Court Opinion

ID: 9896509
Source: CourtListenerOpinion
Date Created: 2023-11-13 13:09:32.458136+00
Date Added: 2024-06-11T09:15:05.431058
License: Public Domain

Opinion issued November 7, 2023

                                   In The

                            Court of Appeals
                                  For The

                        First District of Texas
                           ————————————
                            NO. 01-23-00123-CV
                          ———————————
  ANTHONY G. BUZBEE AND ANTHONY G. BUZBEE, LP D/B/A THE
               BUZBEE LAW FIRM, Appellants
                                     V.
                   TERRY & THWEATT, P.C., Appellee

                  On Appeal from the 334th District Court
                           Harris County, Texas
                     Trial Court Case No. 2020-31793

                        MEMORANDUM OPINION

      Appellants Anthony Buzbee and the Buzbee Law Firm (collectively, Buzbee)

take this interlocutory appeal from the denial of their application to compel

arbitration. See TEX. CIV. PRAC. & REM. CODE § 171.098(a)(1) (authorizing this

interlocutory appeal). In two issues, Buzbee contends that (1) the arbitration
agreement applies to the dispute between Buzbee and appellee, Terry & Thweatt,

P.C. (T&T); and (2) Buzbee did not waive arbitration by substantially invoking the

judicial process. We affirm.

                                     Background

      This case concerns a dispute between two Houston law firms arising from the

representation of a client. Though this Court discussed the underlying facts in detail

in Buzbee v. Terry & Thweatt, P.C., No. 01-20-00659-CV, 2022 WL 52637 (Tex.

App.—Houston [1st Dist.] Jan. 6, 2022, pet. denied) (mem. op.),1 a brief recitation

is necessary for the disposition of this appeal.

      In October 2017, Jade James and her ex-husband, John Luengas, met with

attorneys at T&T about retaining the firm to represent them in a potential wrongful

death lawsuit relating to the death of their daughter. Id. at *1. Ultimately, James

signed a representation agreement with T&T (the Contract) and agreed to pay

attorney’s fees on a contingency basis. Id. at *2. Specifically, the Contract entitled

T&T to a 33 1/3% contingency fee if the case settled before suit or arbitration was

1
      As will be discussed further below, Buzbee filed a motion to dismiss T&T’s lawsuit
      under the Texas Citizens Participation Act (TCPA). See TEX. CIV. PRAC. & REM.
      CODE § 27.001-.011. After the trial court denied the motion, Buzbee filed an
      interlocutory appeal. See TEX. CIV. PRAC. & REM. CODE § 51.014(a)(12)
      (authorizing interlocutory appeal from order denying TCPA motion to dismiss). On
      appeal, this Court affirmed the denial of Buzbee’s TCPA motion. Buzbee, 2022 WL
      52637, at *10.
                                           2
filed, 40% if settled pretrial, and 45% after Plaintiff announced “ready” for trial in

open court.

      The Contract also contained an arbitration provision, which provided, in

relevant part:

      The Client agrees that any and all disputes and/or controversies relating
      to fees and/or costs payable hereunder, including fees and/or costs
      involving associate counsel, shall be resolved solely and exclusively by
      arbitration. . . . Client and Attorneys understand that by Client signing
      this contingency fee employment agreement, Client and Attorneys are
      waiving their respective rights to a judge and/or jury trial on disputes
      and/or controversies relating to fees and/or costs payable hereunder,
      including fees and/or costs involving associate counsel, to binding
      arbitration in the manner provided herein.

James signed the Contract with T&T on October 12, 2017; however, one day later,

James met with attorneys from Buzbee’s law firm. That same day, James sent an

email to T&T terminating the Contract, stating that she had “decided to go with a

different attorney.” Id. at *2. In response, T&T advised James that it would not

release its interest in her case because James did not terminate T&T for cause. Id.

On October 16, 2017, Buzbee filed a wrongful death lawsuit on behalf of James. Id.

Ultimately, the wrongful death suit settled at mediation. In an effort to resolve the

dispute between the law firms, Buzbee offered T&T a sum that T&T contends was

“far less” than its 40% contingency fee agreement with James. T&T demanded the

full 40% fee. Id. Represented by Buzbee, James then initiated arbitration

proceedings against T&T pursuant to the Contract, and the arbitrator awarded a fee

                                          3
of $5,000 to T&T. Id. at *2–3. During arbitration, Buzbee stipulated that the firm

had agreed to pay any fees owed to T&T. Id. at *3.

