Court Opinion

ID: 4701112
Source: CourtListenerOpinion
Date Created: 2021-07-05 07:19:36.055982+00
Date Added: 2024-06-11T08:06:16.043276
License: Public Domain

NUMBER 13-21-00057-CV

                            COURT OF APPEALS

                      THIRTEENTH DISTRICT OF TEXAS

                       CORPUS CHRISTI – EDINBURG

VETS SECURING AMERICA, INC.,                                               Appellant,

                                          v.

EDWARD SMITH,                                                               Appellee.

               On appeal from the County Court at Law No. 2
                        of Nueces County, Texas.

                                     OPINION

   Before Chief Justice Contreras and Justices Benavides and Silva
                  Opinion by Chief Justice Contreras

      In this accelerated interlocutory appeal, appellant Vets Securing America, Inc.

(VSA) contends that the trial court erred by granting appellee Edward Smith’s motion to

lift a stay which was previously imposed to allow the parties to arbitrate an employment

dispute. We affirm.
                                          I.       BACKGROUND

       Smith was employed by VSA as a part-time security guard. As part of his

employment, he was required to agree to an arbitration policy covering “any dispute

between an employee and the Company.”1 In 2020, Smith sued VSA for disability

discrimination and retaliation. He alleged that he is a disabled military veteran and that,

in June 2019, “[his] part-time schedule was taken from [him] by [VSA] and given to two

non-disabled employees.” He asserted that this amounted to a “requirement” that he work

full-time, which he claimed he could not do because of his disability.

       After Smith acknowledged that these claims are covered by the arbitration policy,

the parties filed a “Joint Motion to Abate” the trial court proceedings “pending the outcome

of arbitration.” On September 9, 2020, the trial court granted the “Joint Motion to Abate”

and signed an order stating that “all proceedings in this matter shall be abated until the

parties complete arbitration in accordance with the terms of the parties’ aarbitration

       1   The policy stated in part:
       [T]he Company [VSA] has adopted this Employment Arbitration Policy (“Policy”), consistent
       with and pursuant to the Federal Arbitration Act.
       This Policy is a binding contract between the Company and its employees. Acceptance of
       employment or continuation of employment with the Company is deemed to be acceptance
       of this Policy. . . .
       1. Scope of Policy. The agreement between each individual employee and the Company
       to be bound by the Policy creates a contract requiring both parties to resolve most
       employment-related disputes . . . that are based on a legal claim through final and binding
       arbitration. Arbitration is the exclusive forum for the resolution of such disputes, and the
       parties mutually waive their right to a trial before a judge or jury in federal or state court in
       favor of arbitration under the Policy. . . .
       2. Covered Disputes. The disputes covered under this Policy include any dispute between
       an employee and the Company . . . . A dispute is based on a legal claim and is subject to
       this Policy if it is not specifically excluded from the Policy and if it arises from or involves a
       claim under any federal, state or local statute, ordinance, regulation or common law
       doctrine regarding or relating to employment discrimination . . . .
       4. Arbitration Rules and Procedures. Arbitration shall be held pursuant to the
       Employment Arbitration Rules of the AAA then in effect and available at:
       http://www.adr.org. . . .

                                                       2
aagreement [sic].”

       Smith then initiated arbitration with the American Arbitration Association (AAA) and

timely paid his required filing fee of $300. On November 3, 2020, AAA sent a letter to the

parties stating in part:

       In cases before a single arbitrator, a non-refundable filing fee of $300.00, is
       due from the employee when a claim is filed, unless the arbitration
       agreement provides that the employee pay less. A non-refundable fee of
       $1,900.00 is due from the employer, unless the arbitration agreement
       provides that the employer pay more.

       We have received the employee’s portion of the filing fee in the amount of
       $300.00. Accordingly, we request that the employer pay its share of the
       filing fee in the amount of $1,900.00 on or before November 13, 2020. Upon
       receipt of the balance of the filing fee, the AAA will proceed with
       administration.

       ....

       We would like to remind the employer that [u]nder the Costs of Arbitration
       Section of the Employment/Workplace Arbitration Rules, the employer’s full
       share is due as soon as the employee meets his or her filing requirements,
       even if the matter settles. This notice confirms that employee’s filing
       requirements have been met.

