappl i esonl y w her e t he sa m e cl ai m s oughtt o be a rb i tra te d w a s p re v i o u s l yl i ti g a te d b u t u p h o l d i n g f in d i n g o f w a i v e r w h e re j ur i sdi ct i on of court w as pr evi ousl y i nvoked on al l i ssues) . W e agr ee w i t h R eal Part i es i n I nt er eston t hi s key i ssue. A l t hough t he se ver anc e a gr ee m entco nt ai ns no a r bi t r at i on c l aus e, t he C R EELPuni topt i on pl an— as am ended and at t ached t o t he sever ance a greem en t
— do es. B oth the pri or sui tan d the arbi t r ati on de m an d c o n c e rn cl ai m s t hat“ ar i s[ e] outofori n c onne ct i on w i t h” t he l i m i t ed part ner sh i p ort he l i m i t ed part ner shi p agr eem entby vi rt ue ofthe C R EELPu ni to pt i on pl an, w hi ch i s su bj ec tt o al l t er m s of t he l i m i t ed part ner sh i p agr ee m ent . Sect i on 6. 26 oft he 1 9 9 6 C R E E L PU n i t O p ti o n In c e n ti v e P l a n , a tta c h e d a s a n a p p e n d i xto H a d d o c k ’s s e v e ra n c e a g re e m e n t, e x p re s s l yp ro v i d e s th a t “ th e ri gh t s gran t ed t he r eu n d e r a re g o v e r n e d b ya n d s u bje c tt o e a c h o ft h e t e r m s a n d c o n d it io n s o ft h e p a rt n e r s h ip agr ee m ent . ” That opt i on pl an f urt her pr ovi des t hat upon exe r ci si ng a n opt i on t her eun der , ea ch part i ci pa nt i s “d ee m ed t o ha ve ac ce pt ed and ag r ee d t o be b o u n d b yea c h o f t h e term s a n d co n d i ti o n s o f t h e P a rt n e rsh i p A g ree m e n t f o r a ll pur poses . ” [ Em pha si s add ed. ] As am end ed i n 1994 and t her ea f t er , t he part ner shi p agr eem ent , i n t ur n, contai ns t he ar bi t r at i on agr eem ent und erw hi ch9 ... The t r i al co urtf ound, an d Haddoc k has no tc hal l eng ed t hatf i ndi ng,

th a t he rai se d so m e o f t h e sa m e i ss u e s in t h e p rio r su i t t h a t he n o w se e k s to ar bi t r at e, al l egi ng i n hi s pet i t i on i n t hatsui tt hatt he C r es ce ntEnt i t i es“ m ay be act i ng adv er sel y t o t he i nt er est s ofst ockho l der s and uni t hol der s” and t hat “Haddoc k f urt her bel i eve s t he m ana gem entoft he Em pl oye rG r oup i s notac t i ng i n t he bes ti nt er es t s oft he sh ar eho l der s and uni t hol der s by p r ovi di ng r i sk y l oan s t o e xec ut i vesw hi ch se r i ous l y j eop ar di z e t he f i nan ci al heal t h and st abi l i t y oft he E m p l o y e r G ro u p .” 37 H add ocks ee kst o a r bi t r at e h i s C REELP u ni topt i on an d hi s C EI s t ockopt i on cl ai m s. 9 W hi l e Haddoc k c l ai m s t hathe i ni t i al l y soughtonl y t o r ef or m t he u n fav o rab l e -co m m e n ts c l a u se o f t h e se v e ran c e a g ree m e n t i n th e p ri o r l a w su i t, h e h a d a s t a t e d p u r p o s e f o rd o in g s o — s o t h a th e c o u ld p le a d a n d lit ig a t e h is cl ai m s ofr i sky l oans and m i sm anagem entoft he C r escentEnt i t i es, w hi ch al l ege dl y r es ul t ed i n de val ui ng hi s C REELP a nd CEI opt i ons , w i t houtf ea rof vi ol at i ng t hatcl aus e. M or eov er , he al so s oughtan d obt ai ned af f i r m at i ve i nj unc t i ve r el i efag ai ns tt he C r es ce ntEnt i t i es , pr eve nt i ng t hem f r om t hr ea t eni ng ort ak i ng a ct i on t o f or f ei thi s r i ght s i n t he C REELP u ni topt i onsve st ed i n hi m by t he sever ance agr eem ent . H addo ck expr e ssl y st at ed hi s i nt entt o f i l e an add i t i ona l s ui tt o ass erthi s cl ai m s aga i ns tt he C r es ce ntEnt i t i esor , al t er nat i vel y, t o a ss ertt hos e c l ai m s i n t hats am e s ui t , an d hes oughtt he pr ot ec t i on oft he10 ... A l t hough H add ockpoi nt s outt hat h e ha d and r et ai ns t o t hi s daya