      James and Luengas each filed grievances against T&T with the State Bar of

Texas. Id. at *2. T&T contends that, during the hearings before the grievance

committee, James testified under oath that it was during the initial meeting with

James that Buzbee promised her he would pay any fees owed to T&T on her behalf.

T&T argues that because of this promise, James terminated the Contract with T&T

and hired Buzbee.

      This alleged promise forms the basis of the underlying suit against Buzbee.

On May 27, 2020, T&T sued Buzbee for tortious interference with the Contract. The

suit alleged that Buzbee knew of the Contract and “actively encouraged” James to

fire T&T without cause and hire Buzbee instead. Id. at *3. T&T claims that “Buzbee

personally assured James that if she ended up owing any fees to [T&T], [Buzbee]

would pay those fees for James.” Id. T&T claims that, due to Buzbee’s interference,

it lost “the full 40% contingency fee that would have been earned on the settlement

of James’s case.” Id. T&T’s suit also seeks exemplary damages, claiming that

Buzbee acted with malice or gross negligence. Id.

      On July 7, 2020, Buzbee moved to dismiss the suit pursuant to the TCPA.

After the trial court denied the motion, Buzbee filed an interlocutory appeal, and this

Court affirmed the denial in a decision issued January 6, 2022. See id. at *10. Buzbee

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then sought a petition for discretionary review in the Texas Supreme Court, but that

court denied Buzbee’s petition on October 21, 2022.

      By statute, Buzbee’s interlocutory appeal stayed all proceedings in the trial

court pending resolution of the appeal. See TEX. CIV. PRAC. & REM. CODE §

51.014(b). After the stay was lifted, Buzbee filed the subject motion to compel

arbitration on December 16, 2022, asserting for the first time that T&T was required

to arbitrate its dispute with Buzbee.2 The trial court heard the motion by submission

and ultimately denied the motion on February 16, 2023. This appeal followed.

                     Denial of Motion to Compel Arbitration

      In two issues, Buzbee argues that the trial court erred in denying his motion

to compel arbitration. First, Buzbee argues that equitable estoppel requires T&T to

arbitrate its dispute with Buzbee because T&T’s tortious interference claim against

Buzbee is based on the Contract and the Contract contains an arbitration provision.

Second, Buzbee contends that he did not waive arbitration by substantially invoking

the litigation process.

A.    Standard of Review

      We review a trial court’s order denying a motion to compel arbitration for an

abuse of discretion. Wagner v. Apache Corp., 627 S.W.3d 277, 283 (Tex. 2021);

2
      Buzbee did not raise the issue of arbitration or otherwise mention arbitration in his
      answer to T&T’s suit, the TCPA motion, or any point prior to the motion to compel
      arbitration.
                                            5
Henry v. Cash Biz, LP, 551 S.W.3d 111, 115 (Tex. 2018). A trial court abuses its

discretion if it acts in an arbitrary or unreasonable manner or acts without reference

to guiding rules or principles. Taylor Morrison of Tex., Inc. v. Skufca, 650 S.W.3d

660, 676 (Tex. App.—Houston [1st Dist.] Dec. 30, 2021, no pet.) (citing Downer v.

Aquamarine Operators, Inc., 701 S.W.2d 238, 241–42 (Tex. 1985)). We defer to the

trial court’s factual determinations if they are supported by the evidence, but we

review the court’s legal rulings de novo. Henry, 551 S.W.3d at 115. A trial court has

no discretion in determining what the law is, which law governs, or how to apply the

law. Skufca, 650 S.W.3d at 676.

B.    The Parties’ Burdens

      “A party seeking to compel arbitration has the initial burden to establish the

arbitration agreement’s existence and show that the claims asserted against it fall

within the agreement’s scope.” Mohamed v. Auto Nation USA Corp., 89 S.W.3d 830,

835 (Tex. App.—Houston [1st Dist.] 2002, no pet.) (combined appeal and orig.

proceeding); see also TEX. CIV. PRAC. & REM. CODE § 171.021(a). The initial burden

to establish the existence of a valid arbitration agreement includes proving that the

party seeking to compel arbitration is a signatory to the arbitration agreement or has

the right to enforce the agreement. Mohamed, 89 S.W.3d at 836. A non-signatory

may not enforce an arbitration agreement unless “that non-signatory entity falls into

                                          6
an exception, recognized under general equitable or contract law, that would allow

such enforcement.” Id.