On November 18, 2020, AAA sent a letter to the parties stating in part:

       We have not yet received payment from the employer to cover their portion
       of the filing fee, as described in our letter dated November 3, 2020. The
       employer is requested to pay $1,900.00 to the AAA by December 2,
       2020. The employer’s share of the fee is due regardless of whether the case
       settles.

       If payment was already sent, please accept our apologies and disregard
       this letter. If this non-payment is simply an oversight on the employer’s
       behalf, we trust payment will be made promptly.

       We hope that this situation does not escalate to this level, but we want you
       to be aware that it is the policy of the AAA that if an employer does not
       comply with our request to pay the administrative fees stated in the
       Employment/Workplace Fee Schedule, the AAA may decline to administer
       future cases involving that employer. In addition, the employer may be
       requested to remove the AAA as the provider organization from their
       employment arbitration clauses.

                                             3
(Emphasis in original.)

        On December 8, 2020, AAA sent an email to the parties stating: “We still have not

received the respondent’s share of the filing fee in the amount of $1,900.00. We kindly

ask that payment be made on or before December 15, 2020 in order to avoid having this

matter administratively closed.” Attached to the email was a copy of an invoice addressed

to VSA for $1,900.

        Finally, on December 22, 2020, AAA sent a letter to the parties stating in part:

        The employer has failed to submit the previously requested filing fee;
        accordingly, we have administratively closed our file in this matter. Any filing
        fees received from the employee will be refunded under separate cover.

        Because the employer has failed to comply with the Employment Arbitration
        Rules and the Employment Due Process Protocol, we will decline to
        administer any future employment matter involving Respondent. We ask
        that Respondent remove our name from its arbitration agreements so there
        is no confusion to the public.

After receiving this notice, VSA’s counsel paid VSA’s share of the filing fee via his

personal credit card. The following day, AAA sent an email to the parties stating:

        We have received payment from the respondent in the above referenced
        matter. In order to assign this case to a case manager, we need
        confirmation from the claimant in order to re-open this case. Please provide
        confirmation to the attention of this address.

But Smith refused to “confirm” his willingness to proceed. Instead, he filed an “Opposed

Motion to Lift Stay” on January 22, 2021, arguing that VSA had waived arbitration by

failing to timely pay the AAA filing fee, and citing Brown v. Dillard’s, Inc., 430 F.3d 1004

(9th Cir. 2005), as an analogous case. VSA filed a response, which included an affidavit

by Felix Digilov, an attorney with the law firm representing VSA. The affidavit stated in

part:

        3.     On October 30, 2020, upon notice from the AAA, I directed my staff
        to coordinate with our accounting department, in Los Angeles, California to

                                               4
      pay the $1,900.00 AAA filing fee. On December 8, 2020, after I received an
      email inquiry from my assistant, I once again directed my staff to remit
      payment of the AAA filing fee. I was assured by my staff that the firm would
      make the payment.

      4.       Due to a clerical error within my firm’s accounting department, the
      accounting clerk did not notify either [lead counsel] William S. Helfand or
      myself that our directions to remit the AAA filing fee payment were not
      carried out. Thus, the AAA filing fee remained unpaid until we received
      notice from the AAA on December 22, 2020. Upon notice from AAA on
      December 22, 2020, Mr. Helfand paid the AAA filing fee immediately with
      his personal credit card. On December 23, 2020, the AAA notified
      Defendant that it accepted the Defendant/Respondent’s initial $1,900.00
      filing fee and they invited Plaintiff’s counsel to reconfirm his intent to move
      forward with the arbitration.

      5.      At that point, nothing had occurred in the arbitration other than the
      billing. The parties had not yet been provided a list of potential arbitrators
      and no schedule for the arbitration proceedings had even been discussed.
      The AAA offered to move forward on the same schedule as if we had paid
      the fee two days earlier, but again Plaintiff’s counsel refused.