l i m i t ed part ner sh i p i nt er es t i n C REELP, he has nev er exp l ai ned ho w t he ar bi t r at i on de m and i nvol vest hat l i m i t ed part ner sh i p i nt er es t , ot hert han t hr ough th e i d e n ti c a l o p ti o n s th a t w e re i n v o l v e d i n the p ri o r su i t. 38 c o u rtt h r o u g h a ru lin g t h a th e w o u ld n o tri s kin t e r f e r e n c e o rf o r f e it u r e o fh is opt i onsby pr oce edi ng w i t h hi s pr opos ed l i t i gat i on. O nl y af t erul t i m at el y suf f er i ng an adv er se r esul ti n hi s sui tdi d H addo ck t ur n t o a r bi t r at i on. Haddoc k a l l ege d i n hi s ar bi t r at i on de m and t hatt he opt i on cl ai m s he now as se rt s i n t hatde m and ar e “ cov er ed by t he ar bi t r at i on pr ovi si on i n th e L i m i te d P a rtn e rs h i p A g re e m e n t.” 10The f ac ti s t hatbot h hi s pr i ors ui tan d h i s a rbit rati o n d e m a n d as se rt t h e sa m e co n d u c t of R e a l P a rt i e s i n I n tere st, n a m e ly , a lle g e d lyre f u s in g t o h o n o ra n d re d u c in g in v a lu e h is C R E E L Pu n it opti ons and C EI st ock opti ons. H add ockca nnotha ve i tbot h w ays . I f , as he sa ys , hi s cl ai m s r ega r di ng opt i on r i ght s as se rt ed i n hi s ar bi t r at i on de m and ar e cov er ed by t he ar bi t r at i on agr ee m ent , t hen so w er e t he cl ai m s r ega r di ng t he opt i on r i ght s t hathe s ought t o pr ot ec ti n t he pr evi ousl aw su i tan d pl ann ed t o l i t i gat e o nce he obt ai ned a dec l ar at i on t hatt he unf avo r abl e- com m ent s cl aus e o fhi s se ver anc e a gr ee m ent di d not pr ecl ude such a s ui t . By hi s pr i or l aw sui t , H addo ck i nvoked t he j udi ci al p r o c e s s w it h re s p e c tt o t h e s a m e c la im s s p e c if ic a llyre g a r d in g h is o p t io n s in C R EELPt hathe now seeks t o ar bi t r at e.39

