Court Opinion

ID: 4157785
Source: CourtListenerOpinion
Date Created: 2017-04-04 16:15:27.365604+00
Date Added: 2024-06-11T14:35:16.807598
License: Public Domain

COURT OF APPEALS
                           SECOND DISTRICT OF TEXAS
                                FORT WORTH

                               NO. 02-16-00289-CV

GEO-TECH FOUNDATION REPAIR                                           APPELLANT

                                        V.

TERRY LEGGETT                                                          APPELLEE

                                     ----------

          FROM COUNTY COURT AT LAW NO. 2 OF TARRANT COUNTY
                    TRIAL COURT NO. 2015-006367-2

                                     ----------

                          MEMORANDUM OPINION1

                                     ----------

      In one issue, appellant Geo-Tech Foundation Repair (Geo-Tech) appeals

the trial court’s interlocutory order denying a motion to compel arbitration.2 Geo-

Tech contends that it seeks to enforce a mandatory arbitration provision

contained in the parties’ contract and that appellee Terry Leggett cannot show
      1
         See Tex. R. App. P. 47.4.
      2
         See Tex. Civ. Prac. & Rem. Code Ann. §§ 171.021(a), .098(a)(1) (West
2011).
that Geo-Tech has waived its entitlement to arbitration. Leggett contends that

the record does not include any competent evidence of a valid agreement to

arbitrate and that Geo-Tech’s delay in demanding arbitration justified the trial

court’s denial of the motion to compel arbitration. We reverse and remand.

                                 Background Facts

      In November 2015, Leggett sued Geo-Tech for breach of contract. Leggett

alleged that in April 2011, the parties had entered into an agreement for Geo-

Tech to perform foundation work on Leggett’s Fort Worth home. Leggett alleged

that Geo-Tech had performed the work improperly and had attempted, but had

failed, to correct problems that resulted from the deficient performance. Leggett

asserted that Geo-Tech had “breached its contract . . . for the performance of

services, to-wit, repair to the foundation of [Leggett’s] home.” In his petition,

Leggett sought damages of $40,000 plus attorney’s fees under the civil practice

and remedies code. See Tex. Civ. Prac. & Rem. Code Ann. § 38.001 (West

2015). Geo-Tech filed an answer in which it asserted a general denial and pled

for costs and attorney’s fees.

      Six months after filing its answer, in May 2016, Geo-Tech filed a motion to

compel arbitration under section 171.021 of the civil practice and remedies code.

See id. § 171.021(a). In the motion, Geo-Tech contended that the parties had

entered into a contract for foundation repair of Leggett’s home in April 2011 and

that the contract had the following clauses:

                                         2
      Owner and Contractor agree that any dispute, or lawsuit related in
      any way to this agreement or the work related thereto, shall be
      resolved by mandatory and binding arbitration administered by the
      American Arbitration Association (AAA) in accordance with this
      arbitration agreement and under the commercial arbitration rules of
      the AAA . . . .

            ....

              In the event that the Owner and Contractor cannot agree that
      the movement in the foundation has been controlled and settlement
      is within the tolerances specified above, it is specifically agreed by
      acceptance of this warranty that the matter shall be determined by
      binding arbitration administered by the American Arbitration
      Association (AAA) in accordance with this arbitration agreement and
      under the commercial arbitration rules of the AAA . . . .

To the motion, Geo-Tech attached a copy of the parties’ contract that contains

the provisions above and represented that the attachment was a “true copy,”

although Geo-Tech’s motion was not sworn.          The contract recites Leggett’s

name, address, and signature; states an amount that Leggett agreed to pay Geo-

Tech; includes a date; and illustrates the proposed foundation repair.

      Leggett responded to Geo-Tech’s motion to compel arbitration. He argued

that Geo-Tech had waived its right to demand arbitration because of its delay in

doing so and because of his prejudice caused by the delay. He conceded that

the arbitration clause in the parties’ contract “purport[ed] to allow [Geo-Tech]

to . . . arbitrate the complaints raised by [Leggett].” He argued, however, that the

trial court should not reward Geo-Tech’s “dilatory tactics” by granting arbitration.