      6.      The AAA has an internal appeal process. When it was clear that the
      Plaintiff was relying on his own refusal to move forward with the arbitration
      as a means of trying to avoid his obligation to arbitrate his claims, I initiated
      an appeal within the AAA to request that, in light of the parties’ Rule 11
      agreement and the Court’s Order requiring arbitration that the AAA reinstate
      this arbitration regardless of Plaintiff’s efforts to use the payment of the fee
      one day late as a means of avoiding arbitration. That appeal remains
      pending.

      7.     The payment of the AAA’s fee one day late was due to a clerical
      mistake by counsel, and was not at all intentional. It was certainly not based
      on anyone’s conscious decision and, rather, was directly the opposite of
      what I attempted to arrange internally. This mistake was not one caused by
      our client, [VSA]. In fact, like me and Mr. Helfand, the client did not even
      know of our mistake until after it occurred. [VSA] has always insisted on its
      contractual right to arbitrate and [VSA] has not done anything inconsistent
      with that right.

      At a hearing on Smith’s motion to lift stay on February 1, 2021, the trial court heard

arguments from counsel and then concluded as follows:

      THE COURT:         Okay. I don’t know if this is going to—the motion before
                         me is basically just a motion to lift the stay and abatement.
                         And although [Smith’s counsel] talks about waiver in that

                                             5
                  Dillard’s case, I’m not going to make a ruling on the waiver
                  issue. But I am going to grant his order to lift the stay and
                  abatement. I’m going to give y’all a trial date and we’ll just
                  play it by ear. I will reconsider, when those are brought
                  before me, on the waiver issue or a breach of contract
                  case or maybe the arbitration since y’all are appealing
                  that whole issue with the arbitration ward [sic]. Maybe
                  they will take it up before. So let me—okay, so it’s just a
                  plain order that he submitted. So I’m going to sign off on
                  that. There’s no findings on this. So it looks like it’s a plain
                  order. Do you have any objection, [VSA’s counsel], to the
                  form of the order?

[VSA’s counsel]: Yes, Judge. I think if the Court is going to withdraw—if the
                 Court is going to unabate the case, then the Court has to
                 set aside its order compelling arbitration because—

THE COURT:        Okay. That’s your objection? That’s your objection to the
                  form, sir?

[VSA’s counsel]: Yes, Judge. I’d ask that the Court specifically withdraw its
                 order referring the case to arbitration.

THE COURT:        Okay. Your objection is overruled and I’m going to sign
                  the order that was submitted. And then I guess I’ll be
                  visiting with y’all again at some point when those other
                  issues are brought before me if they’re not resolved in the
                  arbitration.

                  ....

[VSA’s counsel]: Okay. Judge, again, regardless of the Court’s overruling
                 my objection to the form, the effect of the Court’s order is
                 to reinstate this case on the Court’s docket instead of
                 arbitration, am I correct?

THE COURT:        Well, unless there’s other things that are brought to my
                  attention. The only—what I’m reading, [plaintiff’s counsel]
                  is basically to take y’all out. I’m not ruling on whether y’all
                  had waived it. I was looking at the arbitration agreement
                  to see if there was anything that the Court could order her
                  [sic] to consent. Because it seems to me, you know, she
                  [sic] agreed to the arbitration. I mean, it’s unusual that I
                  have a plaintiff agree to arbitrate yet they agree to
                  arbitrate and then for whatever reason y’all drop the ball.
                  And so . . .

[VSA’s counsel]: It sounds like I need to file now an opposed motion to

                                       6
                                compel arbitration, Judge, and I’ll just do that.[ 2]

        THE COURT:              Okay. Then—okay, then I think that’s it. We’re adjourned.
                                Thank you, everyone.

The trial court signed an order granting Smith’s motion to lift stay. The order states, in its

entirety:

        On this 1st day of February, 2021, the court considered the plaintiff’s motion
        to lift the stay/abatement in this matter in the above-styled and numbered
        matter [sic]. After considering the motion, the response, if any, and the
        record, the Court GRANTS the motion.

        It is therefore ORDERED, ADJUDGED, and DECREED, that the plaintiff’s
        motion to list [sic] stay/abatement is GRANTED. This matter will be set for
        a jury trial upon entry of a docket control order.[ 3]

        Signed and entered on this 2nd day of February, 2021.

VSA then filed a motion to reconsider, which was denied. This interlocutory appeal

followed.