W as hi s i nvoc at i on of t he j udi ci al pr oce ss i n t he pr i or l i t i gat i on “s u b sta n ti a l ”? W a i v e r b yli ti g a ti o n c o n d u c t m u st b e d e c i d e d u n d e r a to tal i ty-o fth e -c i rc u m s ta n c e s t e s t o n a c a s e -b y -c a s e b a s i s . Per ry Hom es , 25 8 S . W . 3d at 59 1. Fact or s l i st ed i n t hatcase i n consi der i ng t he t ot al i t y ofthe ci r cum st ances i n c l u d e w h e th e r t h e p a rt y se e k i n g arb i tr a ti o n ch o se to fi l e i n co u rtas p l a i n ti ff, how l ong t he part y seeki ng ar bi t r at i on del ayed bef or e seeki ng t hatp r ocess, w het herthatp art y knew o fthe ar bi t r at i on cl ause fr om the ou t set , how m uch di sc ove r y w asconduc t ed, how m uch pr et r i al ac t i vi t y w entt o t he m er i t s, how m uch t i m e a nd e xpe ns e w asi nc ur r ed i n l i t i gat i on, w het hert he part y s ee ki ng ar bi t r at i on f i l ed di sposi t i ve m ot i ons orsought j udg m enton t he m er i t s, and w hen th e c a s e w a s to b e tri e d . Id. a t591– 92. Real Part i esi n I nter es tas se rtt hatH add ock“ su bs t ant i al l y” i nvok ed t he ju d ic ia l p r o c e s s w it h r e s p e c tt o h is c la im re g a r d in g h is rig h t s in t h e C R E E L Pu n it opti ons because ( 1) H addo ck chose t o f i l e t he pr i orl aw sui ti n c o u rtr at hert han a r b it r a t e (“ w h e t h e rt h e m o v a n tw a s t h e p la in t if f (w h o c h o s e t o f ile i n c o u rt) o r th e d e fe n d a n t (w h o m e re l yre s p o n d e d )” ); (2 ) H a d d o c kf ile d t h e p r io rla w s u itin M a r c h 2 0 0 5 , p u r s u e d it t h r o u g h f in a l ju d g m e n t , a p p e a le d it t o t h is c o u rt , a n d w a it e d u n t il Jul y of2006 t o f i l e h i s dem and f orar bi t r at i on ( “how l ong t he m o v a n t d e l a y e d b e fo re s e e k i n g a rb i tra ti o n ” ); ( 3) H addo ck w as “t he pr i m ar y si gnatory on t he Fi r stA m ended Li m i t ed Part ner sh i p Agr ee m ent ” and “ i nt end ed f ort he ar bi t r at i on40

agr eem entt o b e b r oad and encom pass al l cl ai m s and di sput es (“ w h e th e r th e m o v a n t k n e w o f th e a rb i tra ti o n c l a u s e a l l a l o n g ” ); ( 4) H add ockkn ew oft he ar bi t r at i on a gr ee m enti n 1994 w hen he si gned t he Fi r stA m ended Li m i t ed Part ner shi p A gr eem ent( “w hen th e m o v a n t k n e w o f th e a rb i tra ti o n c l a u s e ” ); (5 ) H a d d o c kw a s th e p l a i n ti ff i n the p ri o r l a w su itan d fi l e d tw o m ot i ons f orsum m a r y j udg m ent( “w het hert he m ovant f i l ed af f i r m at i ve cl ai m s and di sp os i t i ve m ot i ons ”) ; an d ( 6) H addo ck pur sued t he pr i orl aw sui tt o a f i nal j udg m ent( “w het her th e m o v a n t s o u g h t j u d g m e n t o n th e m e ri ts ” ). H add ock doe s not di sp ut e t hes e f ac t s. H add ock cho se t o f i l e hi s pri or su i tr at hert han t o a r bi t r at e, s oughtan d obt ai ned af f i r m at i ve r el i ef , an d e x p res se d h i s i n ten t t o p u rsu e h i s cl a i m s i n th a t l a w su i t o r i n an o th e r su i t as to m i sm anagem entand r ef usal o f th e C r escentEnt i t i es t o al l ow hi m t o exer ci se hi s opt i ons . Thr ougho utt he pr i orl i t i gat i on, H ad doc k n eve rm ent i one d t he ar bi t r at i on agr eem entunderw hi ch he now seeks t o ar bi t r at e hi s opt i on cl ai m s. Y ethe w as cl ear l y aw ar e ofi tbecause he adm i t s i n hi s br i efi n t hi s courtt hat hed e s i r e d t ha ti tb e i nc l ud e d i n t hel i m i t e d pa rt ne r s hi p a gr e e m e nti n 1994. F u rt h e r, w a i v e r m a yb e f o u n d w h e re a p a rt yh a s tri e d an d fai l e d to a c h i e v e a s a ti s fa c to ryre s u ltb e fo re tu rn i n g to a rb i tra ti o n . S e e, e .g ., O ak Pa rtn ers , 2 4 8 S .W .3 d a t 8 4 8 ; L o u der m ilk , 2 0 8 S .W .3 d a t 7 0 4 ; W i l l i a m sIn dus ., I nc. v. Earth Dev. Sys . Cor p. , 1 10 S . W . 3d 1 31 , 1 35 ( Tex . A pp. — H oust on [ 1st D i s t.] 2 0 0 3 , n o p e t.); I n re W i nter Par k Constr. I

