Court Opinion

ID: 4165076
Source: CourtListenerOpinion
Date Created: 2017-05-02 09:19:49.214752+00
Date Added: 2024-06-11T07:46:54.025381
License: Public Domain

COURT OF APPEALS
                          SECOND DISTRICT OF TEXAS
                               FORT WORTH

                               NO. 02-16-00425-CV

LEGOLAND DISCOVERY CENTRE                                              APPELLANT
(DALLAS), LLC

                                         V.

SUPERIOR BUILDERS, LLC                                                   APPELLEE

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        FROM THE 342ND DISTRICT COURT OF TARRANT COUNTY
                   TRIAL COURT NO. 342-275920-14

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                                    OPINION

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      Appellant Legoland Discovery Centre (Dallas), LLC appeals from the trial

court’s interlocutory order denying its motion to compel arbitration.      Because

appellee Superior Builders, LLC did not meet its heavy burden to show that

Legoland waived its right to arbitrate by substantially invoking the judicial process

as to Superior’s claims raised against Legoland, we reverse the trial court’s order

and remand for entry of an order compelling arbitration.
                                I. BACKGROUND

                                   A. FACTUAL

      Legoland hired Superior to be the general contractor for a water-feature

addition to Legoland’s entertainment center in Grapevine, Texas. The contract,

drafted by Superior, included the following arbitration clause:

      Any controversy or claim arising out of or relating to this contract, or
      the breach thereof, shall be settled by arbitration administered by the
      American Arbitration Association under its Construction Industry
      Arbitration Rules, and judgment on the award rendered by the
      arbitrator(s) may be entered in any court having jurisdiction thereof.

The contract also contained a choice-of-law clause providing that Texas law

would govern the contract and a venue clause setting venue regarding “any

action other than a lien foreclosure may at [Superior’s] option lie in . . . Tarrant

County.”

      Legoland believed that Superior did not complete the work contracted for

and damaged adjacent property. Legoland also began to receive nonpayment

notices from several of Superior’s subcontractors and suppliers:            Sunbelt

Rentals; Roofing & Siding Specialists, Inc.; National Wholesale Supply, Inc.;

Love Service Company; H&H Pool Decks, Inc.; Chas. F. Williams Co.; and

Aeroflow. See Tex. Prop. Code Ann. §§ 53.056–.057 (West 2014). Several of

these subcontractors filed lien affidavits, seeking payment. See id. § 53.103

(West 2014). Legoland stopped paying Superior, leaving an alleged balance due

to Superior of $89,642.10. See id. § 53.102 (West 2014).

                                         2
      Legoland notified Superior that it would terminate the contract under its

terms unless Superior cured the defaults.       Superior failed to cure; therefore,

Legoland notified Superior that Legoland had terminated the contract and notified

the affected subcontractors of the termination. See id. § 53.107 (West 2014).

                                B. PROCEDURAL

      Superior filed suit against Legoland on December 11, 2014, raising claims

for breach of contract, violation of the Prompt Payment Act, quantum meruit, and

promissory estoppel. Superior also requested a declaration that it was entitled to

a lien against Legoland’s entertainment center and for a judgment “foreclosing on

[its] Lien . . . together with an order of sale.”   Legoland answered and filed

counterclaims for breach of contract, negligence, and breach of express warranty

based on Superior’s alleged faulty work and failure to pay its subcontractors.

See Tex. R. Civ. P. 97(a). Legoland included in its counterclaims a request for

disclosure. See Tex. R. Civ. P. 194.1, 194.2.

      Superior amended its petition on April 1, 2015, adding as defendants most

of the subcontractors identified in Legoland’s counterclaims but raising the same

claims against Legoland that it raised in its original petition.     Superior also

included a request for disclosure in its amended petition, which Legoland

responded to. On May 13, 2015, Legoland and Superior both signed a letter

agreement, reflecting that Superior’s deadline to respond to Legoland’s requests

for disclosure would be extended to May 20, 2015. See Tex. R. Civ. P. 11,

194.3.