                                             II.      DISCUSSION

A.      Appellate Jurisdiction

        We first address whether we have jurisdiction over the appeal. See M.O. Dental

Lab v. Rape, 139 S.W.3d 671, 673 (Tex. 2004) (“[W]e are obligated to review sua sponte

issues affecting jurisdiction.”). 4 Generally, an appeal may only be taken from a final

judgment, unless an interlocutory appeal is authorized by statute. See Lehmann v. Har-

Con Corp., 39 S.W.3d 191, 195 (Tex. 2001).

        The parties do not dispute that the Federal Arbitration Act (FAA) applies to this

        2   No motion to compel arbitration appears in the record.
        3   No order setting a trial date appears in the record.
        4  In its brief, VSA asks us to issue a writ of mandamus in the event we conclude we lack appellate
jurisdiction. In re Merrill Lynch & Co., 315 S.W.3d 888, 891 (Tex. 2010) (orig. proceeding) (“Under the FAA,
mandamus relief is appropriate if the trial court abuses its discretion by failing to stay the litigation or compel
arbitration.”). In light of our conclusion that we have appellate jurisdiction, we deny this request as moot.

                                                        7
case. See In re Brock Specialty Servs., 286 S.W.3d 649, 653 (Tex. App.—Corpus Christi–

Edinburg 2009, orig. proceeding) (“The FAA may govern a written arbitration clause

enforced in Texas state court if the parties have expressly contracted for the FAA’s

application. . . . When parties have designated the FAA to govern their arbitration

agreement, their designation should be upheld.”); see 9 U.S.C. § 2 (stating that the FAA

applies to a “written provision in . . . a contract evidencing a transaction involving

commerce to settle by arbitration a controversy thereafter arising out of such contract or

transaction . . . .”); id. § 1 (defining “commerce” as interstate commerce).

       The FAA provides:

       If any suit or proceeding be brought in any of the courts of the United States
       upon any issue referable to arbitration under an agreement in writing for
       such arbitration, the court in which such suit is pending, upon being satisfied
       that the issue involved in such suit or proceeding is referable to arbitration
       under such an agreement, shall on application of one of the parties stay the
       trial of the action until such arbitration has been had in accordance with the
       terms of the agreement, providing the applicant for the stay is not in default
       in proceeding with such arbitration.

9 U.S.C. § 3 (emphasis added). An appeal may be taken from an interlocutory order

“refusing a stay of any action under [§] 3” of the FAA. Id. § 16(a)(1)(A); see TEX. CIV.

PRAC. & REM. CODE ANN. § 51.016 (“In a matter subject to the [FAA], a person may take

an appeal . . . from the judgment or interlocutory order of a district court, county court at

law, or county court under the same circumstances that an appeal from a federal district

court’s order or decision would be permitted by 9 U.S.C. [§] 16.”). An order lifting a

previously-imposed stay is considered an order “refusing a stay” for purposes of the FAA.

Pre-Paid Legal Servs. v. Cahill, 786 F.3d 1287, 1291 (10th Cir. 2015); GEA Grp. AG v.

Flex-N-Gate Corp., 740 F.3d 411, 414 (7th Cir. 2014); Dobbins v. Hawk’s Enters., 198

F.3d 715, 716 (8th Cir. 1999); Corpman v. Prudential-Bache Secs., 907 F.2d 29, 30 (3d

                                             8
Cir. 1990). Accordingly, we have jurisdiction over the appeal. See 9 U.S.C. § 16(a)(1)(A);

TEX. CIV. PRAC. & REM. CODE ANN. § 51.016.

B.     Motion to Lift Stay

       The only question presented in this appeal is whether the trial court erred by

granting Smith’s motion to lift the “stay/abatement” that was previously ordered on

September 9, 2020. As is apparent from the “Joint Motion to Abate,” there is no dispute

that the arbitration agreement is valid and enforceable or that Smith’s claims fall within its

scope. In this situation, the FAA states that a trial court, upon a party’s motion, must “stay

the trial of the action until such arbitration has been had in accordance with the terms of

the agreement, providing the applicant for the stay is not in default in proceeding with

such arbitration.” 9 U.S.C. § 3. We review a trial court’s decision on whether to grant a

stay under FAA § 3 for abuse of discretion. Big Bass Towing Co. v. Akin, 409 S.W.3d 835,

838 (Tex. App.—Dallas 2013, no pet.).