nc. , 3 0 S. W . 3d 576 , 579 ( Tex.41

A pp. — Tex ar kana 2 00 0, or i g. pr oceedi ng) ; com par e I n re Bruce Ter

m i ni x C o. , 988 S. W . 2d at7 0 4 ( f i ndi ng no w ai verw her e d ef end antdi d notas k c ourtf or a n yj u d i c i a l d e c i s i o n s u c h a s b yre q u e s ti n g s u m m a ryj u d g m e n t). I ndeed , f ai l i ng t o seek ar bi t r at i on unt i l af t er pr oceedi ng i n l i t i gat i on t o an a d v e r s e re s u ltis t h e c le a r e s tf o r m o fin c o n s i s t e n tl it ig a t io n c o n d u c ta n d is i nevi t abl y f oun d t o const i t ut e subst ant i al i nvocati on of t he l i t i gat i on pr ocess re s u l ti n g i n w a i v e r. S e e, e .g ., Jo n esv. Citi b a n k(S.D .), N.A ., 235 S . W . 3d 333, 34 0– 41 ( Tex . A pp. — FortW ort h 2 00 7, n o p et . ) ( hol di ng defendantw ai ved a rb i tra t i on of cou ntercl ai m byl i t i ga t i ng ov er t w o y ea r s an d a f t er sum m ary j u d g m e n t w a s re n d e re d a g a i n s t h e r); se e al soFrye v. Pai

ne, Weber

, Ja ckso n & C urti s, I n c ., 877 F. 2d 396, 398 ( 5t h Ci r . 1989) ( ho l di ng pa rt y w ai ved a rb i tra ti o n b y p a rti c i p a ti n g i n l i ti g a ti o n th a t e n d e d i n m i s tri a l ), cert. denied, 494 U .S . 1 0 1 6 (1 9 9 0 ); Mi l ler Brewi ng Co. v. FortWorth Di str i b. Co. , 781 F. 2d 494, 497 –98 ( 5t h Ci r . 1986 ) ( f i ndi ng w ai ve rby f i l i ng s t at e c ourtl aw su i tan d p e rm i ttin g i t to b e d i s m i s s e d fo r w a n to f p ro s e c u ti o n ); se e al soCar baj al v. Ho us eh o ld

Ba n kF .S .D ., N o . 0 0 C 0 6 2 6 , 2 0 0 3 W L2 2 1 5 9 4 7 3 , a t* 1 0 (N .D . I ll. Sept . 18, 2003 ) ( not i ng “ [ p] art i ci pat i on i n l i t i gat i on r ai se s con ce r ns off or um shopp i ng. I f a part y f i r stdem ands ar bi t r at i on on l y af t eri tr ecei ves an adver se ru l i n g i n th e l a w s u i t, c o u rts in e v i ta b l yw i l l fi n d w a i v e r” a n d c o l l e c ti n g c a s e s ), a ff’d, 3 7 2 F .3 d 9 0 3 (7 th C i r. 2 0 0 4 ); O a kPa rtn ers , 248 S . W . 3d at849 ( hol di ng42