                                        3
      Two of the defendant subcontractors—Sunbelt and Roofing & Siding

Specialists—filed counterclaims against Superior and cross-claims against

Legoland; one subcontractor, which was not named in Superior’s suit or in

Legoland’s counterclaims, intervened in Superior’s suit. See Tex. R. Civ. P. 60,

97(e). On January 29, 2016, Superior filed an agreed motion for entry of a

scheduling order.1 See Tex. R. Civ. P. 166, 190.4, 192. On March 3, 2016, the

trial court entered the requested scheduling order, setting the trial for the week of

November 14, 2016. On April 15, 2016, Superior again amended its petition to

add Legoland’s surety to its claim seeking a lien declaration. See Tex. Prop.

Code Ann. § 53.171 (West 2014).

      Legoland     conducted    discovery    with   several     of   the   defendant

subcontractors. By October 2016, Legoland had resolved the subcontractors’

claims.2   On October 6, 2016, Legoland filed a motion to compel Superior’s

claims against it to arbitration based on the terms of their contract. Superior

responded that Legoland had waived its right to arbitrate by substantially

invoking the judicial process to Superior’s detriment.        The trial court held a

hearing on October 28, 2016, and concluded that Legoland had affirmatively

waived its right to compel arbitration by agreeing to the trial court’s scheduling

      1
     Only Strategic Demolition, LLC, one of the subcontractors Superior
named as a defendant, did not agree to the scheduling order.
      2
       The claims between Superior, one of the defendant subcontractors, and
the intervenor subcontractor were voluntarily dismissed with prejudice in July
2016. See Tex. R. Civ. P. 162.

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order. On November 3, 2016, the trial court entered an order denying Legoland’s

motion to compel, specifically stating that Legoland “has waived its right to

arbitration by substantially invoking the judicial process to [Superior’s] detriment.”

      Legoland filed a request for findings of fact and conclusions of law3 and a

notice of appeal from the denial of its motion to compel arbitration. Legoland

argues that the trial court erred because it had not substantially invoked the

judicial process and because Superior failed to carry its burden to show that it

was prejudiced by Legoland’s actions. See 9 U.S.C.A. § 16(a)(1)(C) (West 2009)

(allowing interlocutory appeal from order denying arbitration where matter is

subject to the Federal Arbitration Act); Tex. Civ. Prac. & Rem. Code Ann.

§ 51.016 (West 2015), § 171.098(a)(1) (West 2011) (allowing immediate appeal

from interlocutory denial order under the Texas General Arbitration Act).4

      3
       Even if a request for findings of fact and conclusions of law was
appropriate, Legoland did not file a notice of past-due findings and conclusions;
therefore, any complaint arising from their absence was waived. See Tex. R.
Civ. P. 297; Commercial Servs. of Perry, Inc. v. Wooldridge, 968 S.W.2d 560,
563 (Tex. App.—Fort Worth 1998, no pet.). See generally Gene Duke Builders,
Inc. v. Abilene Hous. Auth., 138 S.W.3d 907, 908 (Tex. 2004) (holding
attachment of a deposition, affidavit, and exhibits to plea to the jurisdiction
rendered subsequent hearing on plea evidentiary even though no evidence
proffered at hearing).
      4
        Legoland argues that both the Federal Arbitration Act (FAA) and the
Texas General Arbitration Act (TGAA) apply to the arbitration clause at issue
because the contract did not specifically exclude application of the FAA.
Superior does not directly address this argument but cites to both Texas and
federal cases in support of its appellate arguments. Because the contract did not
specifically exclude application of the FAA and because no party argues that the
FAA differs from the TGAA in any material respect, which would trigger FAA
preemption, we may find guidance in cases arising under either statute. See
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                         II. WAIVER OF ARBITRATION

                             A. STANDARD OF REVIEW

      In general, we review the denial of a motion to compel arbitration for an

abuse of discretion. See Brand FX, LLC v. Rhine, 458 S.W.3d 195, 203 (Tex.

App.—Fort Worth 2015, no pet.). In this appeal, however, no party disputes that

the parties entered into a binding arbitration agreement or that Superior’s claims

against Legoland fell within the scope of that agreement.        The sole point of

contention is whether the trial court correctly concluded that Legoland had

waived its right to enforce the valid and applicable arbitration agreement by

availing itself of the judicial process to Superior’s detriment. Thus, the issue we