       In his motion to lift stay, Smith argued that VSA waived arbitration and breached

the agreement to arbitrate by failing to timely pay its share of the AAA filing fee. He asked

the trial court to “lift the stay/abatement” and to set the cause for a jury trial. In its response

to Smith’s motion, VSA conceded that it paid its AAA filing fee “24 hours late due to an

administrative error,” but it claimed that it did not waive its right to arbitration because (1)

it did not substantially invoke the judicial process, and (2) the late payment did not cause

“any discernible prejudice” to Smith. VSA further argued that the “Joint Motion to Abate”

constituted a Rule 11 agreement binding Smith to consent to proceeding with arbitration

despite the late payment. See TEX. R. CIV. P. 11.

       “Although waiver of arbitration is a disfavored finding, the right to arbitrate—like all

                                                9
contract rights—is subject to waiver.” Forby v. One Techs., L.P., 909 F.3d 780, 783 (5th

Cir. 2018) (internal quotations omitted); see Forest Oil Corp. v. McAllen, 268 S.W.3d 51,

56 (Tex. 2008) (noting that federal and Texas law “strongly favor arbitration”). Generally,

a party seeking to prove waiver of a right to arbitrate must demonstrate: “(1) knowledge

of an existing right to compel arbitration; (2) acts inconsistent with that existing right; and

(3) prejudice to the party opposing arbitration resulting from such inconsistent acts.”

Britton v. Co-op Banking Grp., 916 F.2d 1405, 1412 (9th Cir. 1990). A party may waive

enforcement of an arbitration clause by “substantially invoking the judicial process to the

other party’s detriment or prejudice.” Forby, 909 F.3d at 783; Miller Brewing Co. v. Fort

Worth Distrib. Co., 781 F.2d 494, 497 (5th Cir. 1986); Perry Homes v. Cull, 258 S.W.3d

589, 590 (Tex. 2008); In re Fleetwood Homes of Tex., 257 S.W.3d 692, 694–95 (Tex.

2008) (orig. proceeding) (per curiam).

       In arguing that VSA waived its right to arbitrate, Smith principally relied on Brown

v. Dillard’s, 430 F.3d 1004 (9th Cir. 2005). In that case, the plaintiff Brown filed a notice

of intent to arbitrate her wrongful termination claim, but a representative of her former

employer, Dillard’s, “told Brown that her complaint had no merit and that Dillard’s refused

to arbitrate.” Id. at 1009. Brown then filed suit in California district court. Id. After removing

the case to federal court, Dillard’s moved to compel arbitration. Id. The federal district

court held that the arbitration agreement was unconscionable, and therefore

unenforceable, because “it is not clear that the agreement binds Dillard’s to arbitrate its

own employment-related claims in any meaningful sense.” Id. Without ruling on the

unconscionability issue, the Ninth Circuit Court of Appeals affirmed on different grounds,

holding that Dillard’s breached the agreement by refusing to participate in the arbitration

                                               10
proceedings. Id. at 1010. The court explained that, under California law, “[h]e who seeks

to enforce a contract must show that he has complied with the conditions and agreements

of the contract on his part to be performed.” Id. (citing Pry Corp. of Am. v. Leach, 2 Cal.

Rptr. 425 (Cal. Dist. Ct. App. 1960)). By initially refusing to arbitrate Brown’s claim,

Dillard’s “clearly breached” the arbitration agreement; consequently, it lost its right to

enforce that agreement. Id. The Brown court distinguished the case from another in which

a party retained its right to arbitrate under an agreement even though it breached another

part of the agreement which was unrelated to the arbitration clause. Id. at 1011 (citing

Local Union No. 721 v. Needham Packing Co., 376 U.S. 247 (1964) and noting that,

unlike the defendant in that case, “Dillard’s[’] breach was tantamount to a repudiation of

the arbitration agreement”).

       In addition to Brown, Smith cites several other cases in which a party was found

to have waived arbitration by failing to timely pay arbitration filing fees. See Freeman v.