t r i al co urt ’ s w ai verf i ndi ng ba se d on t ot al i t y ofci r cum st anc esi nc l udi ng eng agi ng i n e xt ens i ve di sc ove r y ov erni net ee n- m ont h pe r i od, f i l i ng of cou nt er cl ai m , cr os s- cl ai m s, an d m ot i on f orpa rt i al s um m ary j udgm ent , an d s e e k i n g a rb i tra ti o n o n l ya fte r fa i l u re o f m e d i a ti o n ). H add ockf i l ed hi s ar bi t r at i on de m and aft er f i l i ng su i t , obt ai ni ng i nj unc t i ve re l i e f, l i ti g a ti n g fo r s o m e n i n e m o n th s , fi l i n g tw o m o ti o n s f o rs u m m a ry j udgm ent , an d f i nal l y s uf f er i ng a n adve r ser es ul ti n t he pr i orl aw su i t . Al l of t hes e f ac t s su pportt he t r i al co urt ’ s f i ndi ng t hathe s ubs t an t i al l y i nvok ed t he l i t i gat i on pr oce ssan d t her ebyw ai ved hi s r i ghtt o a r bi t r at i on. M oreo ve r , pa rt i ci pa t i on i n l i t i ga t i on t o ga i n an ad va ntag e i n fu tu re l i ti g a ti o n c a n re s u l t i n w a i v e r. S e eInreCh ri s tusSp o h nHe a lthS ys . Co rp . , 231 S. W . 3d 475, 481 ( Tex. A pp. — C or pusChr i st i 2007 , or i g. pr oce edi ng) ( hol di ng h o sp i tal ’s p ri o r l i ti g a ti o n co n d u c t i n cri m i n a l ca se c o n sti tu ted w a i v e r of ri g h t t o a r b it r a t e w h e r e p r io r lit ig a t io n in v o lv e d d e v e lo p in g e v id e n c e a s p a rto fs t r a t e g ic pl an f orde f ens e o fci vi l su i t f or dam age s) . H add ockm adecl ea ri n hi s pl ea di ngs i n hi s pr i ors ui tt hathi s st r at egyan d pl an w ast o obt ai n a n i nt er pr et at i on oft he s e v e r a n c e a g r e e m e n tt h a tw o u ld p e r m ith im t o a s s e rth is c la im s in a la w s u it
w i t hou tvi o l a t i ng t he unfavor abl e- com m ent s cl ause w hi l e pr event i ng R eal Part i esi n I nt er es tf r om t ak i ng any ac t i on t o i nt er f er e w i t h t he opt i on r i ght s he sough tt o pr ot ectby i nj uncti ve r el i efand w hi ch he now seeks t o ar bi t r at e.43

H add ockf i l ed hi s ar bi t r at i on de m and f orhi s opt i on cl ai m s ove ra yea ran d a h a l f a fte r fi l i n g s u i t, p ro s e c u ti n g th a t s u i t, s u ffe ri n g a n a d v e rs e s u m m a ry j u d g m e n t i n the tr i a l co u rt , a n d afte r di sm i ss i n g h i s a p p e a l to th i s c o u rt . C o n s id e r in g t h e t o t a lit yo ft h e c ir c u m s t a n c e s a s a rt ic u la t e d in Per ry Hom es , we hol d t hatH addo ck subst ant i al l y i nvoked t he j udi ci al pr ocess.

2. Pr ej udi ce S u b s ta n ti a l l yi n v o k i n g t h e ju d i c i a l p ro c e s s d o e s n o t w a i v e a p a rty ’s ar bi t r at i on r i ghtsunl ess t he opp osi ng par t y al so pr oves t hat i tsuf f er ed pr ej udi ce a s a re s u l t. Per

ry Hom es , 258 S . W . 3d at593– 94 ( ci t i ng In reBru c eT er m in ix Co. , 988 S. W . 2d at 704 ) . “Court s w i l l notf i nd t hata part y ha s w ai ved i t s r i ght t o enf or ce an ar bi t r at i on cl ause by m er el y t aki ng part i n l i t i gat i on unl ess i thas su b sta nt i al l y i nvoked t he j udi ci al pr ocess t o i t s oppon ent ’ s det r i m ent . ” Inre S ervi c eCo rp . I

