Opinion ID: 2834306
Heading Depth: 1
Heading Rank: 4

Heading: When Is the Litigation Process Substantially Invoked?

Text: We have said on many occasions that a party waives an arbitration clause by substantially invoking the judicial process to the other party’s detriment or prejudice. [36] Due to the strong presumption against waiver of arbitration, this hurdle is a high one. [37] To date, we have never found such a waiver, holding in a series of cases that parties did not waive arbitration by: $ filing suit; [38] $ moving to dismiss a claim for lack of standing; [39] $ moving to set aside a default judgment and requesting a new trial; [40] $ opposing a trial setting and seeking to move the litigation to federal court; [41] $ moving to strike an intervention and opposing discovery; [42] $ sending 18 interrogatories and 19 requests for production; [43] $ requesting an initial round of discovery, noticing (but not taking) a single deposition, and agreeing to a trial resetting; [44] or $ seeking initial discovery, taking four depositions, and moving for dismissal based on standing. [45] These cases well illustrate the kind of conduct that falls short. But because none amounted to a waiver, they are less instructive about what conduct suffices. We have stated that “allowing a party to conduct full discovery, file motions going to the merits, and seek arbitration only on the eve of trial” would be sufficient. [46] But what if (as in this case) only two out of these three are met? And how much is “full discovery”? We begin by looking to the standards imposed by the federal courts. They decide questions of waiver by applying a totality-of-the-circumstances test on a case-by-case basis. [47] In doing so, they consider a wide variety of factors including: $ whether the movant was plaintiff (who chose to file in court) or defendant (who merely responded); [48] $ how long the movant delayed before seeking arbitration; [49] $ whether the movant knew of the arbitration clause all along; [50] $ how much pretrial activity related to the merits rather than arbitrability or jurisdiction; [51] $ how much time and expense has been incurred in litigation; [52] $ whether the movant sought or opposed arbitration earlier in the case; [53] $ whether the movant filed affirmative claims or dispositive motions; [54] $ what discovery would be unavailable in arbitration; [55] $ whether activity in court would be duplicated in arbitration; [56] and $ when the case was to be tried. [57] Of course, all these factors are rarely presented in a single case. Federal courts have found waiver based on a few, or even a single one. [58] We agree waiver must be decided on a case-by-case basis, and that courts should look to the totality of the circumstances. Like the federal courts, this Court has considered factors such as: $ when the movant knew of the arbitration clause; [59] $ how much discovery has been conducted; [60] $ who initiated it; [61] $ whether it related to the merits rather than arbitrability or standing; [62] $ how much of it would be useful in arbitration; [63] and $ whether the movant sought judgment on the merits. [64] Thus, we disagree with the court of appeals that waiver is ruled out in this case solely because the Culls “did not ask the court to make any judicial decisions on the merits of their case.” [65] While this is surely a factor, [66] it is not the only one. Waiver involves substantial invocation of the judicial process , not just judgment on the merits. We also disagree with the Defendants that different standards should apply to plaintiffs and defendants. As parties may begin arbitration without a court order, it is certainly relevant that a plaintiff chose to file suit instead. But Texas procedure also contemplates that parties may file suit in order to compel arbitration. [67] Thus, while the movant’s status is a factor to consider, it does not alone justify a finding of waiver or change the basic nature of the totality-of-the-circumstances test. [68] We recognize, as we have noted before, “the difficulty of uniformly applying a test based on nothing more than the totality of the circumstances.” [69] But there appears to be no better test for “substantial invocation.” [70] As the United States Supreme Court has said about minimum contacts, tests based on “reasonableness” are never susceptible to mechanical application — “few answers will be written in black and white[;] [t]he greys are dominant and even among them the shades are innumerable.” [71] How much litigation conduct will be “substantial” depends very much on the context; three or four depositions may be all the discovery needed in one case, [72] but purely preliminary in another. [73] Moreover, this test is quite similar to one we have long recognized and recently applied to arbitration — estoppel. Estoppel is a defensive theory barring parties from asserting a claim or defense when their representations have induced “action or forbearance of a definite and substantial character” and “injustice can be avoided only by enforcement.” [74] In arbitration cases, we have held a nonparty who enjoys substantial direct benefits from a contract may be estopped from denying an arbitration clause in the same contract. [75] By the same token, a party who enjoys substantial direct benefits by gaining an advantage in the pretrial litigation process should be barred from turning around and seeking arbitration with the spoils. The answer to most questions regarding arbitration “flow inexorably from the fact that arbitration is simply a matter of contract between the parties.” [76] Like any other contract right, arbitration can be waived if the parties agree instead to resolve a dispute in court. Such waiver can be implied from a party’s conduct, although that conduct must be unequivocal. [77] And in close cases, the “strong presumption against waiver” should govern. [78]