Leggett did not object to the contract that Geo-Tech attached to its motion to

compel or contest Geo-Tech’s assertions that the parties had entered into a

                                         3
contract and that the contract had contained the arbitration provisions quoted

above.

      After Geo-Tech replied to Leggett’s response, the trial court denied Geo-

Tech’s motion to compel arbitration. Geo-Tech brought this appeal.

                           Motion to Compel Arbitration

      Geo-Tech contends that the trial court erred by denying the motion to

compel arbitration.    In their briefing to this court, the parties focus on two

disputes: (1) whether Geo-Tech was required to authenticate the contract that it

attached to its motion to compel in the trial court (and whether Leggett was

required to object to any failure to authenticate the contract as a prerequisite to

arguing lack of authentication on appeal), and (2) whether Geo-Tech’s delay in

seeking arbitration resulted in a waiver of its right to do so.

      A written agreement to arbitrate a controversy that arises between parties

after the date of the agreement is generally valid and enforceable. See Tex. Civ.

Prac. & Rem. Code Ann. § 171.001(a)(2) (West 2011); Jabri v. Qaddura, 108
S.W.3d 404, 410 (Tex. App.—Fort Worth 2003, no pet.). A party to such an

agreement may file a motion to compel arbitration of a dispute, and the trial court

“shall order” the parties to arbitrate on a showing of an agreement to arbitrate

and the opposing party’s refusal to do so. Tex. Civ. Prac. & Rem. Code Ann.

§ 171.021(a); Jabri, 108 S.W.3d at 410. If a party opposing arbitration “denies

the existence of the agreement,” the court “shall summarily determine that issue.”

                                           4
Tex. Civ. Prac. & Rem. Code Ann. § 171.021(b). When a trial court denies a

motion to compel arbitration, the party seeking arbitration may bring an

interlocutory appeal. Id. § 171.098(a)(1).

      We review a trial court’s denial of a motion to compel arbitration for an

abuse of discretion, but we review whether there is a valid and enforceable

arbitration agreement de novo. Watts Regulator Co. v. Tex. Farmers Ins. Co.,

498 S.W.3d 643, 646 (Tex. App.—Fort Worth 2016, pets. abated); BBVA

Compass Inv. Solutions, Inc. v. Brooks, 456 S.W.3d 711, 723 (Tex. App.—Fort

Worth 2015, no pet.); Brand FX, LLC v. Rhine, 458 S.W.3d 195, 203 (Tex.

App.—Fort Worth 2015, no pet.). A party seeking to compel arbitration must

show that the claims at issue are subject to a valid arbitration agreement and fall

within the scope of that agreement. Watts Regulator Co., 498 S.W.3d at 646–47.

      Federal and state law strongly favor arbitration.     BBVA Compass Inv.

Sols., Inc., 456 S.W.3d at 717. “[A] trial court that refuses to compel arbitration

under a valid and enforceable arbitration agreement has abused its discretion.”

Brand FX, LLC, 458 S.W.3d at 204.

Authentication

      On appeal, Geo-Tech contends that the contract attached to its motion to

compel contains valid and binding arbitration provisions.         Leggett argues,

however, that the attachment cannot serve as competent evidence of a valid

agreement to arbitrate because it is not authenticated. Leggett does not deny

that the parties entered into a contract (indeed, he has brought a claim for breach

                                         5
of that contract), but he contends that the contract that appears in the record was

not properly authenticated.

       Leggett did not raise this argument in the trial court. On appeal, he cites

two cases for the proposition that an unauthenticated contract cannot serve as

competent evidence of an agreement to arbitrate. See In the Estate of Guerrero,

465 S.W.3d 693, 705 (Tex. App.—Houston [14th Dist.] 2015, pet. denied)

(en banc) (“Because Champion has not authenticated the Arbitration Agreement

or any of the sales documents it attached to its motions to compel arbitration,

there is no competent evidence of an agreement to arbitrate.”); In re Universal

Fins. Consulting Grp., No. 14-08-00226-CV, 2008 WL 2133186, at *2 (Tex.