n t’l, 85 S. W . 3d at 174 . “W hen one part y r eve al s a d i si ncl i nat i on t o r esortt o ar bi t r at i on on any phase ofsui ti nvol vi ng al l p art i es, those part i es a r e p r eju d ic e d b yb e in g f o r c e d t o b e a rt h e e x p e n s e o fa t r ia l. . . . S u b s t a n t ia lly i nvok i ng t he l i t i gat i on m ac hi nery qu al i f i esast he ki nd ofpr ej udi ce t hati s t he essence ofw ai ver . ” E.C. E rn s t, I n c . v. Ma n h a tta nCo n s tr. Co ., 559 F. 2d 268, 26 9 ( 5th C i r . 19 77 ) ( hol di ng ext ensi ve post sui t act i ons i n al l phases ofcom pl ex l i ti g a ti o n s e rv e d a s w a iv e r o f ri g h t to a rb i tra te w h e n o p p o s i n g p a rti e s w e re44

p r eju d ic e d b yb e in g f o r c e d t o b e a re x p e n s e s o fa q u it e le n g t h yt r ia l, w h ic h is th e k i n d o f p rej u d i c e a rb i tra ti o n i s d e s i g n e d to a v o i d ).

“ P re ju d ic e ” h a s m a n ym e a n i n g s . Per ry Hom es , 258 S. W . 3d a t597. How e ve r , pr ej ud i c e or “ de t r i m e nt ” i n t he c on t e xt of l i t i ga t i on condu ct i ncon si st entw i t h ar bi t r at i on rel at es t o “i nher entunf ai r ness” caused by “a part y’ s att em ptt o ha ve i tb oth w aysby sw i t chi ng be t w ee n l i t i gat i on a nd a r bi t r a t i on t o i t s ow n a dv a nt a ge. ” Id.; se e al soSubway, 169 F. 3d a t327 ( r ef er r i ng t o “ i nhe r entunf ai r nes s— i n t er m s ofde l ay, ex pen se , orda m aget o a p a rt y ’s l e g a l p o sit i o n — th a t oc c u rs w h e n the p a rt y ’s o p p o n e n t f o rce s i t t o l i ti g a te a n i ss u e an d l a ter se e k s to arb i tr a te th a t sa m e i ss u e ”). “[A ] p a rt y shoul d not be al l ow ed pur posef ul l y and unj ust i f i abl y t o m ani pul at e t he exer ci se ofi t s ar bi t r al r i ght s si m pl y t o ga i n a n unf ai rt ac t i ca l ad van t ag e ov er t he opp osi ng par t y. ” Id. ( ci t i ng I n re Tyc o I

nt ’ l Ltd. Secur

iti esLiti gati on , 422 F. 3d 4 1 , 4 6 n .5 (1 s t C i r. 2 0 0 5 )). U l t i m at el y, w hatco ns t i t ut esw ai veroft he r i ghtt o a r bi t r at e d epe ndson t he f act s ofeach case. P AICO , 383 F. 3d at346 ( ci t i ng Ten neco Resi ns, I nc. v. Da v yI

n t ’ l , AG , 7 7 0 F .2 d 4 1 6 , 4 2 0 (5 th C i r 1 9 8 5 )). T h re e fa c to rs a re p a rti c u l a rl yre l e v a n t i n d e te rm i n i n g p rej u d i c e . Id . Fi r st , pr et r i al act i vi t y r el at ed to a l l c l a i m s i n c l u d i n g th o s e th a t a re a rb i tra b l e m a yre s u l t i n p rej u d i c e . Id . ( c i t i n g Pr