      “If the party seeking arbitration carries its initial burden, the burden then shifts

to the party resisting arbitration to present evidence on its defenses to the arbitration

agreement.” Id. at 835 (citing In re Oakwood Mobile Homes, Inc., 987 S.W.2d 571,

573 (Tex. 1999) (per curiam)).

C.    Existence of a Valid Arbitration Agreement

      The parties do not dispute the existence of a valid arbitration agreement

between T&T and James. Rather, the question is whether Buzbee, as a non-signatory

to the agreement, can compel T&T to arbitrate its dispute against Buzbee under the

agreement. Buzbee argues he can compel arbitration of T&T’s tortious interference

claim because T&T’s “right to recover and its damages depend on the existence of

the contract containing the arbitration clause.” See Cooper Indus., LLC v. Pepsi-Cola

Metro. Bottling Co., 475 S.W.3d 436, 443 (Tex. App.—Houston [14th Dist.] 2015,

no pet.). Buzbee thus argues he may compel arbitration under the doctrine of

equitable estoppel. T&T disputes the application of the equitable estoppel doctrine

and further argues that, in any event, Buzbee waived any right to compel arbitration.

      We need not decide whether Buzbee may compel arbitration of T&T’s claim

under the doctrine of equitable estoppel because, even if he could, we conclude he

nevertheless waived any such right by substantially invoking the judicial process.

                                           7
D.    Waiver of Right to Arbitrate

      Assuming, without deciding, that Buzbee met his initial burden to establish

the existence of a valid arbitration agreement based on the doctrine of equitable

estoppel, we must determine whether Buzbee waived any right to compel arbitration.

See id. at 447 (“Once the arbitration movant establishes a valid arbitration agreement

that encompasses the claims at issue, a trial court has no discretion to deny the

motion to compel arbitration unless the opposing party proves a defense to

arbitration such as waiver.”). Whether a party waived its right to arbitrate is a

question of law that we review de novo. Henry, 551 S.W.3d at 115; G.T. Leach

Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502, 511 (Tex. 2015).

      Because public policy favors arbitration, there is a strong presumption against

finding that a party has waived its right to arbitration, and the burden to prove waiver

is thus a heavy one. In re Bruce Terminix Co., 988 S.W.2d 702, 704, 705 (Tex. 1998)

(per curiam); EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 89 (Tex. 1996) (per

curiam). Any doubts regarding waiver are resolved in favor of arbitration. In re

Bruce Terminix, 988 S.W.2d at 705.

      Waiver may be implied or express, but it must be intentional. See Mancias,

934 S.W.2d at 89. Whether waiver occurs depends on the individual facts and

circumstances of each case. Pepe Int’l Dev. Co. v. Pub Brewing Co., 915 S.W.2d

925, 931 (Tex. App.—Houston [1st Dist.] 1996, no writ) (combined appeal and orig.

                                           8
proceeding); Merrill Lynch, Pierce, Fenner & Smith v. Eddings, 838 S.W.2d 874,

879 (Tex. App.—Waco 1992, writ denied). Waiver will be found only when (1) the

party seeking arbitration has substantially invoked the judicial process and (2) the

party opposing arbitration suffers actual prejudice as a result.3 Pepe Int’l Dev., 915

S.W.2d at 931; see also In re Bruce Terminix, 988 S.W.2d at 704.

       1.     Substantially Invoking the Judicial Process

       Substantially invoking the judicial process can occur when the proponent of

arbitration takes specific and deliberate actions that are inconsistent with the right to

arbitrate, or if it actively tries but fails to achieve a satisfactory result in litigation

before turning to arbitration. Tuscan Builders, LP v. 1437 SH6 LLC, 438 S.W.3d

717, 720 (Tex. App.—Houston [1st Dist.] 2014, pet. denied); see also in re Vesta

Ins. Grp., Inc., 192 S.W.3d 759, 763 (Tex. 2006) (orig. proceeding) (per curiam).

For a waiver to have occurred, the movant “must, at the very least, [have] engage[d]

in some overt act in court that evince[d] a desire to resolve the [same] arbitrable

dispute through litigation rather than arbitration.” Haddock v. Quinn, 287 S.W.3d

3
       A recent United States Supreme Court opinion rejects any requirement of proof of
       prejudice as an “arbitration-specific” federal procedural rule in cases brought in
       federal court. See Morgan v. Sundance, Inc., 596 U.S. 411, 416–19 (2022).
       Regardless of whether that ruling governs our analysis here, see Momentum Project
       Controls, LLC v. Booflies to Beefras LLC, No. 14-22-00712-CV, 2023 WL
       4196584, at *5 n.5 (Tex. App.—Houston [14th Dist.] Jun. 27, 2023, pet. filed)
       (describing this as an “unsettled” question), we nevertheless determine that T&T
       suffered prejudice as a result of Buzbee’s conduct, as outlined below.
                                            9
158, 177 (Tex. App.—Fort Worth 2009, pet. denied) (combined appeal and orig.

proceeding) (internal quotations omitted).