SmartPay Leasing, 771 Fed. App’x 926, 933 (11th Cir. 2019) (“In sum, SmartPay acted

inconsistently with its contractual right to arbitrate when it refused to pay the initial filing

fee, as expressly required by the arbitration agreement. SmartPay therefore waived its

right to arbitration by failing to pay arbitration fees.”); Pre-Paid Legal Servs., 786 F.3d at

1294 (“[A] party’s failure to pay its share of arbitration fees breaches the arbitration

agreement and precludes any subsequent attempt by that party to enforce that

agreement.”); Sink v. Aden Enters., 352 F.3d 1197, 1201 (9th Cir. 2003) (“Aden’s failure

to pay required costs of arbitration was a material breach of its obligations in connection

with the arbitration. Aden had a fair chance to proceed with arbitration, but Aden scuttled

that prospect by its non-payment of costs, impeding the arbitration to the point where the

                                              11
arbitrator cancelled the arbitration and declared Aden in default. In these circumstances,

we hold that § 4 of the FAA does not compel a district court to return the parties once

more to arbitration.”); see also Garcia v. Mason Contract Prods., No. 08-23103-CIV, 2010

WL 3259922, at *5 (S.D. Fla. Aug. 18, 2010) (unpublished) (“Defendant’s failure to comply

with the contractual rules agreed to by the parties clearly constitutes a ‘default’ as that

term is used in § 3 of the FAA. . . . Having defaulted on the parties’ contractual rules,

Defendant can no longer claim entitlement to a stay or dismissal as per § 3 of the FAA.”).

        For purposes of the prejudice analysis, Brown is distinguishable from the instant

case. There, the plaintiff “did not choose to litigate. She chose to arbitrate, and when she

was rebuffed by Dillard’s, she sued as a last resort.” Brown, 430 F.3d at 1012. The court

therefore held that, “[i]n this circumstance, we have no trouble concluding that the delay

and costs incurred by Brown are prejudicial for the purpose of waiver analysis.” Id. at

1012–13. On the other hand, in this case, Smith filed his lawsuit before agreeing to

arbitration. See id. at 1012 (“Unsurprisingly, courts are reluctant to find prejudice to the

plaintiff who has chosen to litigate, simply because the defendant litigated briefly (e.g., by

filing a motion to dismiss or requesting limited discovery) before moving to compel

arbitration.”). And the record shows that, if Smith had confirmed to AAA his willingness to

arbitrate despite VSA’s late fee payment, the arbitration would have proceeded on the

same schedule as if VSA had paid the fee one day earlier. 5

        Even though Brown is not exactly on point, we find that the trial court did not abuse

its discretion in granting Smith’s motion to lift stay. We note first that it is unclear whether

        5 Brown is also factually distinguishable on the basis that Dillard’s “refused” to arbitrate, whereas
VSA’s failure to timely pay the filing fee was unintentional, at least according to Digilov. This is a distinction
without a legal difference, however, because subjective intent to waive is not among the elements
necessary to establish waiver. See Britton v. Co-op Banking Grp., 916 F.2d 1405, 1412 (9th Cir. 1990).

                                                       12
Smith actually needed to show he was prejudiced by VSA’s delay in order for his motion

to have merit. Several of the cases cited above, including Brown, considered whether a

party breached the arbitration agreement, and therefore forfeited its right to enforce it

under traditional contractual waiver rules, by failing to timely pay the filing fee. See Brown,

430 F.3d at 1010; Sink, 352 F.3d at 1201; Freeman, 771 Fed. App’x at 933. But the

question presented here is narrower—it asks only whether the trial court was required to

maintain the stay under § 3 of the FAA. To establish that the stay should be lifted, Smith

arguably did not need to show the traditional elements of waiver, including prejudice, nor

did he necessarily need to show that VSA materially breached the arbitration agreement

so as to excuse his performance thereunder. See Hernandez v. Gulf Group Lloyds, 875

S.W.2d 691, 692 (Tex. 1994) (“[W]hen one party to a contract commits a material breach

of that contract, the other party is discharged or excused from any obligation to perform.”).

Instead, he had to show only that the arbitration “has been had in accordance with the

terms of the agreement” or that VSA is “in default in proceeding with such arbitration.”