App.—Houston [14th Dist.] May 20, 2008, orig. proceeding) (mem. op.) (“Here,

no affidavit was submitted with either the motion to compel or the amended

motion to compel authenticating the escrow agreement or the asset purchase

agreement. We conclude that there is no competent evidence of an agreement

to arbitrate.”).

       The plain language of section 171.021(b) requires a trial court to

“determine [the] issue” of the existence of an arbitration agreement when the

party opposing arbitration “denies the existence of the agreement.” Tex. Civ.

Prac. & Rem. Code Ann. § 171.021(b); see BCCA Appeal Grp. v. City of

Houston, 496 S.W.3d 1, 8 (Tex. 2016) (explaining that we must “initially look to

the plain meaning of the text as the sole expression of legislative intent”); see

also ANCO Ins. Servs. of Houston, Inc. v. Romero, 27 S.W.3d 1, 5 (Tex. App.—

                                        6
San Antonio 2000, pet. denied) (“If a party opposes an application to arbitrate by

denying the existence of an agreement, the trial court must summarily determine

that issue.”). Leggett never denied the existence of an agreement. Instead, he

pled in his original petition that he had entered into an agreement in April 2011

with Geo-Tech for foundation repair at a particular Fort Worth address, and the

foundation repair contract that Geo-Tech attached to its motion to compel

contains that date and that address along with detailed terms, Geo-Tech’s

letterhead, and Leggett’s signature.     Furthermore, Leggett’s sole response to

Geo-Tech’s motion to compel arbitration—that Geo-Tech had waived its right to

demand arbitration—assumed that Geo-Tech at one point had the right to

compel arbitration under the parties’ contract. Leggett’s response acknowledged

the existence of the “arbitration clause” that “purport[ed] to allow [Geo-Tech] . . .

to arbitrate the complaints raised by [Leggett] as early as April of 2011.” Leggett

quoted part of the arbitration clause in his response and referred to arbitration as

“relief [that Geo-Tech was] capable of requesting five years ago.” [Emphasis

added.] The response assumed that Geo-Tech once enjoyed an “entitlement to

seek to arbitrate this . . . dispute.”

       Under these specific circumstances, because Leggett never denied in the

trial court that an arbitration agreement existed and assumed or acknowledged

that one existed, we cannot affirm the trial court’s order on the basis of Geo-

Tech’s failure to present competent evidence of an agreement to arbitrate, as

Leggett argues. See Tex. Civ. Prac. & Rem. Code Ann. § 171.021(b); see also

                                         7
Bell v. Koch Foods of Miss., LLC, 358 Fed. Appx. 498, 501 (5th Cir. 2009)

(overruling an appellate complaint concerning an alleged lack of authentication of

arbitration agreements when the party opposing arbitration did not object to

authenticity in the trial court and did not argue that the agreements had not been

properly signed); In re Whitfield, 115 S.W.3d 753, 755 (Tex. App.—Beaumont

2003, no pet.) (relying on a party’s admission that arbitration agreements

existed).

      Our conclusion in this regard receives support from three principles that

generally undergird the requirement of preservation of error. See Tex. R. App. P.

33.1(a). First, “requiring that parties initially raise complaints in the trial court

conserves judicial resources by providing trial courts the opportunity to correct

errors before appeal.” Mansions in the Forest, L.P. v. Montgomery Cty., 365
S.W.3d 314, 317 (Tex. 2012).         Second, “judicial decision-making is more

accurate when trial courts have the first opportunity to consider and rule on

error.” Id. Third, and most pertinent to the issue presented here, a party should

not be “permitted to waive, consent to, or neglect to complain about an error at

trial and then surprise his opponent on appeal by stating his complaint for the first

time.” Id.

      We note that in each of the cases relied on by Leggett, the party opposing

arbitration objected in the trial court to the lack of authentication and therefore

appeared to deny the existence of the agreement in accordance with section

171.021(b). See Guerrero, 465 S.W.3d at 704; Universal Fins. Consulting Grp.,

                                         8
2008 WL 2133186, at *1; see also Tex. Civ. Prac. & Rem. Code Ann.