      In determining whether Buzbee waived the right to arbitrate, we consider

whether Buzbee’s litigation conduct demonstrates an “aggressive litigation strategy”

that would substantially invoke the litigation process. See Okorafor v. Uncle Sam &

Assocs., Inc., 295 S.W.3d 27, 40 (Tex. App.—Houston [1st Dist.] 2009, pet. denied);

see also In re Christus Spohn Health Sys. Corp., 231 S.W.3d 475, 479 (Tex. App.—

Corpus Christi-Edinburg 2007, no pet.) (orig. proceeding) (explaining that actions

inconsistent with right to arbitrate may include “some combination of filing an

answer, setting up a counterclaim, pursuing extensive discovery, moving for a

continuance, and failing to timely request arbitration”) (citing Cent. Nat’l Ins. Co. of

Omaha v. Lerner, 856 S.W.2d 492, 494 (Tex. App.—Houston [1st Dist.] 1993, no

pet.) (orig. proceeding) (per curiam)).

      In determining whether a party waived an arbitration clause, the courts can

consider, among other factors: (1) whether the movant for arbitration was the

plaintiff (who chose to file in court) or the defendant (who merely responded), (2)

when the movant learned of the arbitration clause and how long the movant delayed

before seeking arbitration, (3) the amount of the movant’s pretrial activity related to

the merits rather than arbitrability or jurisdiction, (4) the amount of discovery

conducted, and (5) whether the movant sought judgment on the merits. See Perry

                                          10
Homes v. Cull, 258 S.W.3d 580, 591–92 (Tex. 2008); In re Hawthorne Townhomes,

L.P., 282 S.W.3d 131, 141 (Tex. App.—Dallas 2009, no pet.) (combined appeal and

orig. proceeding). We analyze whether waiver occurred based on the totality of the

circumstances presented in each case. See In re Citigroup Global Mkts., Inc., 258

S.W.3d 623, 625 (Tex. 2008) (orig. proceeding) (per curiam); Okorafor, 295 S.W.3d

at 38; Interconex, Inc. v. Ugarov, 224 S.W.3d 523, 533 (Tex. App.—Houston [1st

Dist.] 2007, no pet.). “[A]ll these factors are rarely presented in a single case.” Perry

Homes, 258 S.W.3d at 591. Although substantial delay and pretrial activity often do

not rise to the level of conduct warranting waiver of the right to arbitrate, whether

the movant previously attempted to dispose of the litigation on the merits “ordinarily

is a key factor in assessing a waiver defense.” Pounds v. Rohe, 592 S.W.3d 549, 554

(Tex. App.—Houston [1st Dist.] 2019, no pet.) (citing Richmont Holdings v.

Superior Recharge Sys., 455 S.W.3d 573, 575 (Tex. 2014) (per curiam)).

      The totality of the circumstances presented by this case demonstrates an

attempt by Buzbee to “have it both ways.” See In re Citigroup Global Mkts., 258

S.W.3d at 625 (quoting Perry Homes, 258 S.W.3d at 597). Buzbee sought a

determination on the merits by filing a TCPA motion. Specifically, Buzbee’s motion

asked the trial court to dismiss T&T’s suit because (1) T&T failed to make out a

prima facie case as to each element of its claim, and (2) Buzbee had established his

affirmative defenses as a matter of law. See also Buzbee v. Clear Channel Outdoor,

                                           11
LLC, 616 S.W.3d 14, 22 (Tex. App.—Houston [14th Dist.] 2020, no pet.)

(describing TCPA motion as “procedural vehicle to address the merits of a claim. . .

designed to accelerate the presentation of evidence to support the merits of a suit in

those circumstances to which the [TCPA] applies”); HydroChem LLC v. Evoqua

Water Tech., LLC, 650 S.W.3d 6, 10 (Tex. App.—Houston [1st Dist.] 2020, pet.

denied) (explaining TCPA creates “a set of procedural mechanisms through which

a litigant may require, by motion, a threshold testing of the merits of legal

proceedings or filings that are deemed to implicate the expressive interests protected

by the statute, with the remedies of expedited dismissal, cost-shifting, and sanctions

for any found wanting”) (internal quotations omitted).