See 9 U.S.C. § 3. If he made either showing, then the statute does not require a stay,

regardless of whether the late payment was prejudicial. See id.; Pre-Paid Legal Servs.,

786 F.3d at 1294 (“The AAA determined the arbitration had gone as far as it could due to

Mr. Cahill’s repeated refusal to pay the fees. Under the AAA rules, the panel terminated

the proceedings. As such, the arbitration ‘ha[d] been had in accordance with the terms of

the agreement,’ removing the § 3 requirement for the district court to stay the

proceedings.”); see also, e.g., Mead v. Johnson Grp., 615 S.W.2d 685, 689 (Tex. 1981)

(“Default by one party excuses performance by the other party.”).

       Courts have repeatedly found default when the arbitrating authority terminates

                                              13
arbitration for non-payment of fees or enters a default due to non-payment. See Sink, 352

F.3d at 1199–20 (affirming denial of motion to compel arbitration on default grounds after

arbitrator cancelled arbitration due to non-payment of fees and entered default); Garcia,

2010 WL 3259922, at *4 (denying motion to compel arbitration after arbitrator entered

default upon non-payment of fee and AAA refused to reopen the case after payment);

Stowell v. Toll Bros., No. 06-CV-2103, 2007 WL 30316, at *1 (E.D. Pa. Jan. 4, 2007)

(mem.) (finding defendant defaulted when AAA “declined to administer the case” due to

defendant’s non-payment of filing fee). Here, AAA administratively closed the arbitration

expressly because of VSA’s late payment. Thus, the arbitration “ha[d] been had in

accordance with the terms of the agreement,” and VSA was “in default in proceeding with

[the] arbitration,” meaning the FAA did not require a stay. See 9 U.S.C. § 3; Pre-Paid

Legal Servs., 786 F.3d at 1294; cf. Conn Appliances, Inc. v. Jones, No. 05-20-00149-CV,

2020 WL 6304990, at *4 (Tex. App.—Dallas Oct. 28, 2020, no pet.) (mem. op.) (finding

trial court should have compelled arbitration where plaintiff “failed to establish that the

AAA terminated the arbitration proceedings due to a non-payment of fees and in fact

acknowledges that at present the arbitration case is not in danger of being suspended or

close[d]”).

       Even assuming a showing of prejudice was required, we conclude it was

sufficiently made in this case. First, VSA’s repeated contention that it paid its filing fee

only “one day late” is disingenuous. There is no dispute that, after Smith initiated

arbitration, VSA received at least three written notices from AAA: the first requesting

payment of the filing fee on or before November 13, 2020; the second requesting payment

on or before December 2, 2020; and the third requesting payment on or before December

                                            14
15, 2020. Having not received the payment in response to any of the above notices, AAA

“administratively closed” the arbitration, as evidenced by its December 22, 2020 letter.

VSA’s counsel paid the filing fee only after receiving this letter. The payment was made

thirty-nine days after November 13, 2020—the date upon which AAA initially informed

VSA that payment was due. Though VSA argues that a one-day delay in payment would

not have caused any delay in the arbitration schedule if Smith agreed to proceed, the

record does not support the same conclusion with respect to a thirty-nine-day delay in

payment.

       Second, the fact that Smith initially chose to litigate before submitting his claim to

arbitration does not mean that he cannot have suffered prejudice from VSA’s delay.

Though the Brown court remarked that “courts are reluctant to find prejudice to the plaintiff

who has chosen to litigate,” that was in the context of considering whether the defendant

waived arbitration by “substantially invoking the judicial process.” In such a situation, a

plaintiff who initially chose to litigate cannot claim to be prejudiced by the defendant

making the same choice. But here, Smith does not argue that VSA waived arbitration by

substantially invoking the judicial process; instead, he claims that VSA was in default of

its obligations under the arbitration agreement. Accordingly, it is immaterial to the

prejudice analysis that Smith filed suit before he agreed to arbitrate.