icev. D rexel

Bur nha m Lam bert

, I nc . 7 9 1 F .2 d 1 1 5 6 , 1 1 6 1

– 6 2 ( 5 th45

C i r . 1986 ) ) . Sec ond, t i m e a nd e xpe ns e i ncu r r ed i n def end i ng agai ns ta m ot i on fo r s u m m a ryj u d g m e n t c o u l d p rej u d i c e th e p a rtyo p p o s in g a rb i tra ti o n . Pr i ce , 7 9 1 F .2 d a t 1 1 6 2 . T h u s , b o th d e la ya n d t h e e x te n t o f th e m o v i n g p a rty ’s part i ci pat i on i n j udi ci al p r oceedi ngs ar e m at er i al f act or s i n assess i ng pr ej udi ce. Frye , 877 F. 2d at 398 . Thi r d, f ai l ur e t o as se rt t he r i ght t o de m and ar bi t r at i on i s a f act or bear i ng on t he quest i on of pr ej udi ce al ong w i t h ot herconsi der at i ons. Pr i ce, 791 F. 2d at1161 –62 . A dem and f orar bi t r at i on pu t s t he ot herpa rt y on n o ti c e tha t arb i tr a ti o n is fo rt h c o m i n g a n d affo rds tha t pa rt ythe o p p o rt u n i ty to a v o id c o m p r o m is in g it s p o s it io n w it h re g a r d t o a r b it r a b le a n d n o n a r b it r a b le c l a i m s . P

AICO, 383 F. 3d a t347. I fa part y ha s as se rt ed t he r i ghtt o a r bi t r at e a torbe f or e c om m enc em ent ofl i t i gat i on, t he part y opp osi ng ar bi t r at i on w i l l n ecessar i l y car r y a heavy bu r den to s h o w w a i v e r. Id. Conver se l y, w hen a part y f ai l s t o dem and ar bi t r at i on a nd al so e n g a g e s i n p r e t r i a l a c t i v i t y i n c o n s i s t e n t w i t h t h e i n t e n t t o a r b i t r at e, t he oppos i ng part y see ki ng t o show w ai ver“m ay m or e e as i l y s how t hati t s pos i t i on has been com pr om i sed, i . e. , pr ej udi ced. ” Id .; seeO akPa rtners, 248 S . W . 3d at85 1 ( concl udi ng t hatp l a i n t i f fshow ed pr ej udi ce w hen defendantdel ayed n in e t e e n m o n t h s b e f o r e m o v in g t o c o m p e l a r b it r a t io n , d u r in g w h ic h t im e it ac t i vel y pu r su ed l i t i gat i on i n t he t r i al cou rt , so ught di sc ove r y f r om pl ai nt i f f , an d ac t i vel y s oughtr el i eff r om t he t r i al court , w hi ch f or ce d pl ai nt i f ft o r es pond and46

to i n c u r a tto rn e y ’s fe e s ); Jo n es, 235 S. W . 3d at340– 41 ( hol di ng a ppe l l ant w a i v e d h e r ri g h t to a rb i tra te w h e n s h e w a i te d fo r o v e r tw o y e a rs a fte rc a rd is s u e r ’s f ir s tp e t it io n w a s f ile d b e f o r e re q u e s t in g a r b it r a t io n , a n d b yt h a tt im e had f i l ed num er ous m ot i ons i ncl udi ng a m ot i on t o di sm i ss , a cou nt er cl ai m , an d o p p o s i ti o n to s u m m a r yj u d g m e n t); see al so Fraser

v. Mer

r i l l Lynch Pi

erce, Fenner & Sm ith, I

nc . , 8 17 F . 2d 2 50 , 2 53 ( 4t h Ci r . 1 98 7) ( f i n d i n g s uf f i ci ent p r eju d ic e t o s u p p o rtw a iv e rw h e r e b r o k e r a g e f ir m d e la y e d f o u r -a n d -o n e - h a lf year s bef or e seeki ng ar bi t r at i on, t w o t r i al dat es passed, and opp osi ng par t y w as r equi r ed t o r espond t o t w o m ot i ons f orpart i a l sum m ar y j udg m entand t hr ee m ot i ons t o di sm i ss) ;Mi l ler Brewi ng , 7 8 1 F .2 d a t 4 9 7