§ 171.021(b). Thus, we conclude that those cases are distinguishable.        See

Guerrero, 465 S.W.3d at 704 (noting that the facts in that case concerning the

arbitration agreement were “disputed” and acknowledging that a “trial court may

summarily decide whether to compel arbitration on the basis of affidavits,

pleadings, discovery, and stipulations if the material facts are not controverted”

(emphasis added)); see also Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 269

(Tex. 1992) (“[W]e hold that the trial court may summarily decide whether to

compel arbitration on the basis of affidavits, pleadings, discovery, and

stipulations.”). To the extent that the courts’ decisions in the cases cited by

appellant may be construed to hold that a party may challenge authentication of

an arbitration agreement for the first time on appeal even when the party never

challenged the agreement in the trial court and affirmatively acknowledged the

agreement’s existence there, we disagree.

      We conclude that the totality of the record establishes the existence of a

valid arbitration agreement, especially in light of Leggett’s failure to deny the

existence of that agreement and his assumption that the agreement existed. See

Watts Regulator Co., 498 S.W.3d at 646.

Alleged waiver

      Given our conclusion that the record establishes the existence of an

arbitration agreement between Geo-Tech and Leggett, arbitration must occur

unless Geo-Tech’s delay in seeking arbitration resulted in waiver, as Leggett

                                        9
contends.   See Tex. Civ. Prac. & Rem. Code Ann. §§ 171.001(a), .021(a).

Leggett argues that Geo-Tech waived its right to demand arbitration because it

first made the demand months before the date set for trial and years after the

parties had entered the agreement for foundation repairs and after Geo-Tech had

failed to make the repairs. Geo-Tech contends that the lapse of time between

Leggett’s November 2015 original petition and Geo-Tech’s May 2016 demand for

arbitration is insufficient to establish waiver, that Geo-Tech has not substantially

invoked the judicial process to cause waiver, and that Leggett has not shown any

prejudice caused by Geo-Tech’s delay in requesting arbitration.

      As the Texas Supreme Court recently explained,

            A party’s right to arbitrate may be waived by its substantially
      invoking the judicial process to the other party’s detriment. To effect
      such an implied waiver, however, the conduct that substantially
      invoked the judicial process must have prejudiced the other party to
      the arbitration agreement. When courts consider allegations of such
      a waiver, “[t]here is a strong presumption” against it . . . . The
      presumption governs in close cases. . . .

             Where facts are undisputed, whether the right to arbitrate has
      been waived is a matter of law subject to de novo review on appeal.
      The party asserting waiver bears a heavy burden of proof to show
      the party seeking arbitration has waived its arbitration right. Whether
      waiver has occurred depends on the totality of the circumstances.
      The analysis involves numerous factors, including 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

                                        10
      litigation, and whether the discovery conducted would be unavailable
      or useful in arbitration.

             Generally, no one factor is, by itself, dispositive. Parties
      seeking to arbitrate have taken several different types of action
      without substantially invoking the judicial process. Examples of such
      actions include filing suit, conducting discovery, noticing depositions,
      taking depositions, agreeing to trial settings, and moving for
      procedural disposition. Additionally, asserting defensive claims . . .
      does not waive arbitration. And while delay by the party seeking
      arbitration may be a factor, we have found no waiver in cases where
      there were delays of as much as eight months and even two years.[3]

RSL Funding, LLC v. Pippins, 499 S.W.3d 423, 430–31 (Tex. 2016) (citations

omitted); see G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502,

511–12 (Tex. 2015) (stating that a party asserting waiver as a defense to

arbitration has the “high” burden “to prove that (1) the other party has

‘substantially invoked the judicial process,’ which is conduct inconsistent with a

claimed right to compel arbitration, and (2) the inconsistent conduct has caused it

to suffer detriment or prejudice”); Richmont Holdings, Inc. v. Superior Recharge

Sys., L.L.C., 455 S.W.3d 573, 575–76 (Tex. 2014) (stating that “mere delay in

moving to compel arbitration is not enough for waiver” and explaining that

whether a party has “substantially invoked the judicial process depends on . . .

factors [such as] the reason for delay in moving to enforce arbitration, the amount

of discovery conducted by the movant, and whether the movant sought

disposition on the merits”); Kennedy Hodges, L.L.P. v. Gobellan, 433 S.W.3d
3
        The delay between when Leggett filed his original petition and when Geo-
Tech filed its motion to compel arbitration was six months.