       On appeal, VSA emphasizes that the trial court pointedly refused to rescind or

vacate its September 9, 2020 order and made “no findings” at the February 1, 2021

hearing. VSA characterizes the September 9 order as an “order compelling arbitration,”

and it argues that the trial court’s refusal to vacate it means that the parties must proceed

with arbitration despite VSA’s late payment of the filing fee. But strictly speaking, the

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September 9 order did not compel arbitration; instead, it abated the case so that

arbitration could be completed. The trial court was never asked to adjudicate the issue of

whether Smith’s claims were referable to arbitration under the agreement, and it made no

such finding at any point. Instead, it abated the case because the parties had already

agreed that Smith’s claims were arbitrable. Thus, the fact that the trial court expressly

refused to vacate the September 9 order does not mean that Smith must agree to confirm

his willingness to proceed with arbitration. 6

        VSA also argues that Smith is required to confirm his willingness to proceed with

arbitration because the “Joint Motion to Abate” constituted a Rule 11 agreement in which

Smith agreed to “complete” arbitration. But to the extent the joint motion constituted a

legally-binding agreement, it was an agreement to arbitrate Smith’s claims in accordance

with the arbitration agreement. By failing to timely pay the AAA filing fee after at least

three written notices and thirty-nine days, VSA breached that agreement and thereby

surrendered its ability to enforce it. See Pre-Paid Legal Servs., 786 F.3d at 1294; Sink,

352 F.3d at 1201.

        Finally, we note that due to VSA’s late payment, AAA’s own rules prevent it from

proceeding with arbitration without Smith’s “confirmation.” However, Smith has refused to

provide that confirmation, and AAA—a private entity—is powerless by itself to compel

Smith to provide it. Moreover, VSA has never explicitly requested a court order compelling

          6 VSA reads too much into the trial court’s remarks at the February 1, 2021 hearing. As shown by

the hearing transcript, the court declined to vacate its September 9, 2020 order not because it believed the
parties were required to return to arbitration, but rather because that relief had not been requested in the
parties’ pleadings. The court’s remark regarding “no findings” referred to the proposed order submitted by
Smith’s counsel; and the court’s statement seemingly anticipating further arbitration proceedings (“I guess
I’ll be visiting with y’all again at some point when those other issues are brought before me if they’re not
resolved in the arbitration”) referred to Digilov’s representation that he “initiated an appeal” with AAA in
order to “reinstate this arbitration” despite Smith’s refusal to consent. These remarks do not indicate that
the trial court intended to order the parties to return to arbitration.

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Smith to provide confirmation or compelling AAA to re-open the case without his

confirmation. In any event, according to its December 22, 2020 letter to the parties, AAA

“will decline to administer any future employment matter involving [VSA]” because of

VSA’s late payment. 7 If the trial court had denied Smith’s motion to lift stay here, it is

feasible that the dispute would devolve into a stalemate, with neither forum willing or able

to hear Smith’s claims. Such an outcome would be odious to the interests of justice and

would not advance any public policy favoring arbitration. 8

        By paying its arbitration filing fee late, after multiple notices and extensions, VSA

defaulted on its obligations under the arbitration agreement. Therefore, § 3 of the FAA

did not require the trial court to preserve the stay. We overrule VSA’s issue on appeal.

                                            III.     CONCLUSION

        The trial court’s judgment is affirmed.

                                                                              DORI CONTRERAS
                                                                              Chief Justice

Delivered and filed on the
1st day of July, 2021.

        7In its email of December 23, 2020, AAA advised the parties that it received payment from VSA
but would “need confirmation” from Smith “in order to re-open this case” and to assign it to a case manager.
The email did not mention AAA’s representation, made in its letter the previous day, that it “will decline to
administer any future employment matter involving [VSA].”
        8   VSA states in its brief as follows: “In fact, notwithstanding [Smith’s] prior refusal to move forward,
the AAA re-initiated arbitration of this matter on February 19, 2021.” This is a misrepresentation of the
record. According to a document attached to VSA’s motion to reconsider, VSA opened a new case with
AAA on February 1, 2021, immediately after the hearing at which the trial court granted Smith’s motion to
lift stay. However, the document explicitly states that it was merely an acknowledgement of AAA’s receipt
of documentation. The document states: “This notice does not constitute the AAA’s initiation of the case or
satisfaction of all AAA administrative filing requirements.”

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