— 9 8 (fi n d i n g w a i v e r w h e re p l a i n ti ff u n c o n d i ti o n a l l yfi l e d su i t, w a i ted eigh t m o n th s to as se rtri g h t t o ar bi t r at e, and di d not pur sue ar bi t r at i on unt i l af t er i t s sui tw as di sm i ssed t hr ee yea r s l at erf orw antofpr os ec ut i on) . L i ke w i se , i n Pr i ce , th e F i fth C i rc u i t C o u rt ofA ppe al s hel d t hatpr ej udi ce r es ul t ed i n w ai verw hen t he part y op pos i ng a rbit rati o n h a d b e e n p u t t o the ex p e n se an d ti m e o f de fen d i n g a m o ti o n to d i sm i ss an d for su m m a ry j u d g m e n t be c a u se u n l i k e a p e rfu n c to ry m o ti o n to di sm i ssbe f or e a ns w er i ng, a f ed eral r ul e 12( b) m ot i on t o di sm i ssan d f or sum m ar y j udg m ent “coul d not have caused anyt hi ng butsubst ant i al pr ej udi ce t o t hePr i c e s . ” 791 F . 2d a t1162 .47

H add ockf ai l ed t o s ee k a r bi t r at i on be f or e i ni t i at i ng the pr i orl i t i gat i on. Th en he w ai t ed overfourt een m onths bef or e request i ng ar bi t r at i on, f r om M ar ch 2 0 0 5 , w h e n h e f ile d t h e p r io rla w s u it , u n t il J u ly2 0 0 6 , w h e n h e f ile d h is st at em entofcl ai m s w i t h t he A A A . Dur i ng t hatt i m e, am ong ot her t hi ngs , he o b tai n e d a te m p o raryi n j u n c ti o n , fi l e d tw o m o ti o n s fo r su m m a ry j u d g m e n t, l i t i gat ed hi s cl ai m s t o an adver se j udg m ent , and f i l ed and di sm i ssed an appeal f r om t hatj udgm ent . The t r i al co urts pec i f i ca l l y f ound t hatt he “C r esce nt Ent i t i esw er e p r ej udi ce d byH add ock ’ s i nvoc at i on of t he j udi ci al sy st em i n t he Pr i orLa w su i t . I n r el i ance on Haddoc k’ s ac t i ons , t he C r es ce ntEnt i t i ess pen t su bs t ant i al su m s def end i ng H add ock ’ s cl ai m s i n t he Pr i or La w su i tand pr os ec ut i ng a co unt er cl ai m . ” H add ockha s notch al l eng ed t hatf i ndi ng. W e h ol d t hatthe tr i al co urtdi d notab us e i t s di sc r et i on bys t ayi ng t he ar b i t r a t i o n b e c a u s e Ha d d o c km a d e h i s c h o i c e : h e s u b s t a n t i a l l yi n v o k e d t he j udi ci al pr ocess as t o hi s opt i on cl ai m s t o t he pr ej udi ce ofReal Part i es i n I nt er est i n t h e p ri o r li ti g a ti o n a n d th e re b yw a i v e d h i s ri g h t to a rb i tra te th o s e c l a i m s . W e over r ul e H addo ck’ s t hi r d i ssue. I V . C onc l us i on H addo ck does notchal l enge t he t r i al co urt ’ s r ul i ng t hathi s cl ai m s based on hi s st ock opt i onsi n CEI orhi s Sar ban es - O xl ey cl ai m ar e b eyo nd t he sc ope oft he ar bi t r at i on agr eem ent . N orhas he r ai sed an i ssue on ap peal as t o t he t r i al48

cou rt ’ s r ul i ng thathi s cl ai m s aga i ns tQ ui nn, Row se y, an d W or r el l ar e b eyo nd t he sc ope oft he ar bi t r at i on a gr ee m en t . Ther ef or e, w e n ee d notr ea ch t he pr opr i et y oft he t r i al court ’ s or deras t o t hose cl ai m s. H avi ng ov er r ul ed H add ock ’ s t hr ee i ss ues , w e d enyt he pet i t i on f orw r i to fm and am us , an d w e di sm i sst he i nt er l ocu t or y a ppe al f orw antofj ur i sd i ct i on.

A N N E GA RD N ER J U S T I C E PA N EL: GA RD N ER a nd W A LKER, JJ. ; an d DI X O N W . H O LM A N , J. ( Seni or J u s ti c e , R e ti re d , S i ttin g b yA s s i g n m e n t). W A LKER, J. co ncu r s w i t houtopi ni on. DEL I VERE D: F e br ua r y 26, 2009