      Further, after the denial of Buzbee’s TCPA motion by the trial court, Buzbee

sought review of the trial court’s decision in this Court and to the Texas Supreme

Court. In total, more than two years elapsed before Buzbee raised the issue of

arbitration, even though Buzbee represented James in arbitration proceedings against

T&T arising out of the same arbitration agreement years earlier. “Indeed, failing to

seek arbitration until after proceeding in litigation to an adverse result is the clearest

form of inconsistent litigation conduct and is inevitably found to constitute

substantial invocation of the litigation process resulting in waiver.” Haddock, 287

S.W.3d at 180; see also Accord Bus. Funding, LLC v. Ellis, 625 S.W.3d 612, 618

(Tex. App.—Houston [14th Dist.] 2021, no pet.) (holding movant waived right to

                                           12
arbitration where it “delayed seeking arbitration until it was clear that it would

receive an adverse result” in litigation). We conclude that Buzbee’s activity in the

suit constituted substantial invocation of the judicial process.

      2.     Actual Prejudice

      We next consider whether T&T has demonstrated sufficient prejudice

resulting from Buzbee’s conduct. Prejudice refers to the inherent unfairness caused

by “a party’s attempt to have it both ways by switching between litigation and

arbitration to its own advantage.” Citigroup Global Mkts., 258 S.W.3d at 625

(quoting Perry Homes, 258 S.W.3d at 597). This inherent unfairness may be

demonstrated “in terms of delay, expense, or damage to a party’s legal position that

occurs when the party’s opponent forces it to litigate an issue and later seeks to

arbitrate that same issue.” Perry Homes, 258 S. W.3d at 597 (quoting Republic Ins.

Co. v. PAICO Receivables, LLC, 383 F.3d 341, 346 (5th Cir. 2004)).

      Here, Buzbee delayed seeking arbitration for over two years.4 During that

period, T&T was forced to respond to Buzbee’s TCPA motion and was therefore

obligated to present evidence to defeat Buzbee’s TCPA motion, providing Buzbee

with additional information concerning the basis for T&T’s claims in the process.

4
      We recognize the two-year delay was a result of the stay pending the resolution of
      the TCPA motion, but that course of action was set in motion by Buzbee’s litigation
      strategy.
                                          13
      Buzbee contends that T&T would have had to reveal this information during

arbitration anyway. This argument shows how Buzbee’s litigation conduct

prejudiced T&T. By proceeding with litigation and seeking a dismissal on the merits

of T&T’s claims, Buzbee’s actions required T&T to prematurely marshal its proof.

But when Buzbee did not prevail, he nevertheless sought a second bite at the apple

through arbitration. See Pounds, 592 S.W.3d at 558 (holding that nonmovant would

suffer prejudice in arbitration after movants unsuccessfully sought resolution on

merits via summary judgment; “compelling arbitration at this point in the

proceedings would allow [movants] to undo the trial court’s adverse summary-

judgment ruling and deprive [nonmovant] of this favorable result”); Adams v.

StaxxRing, Inc., 344 S.W.3d 641, 652 (Tex. App.—Dallas 2011, pet. denied)

(holding that requiring nonmovant to “marshal their evidence, thought process, and

legal analysis” was evidence of compromise to nonmovant’s legal position and

relevant to showing prejudice); see also Prof’l Advantage Software Sols., Inc. v.

West Gulf Mar. Assoc., Inc., No. 01-15-010006-CV, 2016 WL 2586690, at *5 (Tex.

App.—Houston [1st Dist.] May 5, 2016, no pet.) (mem. op.) (observing that if

“arbitration were allowed [after nonmovant responded to three summary judgment

motions], [movant] would have the benefit of having forced a ‘preview’ of

[nonmovant’s] case on the merits”).

                                        14
       After considering the totality of the circumstances, as we must, see Perry

Homes, 258 S.W.3d at 591, we determine that Buzbee’s conduct in “attempt[ing] to

have it both ways by switching between litigation and arbitration to [his] own

advantage” evinces the “inherent unfairness” sufficient to establish prejudice. Id. at

597.

       Having determined that Buzbee substantially invoked the judicial process to

T&T’s prejudice, we overrule Buzbee’s second issue.

                                    Conclusion

       We affirm the trial court’s order denying Buzbee’s motion to compel

arbitration.

                                              Amparo Guerra
                                              Justice

Panel consists of Justices Goodman, Rivas-Molloy, and Guerra.

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