Opinion ID: 2834306
Heading Depth: 1
Heading Rank: 5

Heading: Is a Showing of Prejudice Required?

Text: Although convinced that the Culls had substantially invoked the litigation process, the trial court compelled arbitration because the Defendants did not prove an arbitrator would not have allowed the same discovery. “Even substantially invoking the judicial process does not waive a party’s arbitration rights unless the opposing party proves that it suffered prejudice as a result.” [79] On at least eight occasions, we have said prejudice is a necessary requirement of waiver by litigation conduct. [80] The Defendants ask us to reconsider this requirement. They point out that Texas law does not require a showing of prejudice for waiver, but only an intentional relinquishment of a known right. [81] Waiver “is essentially unilateral in its character” and “no act of the party in whose favor it is made is necessary to complete it.” [82] Thus, they argue we cannot impose a waiver rule for arbitration contracts that does not apply to all others. [83] We decline the Defendants’ invitation based on both federal and state law. The Defendants say the federal courts are split on the issue, but the split is not very wide. Of the twelve regional circuit courts, ten require a showing of prejudice, [84] and the other two treat it as a factor to consider. [85] We have noted before the importance of keeping federal and state arbitration law consistent. [86] Under Texas law, waiver may not include a prejudice requirement, but estoppel does. In cases of waiver by litigation conduct, the precise question is not so much when waiver occurs as when a party can no longer take it back. As noted above, Texas estoppel law does not allow a party to withdraw a representation once the other party takes “action or forbearance of a definite and substantial character.” [87] Using precisely the same terms, the Restatement does not allow a party to withdraw an option contract when the offeree has taken substantial action based upon it. [88] In these contexts, prejudice is an element of the normal contract rules. Thus, we agree with the courts below that waiver of arbitration requires a showing of prejudice.