review is whether Superior established its defense to enforcement—waiver. This

is a legal question subject to de novo review.5 See id. at 204

In re D. Wilson Constr. Co., 196 S.W.3d 774, 778–80 (Tex. 2006) (pet. for review
and orig. proceeding); Howerton v. Wood, No. 02-15-00327-CV, 2017 WL
710631, at *2 (Tex. App.—Fort Worth Feb. 23, 2017, no pet. h.) (mem. op.); see
also In re L & L Kempwood Assocs., L.P., 9 S.W.3d 125, 127–28 (Tex. 1999)
(pet. for review and orig. proceeding) (holding Texas choice-of-law provision
does not select the TGAA to the exclusion of the FAA unless the provision
specifies the inapplicability of the FAA). See generally 3 Roy W. McDonald &
Elaine A. Grafton Carlson, Texas Civil Practice § 19:55 (2d ed. 2000) (“The
federal decisions are consistent with the holdings of the Texas courts” regarding
waiver of arbitration.)
      5
       We recognize that a trial court’s determination of facts relevant to a
defense to a motion to compel arbitration is a question of fact for the trial court,
which we are to review deferentially. See Brand FX, 458 S.W.3d at 204.
However, there were no factual disputes before the trial court relevant to
Superior’s waiver defense, and the parties proffered no evidence at the hearing
on the motion to compel. Accordingly, Legoland’s waiver is a pure issue of law
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                               B. IMPLIED WAIVER

      Waiver of a valid and applicable arbitration agreement may be express or

implied. See G.T. Leach, 458 S.W.3d at 511. As it did in the trial court, Superior

argues that Legoland impliedly waived its right to enforce their arbitration

agreement through its conduct. As such, Superior had the burden to prove that

(1) Legoland “substantially invoked the judicial process”—engaged in conduct

inconsistent with a claimed right to compel arbitration and (2) the inconsistent

conduct caused Superior to suffer a detriment or prejudice. See id. at 511–12.

Because the law strongly favors arbitration, Superior’s burden to prove the

defense “is a high one.” Perry Homes v. Cull, 258 S.W.3d 580, 590 (Tex. 2008),

cert. denied, 555 U.S. 1103 (2009). So high, in fact, that appellate courts seldom

find an implied waiver through litigation conduct. See, e.g., RSL Funding, LLC v.

Pippins, 499 S.W.3d 423, 430–31 (Tex. 2016); Richmont Holdings, Inc. v.

Superior Recharge Sys., LLC, 455 S.W.3d 573, 575 & n.1 (Tex. 2014); see also

Perry Homes, 258 S.W.3d at 590 (in appeal finding waiver, stating court had

“never” before found implied waiver through litigation conduct).

      We determine whether Legoland impliedly waived its right to seek

arbitration based on the totality of the circumstances and are guided by several

factors, including:

reviewable de novo. See G.T. Leach Builders, LLC v. Sapphire V.P., LP,
458 S.W.3d 502, 511 (Tex. 2015).

                                        7
      whether the party asserting the right to arbitrate was plaintiff or
      defendant in the lawsuit, how long the party waited before seeking
      arbitration, the reasons for any delay in seeking to arbitrate, how
      much discovery and other pretrial activity the party seeking to
      arbitrate conducted before seeking arbitration, whether the party
      seeking to arbitrate requested the court to dispose of claims on the
      merits, whether the party seeking to arbitrate asserted affirmative
      claims for relief in court, the amount of time and expense the parties
      have expended in litigation, and whether the discovery conducted
      would be unavailable or useful in arbitration.

RSL Funding, 499 S.W.3d at 430; see also Perry Homes, 258 S.W.3d at 590–91.

No one factor is dispositive. See RSL Funding, 499 S.W.3d at 430. Even in

close cases, the presumption against waiver governs. See id.

      The totality of the circumstances here do not support waiver by Legoland.

See, e.g., G.T. Leach, 458 S.W.3d at 512–15; EZ Pawn Corp. v. Mancias,

934 S.W.2d 87, 90 (Tex. 1996) (writ of error and orig. proceeding); Brown v.

Anderson, 102 S.W.3d 245, 250–51 (Tex. App.—Beaumont 2003, pet. denied).

Legoland was the defendant in the suit brought by Superior. See G.T. Leach,
458 S.W.3d at 512; cf. Nicholas v. KBR, Inc., 565 F.3d 904, 908 (5th Cir. 2009)

(holding substantial invocation frequently shown where plaintiff seeks to compel

arbitration after filing suit without raising arbitration clause). Legoland sought

only routine disclosures under rule 194 from Superior, which Superior also

requested from Legoland and which would be available and useful during

arbitration. See G.T. Leach, 458 S.W.3d at 514; see also American Arbitration

Association, Construction Industry Arbitration Rules R-24 (July 1, 2015),

http://www.adr.org/construction   (providing   for   prehearing   production    of

                                        8
information between parties).      The trial court recognized that only “basic”

discovery had occurred even though the discovery deadline had passed.

Legoland did not ask for pretrial, summary disposition of Superior’s claims

brought against it. See G.T. Leach, 458 S.W.3d at 513. Although Legoland

sought affirmative relief from the trial court in its counterclaims, these claims

were compulsory. See Tex. R. Civ. P. 97(a); G.T. Leach, 458 S.W.3d at 513–14.

      Legoland did not seek to compel arbitration until twenty-two months after

Superior filed suit, which could point to substantial invocation.         However,

Superior added the subcontractors as defendants in its suit approximately four

months after filing its initial petition,6 and Legoland sought to settle these

subcontractors’ liens against its property before moving to compel arbitration.

See Walker v. J.C. Bradford & Co., 938 F.2d 575, 578 (5th Cir. 1991) (“Attempts

at settlement . . . are not inconsistent with an inclination to arbitrate and do not

preclude the exercise of a right to arbitration.”). These subcontractors were not

subject to Legoland and Superior’s arbitration agreement and, therefore, could

not have been forced to arbitration. Legoland sought arbitration within days of

settling with the last subcontractor and participated in minimal discovery with

Superior over the course of the litigation. See RSL Funding, 499 S.W.3d at 430–

33; see also Garg v. Pham, 485 S.W.3d 91, 108 (Tex. App.—Houston [14th Dist.]

      6
      It appears that Superior added the subcontractors in response to
Legoland’s counterclaims in which Legoland raised the issue of the unpaid
subcontractors.

                                         9
2015, no pet.) (“Although delay is relevant in a determination of whether a party

has substantially invoked the judicial process, the focus is on the amount of

pretrial activity and discovery related to the merits of the case during that time

period.”).

      The trial court placed heavy emphasis on the fact that Legoland agreed to

the entry of the trial court’s scheduling order. But agreeing to a scheduling order

under these facts does not equate to a waiver of the right to compel arbitration.

See Walker, 938 F.2d at 577–78; Brown, 102 S.W.3d at 251; cf. G.T. Leach,
458 S.W.3d at 511 (concluding agreeing to scheduling order did not establish

express waiver of arbitration right).        Additionally, Superior’s unsupported

averment in its appellate brief that it incurred $35,000 in attorneys’ fees to

prosecute its suit against Legoland and the subcontractors does not show waiver

by Legoland. See In re Vesta Ins. Grp., Inc., 192 S.W.3d 759, 763 (Tex. 2006)

(orig. proceeding); Cooper Indus., LLC v. Pepsi–Cola Metro. Bottling Co.,

475 S.W.3d 436, 452 (Tex. App.—Houston [14th Dist.] 2015, no pet.); Structured

Capital Res. Corp. v. Arctic Cold Storage, LLC, 237 S.W.3d 890, 896 (Tex.

App.—Tyler 2007, no pet. & orig. proceeding).

                                III. CONCLUSION

      We conclude that Legoland’s actions in Superior’s suit did not substantially

invoke the judicial process; therefore, Superior failed to carry its heavy burden to

show that Legoland waived its contractual right to arbitrate. See G.T. Leach,
458 S.W.3d at 513 (“A party’s litigation conduct aimed at defending itself and

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minimizing its litigation expenses, rather than at taking advantage of the judicial

forum, does not amount to substantial invocation of the judicial process.”). We

need not address the second factor regarding waiver—prejudice to Superior.

Accordingly, we sustain Legoland’s issue, reverse the trial court’s order, and

remand to that court for entry of an order compelling the parties’ dispute to

arbitration pursuant to their arbitration agreement. See Tex. R. App. P. 43.2(d),

43.3(a); Brand FX, 458 S.W.3d at 206.

                                                   /s/ Lee Gabriel

                                                   LEE GABRIEL
                                                   JUSTICE

PANEL: LIVINGSTON, C.J.; GABRIEL and PITTMAN, JJ.

DELIVERED: April 27, 2017

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