                                        11
542, 543 (Tex. 2014) (“Proving waiver is a high hurdle due to the strong

presumption against waiver of arbitration.”); Prudential Sec. Inc. v. Marshall, 909
S.W.2d 896, 898–99 (Tex. 1995) (orig. proceeding) (“A party does not waive a

right to arbitration merely by delay; instead, the party urging waiver must

establish that any delay resulted in prejudice.”).

      In the context of showing waiver of a right to arbitration, prejudice means

“inherent unfairness 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.” Kennedy Hodges, L.L.P., 433 S.W.3d

at 545. “Any doubts regarding waiver are resolved in favor of arbitration.” Nw.

Constr. Co. v. Oak Partners, L.P., 248 S.W.3d 837, 847 (Tex. App.—Fort Worth

2008, pet. denied). Merely engaging in litigation, such as filing counterclaims or

participating in discovery, is not enough to result in waiver. Branch Law Firm

L.L.P. v. Osborn, No. 14-14-00892-CV, 2016 WL 444867, at *14 (Tex. App.—

Houston [14th Dist.] Feb. 4, 2016, pet. denied).

      The record in this case does not contain sufficient evidence of either

required ground for waiver:     that Geo-Tech substantially invoked the judicial

process or that Leggett has been prejudiced. See G.T. Leach Builders, LLC, 458
S.W.3d at 511–12. The forty-seven-page clerk’s record establishes Geo-Tech’s

limited participation in this suit. The record contains only three documents filed

by Geo-Tech: its original answer, its motion to compel arbitration, and its reply to

Leggett’s response to the motion to compel arbitration. Geo-Tech’s answer—a

                                         12
one-page document—asserts only a general denial and a request for costs and

attorney’s fees. See Tex. R. Civ. P. 92. The record does not establish any

attempt by Geo-Tech to seek disposition of Leggett’s breach of contract claim on

its merits or otherwise.

      Furthermore, in its reply to Leggett’s response to the motion to compel,

Geo-Tech represented that it had not propounded any discovery, and Leggett, as

the party bearing the burden on the waiver issue, did not present evidence to the

contrary. Also, an e-mail that appears in the record, sent by Leggett’s counsel to

Geo-Tech’s counsel in May 2016, indicates that Geo-Tech had not responded to

at least some of Leggett’s discovery requests at that time. On appeal, Geo-Tech

acknowledges that it has propounded requests for disclosure, see Tex. R. Civ. P.

194.2, but states that it has served no other requests for discovery.

      For all of these reasons, we cannot conclude that Geo-Tech substantially

invoked the judicial process. See G.T. Leach Builders, LLC, 458 S.W.3d at 511–

12.

      With regard to prejudice, although Leggett emphasizes that Geo-Tech

sought arbitration after the case was already set for trial, the record shows that

Geo-Tech filed the motion to compel arbitration just a few days after Leggett’s

counsel sent an e-mail stating that he was going to set the case for trial. Further,

Leggett stated in his response to the motion to compel that the trial date was set

for October 2016, which is five months after Geo-Tech sought arbitration.

                                        13
Therefore, the record does not suggest that Geo-Tech waited until Leggett had

spent significant resources preparing for trial before demanding arbitration.4

      In the trial court, Leggett argued that Geo-Tech’s delay in seeking

arbitration before Leggett filed his original petition may have caused the loss of

certain claims under a statute of limitation.     But Leggett did not reveal what

claims he could have brought but had not.           Furthermore, although Leggett

argued in the trial court that Geo-Tech “str[ung him] along with hollow promises

as his rights fade[d], [and then sought to take] away his day in [c]ourt,” 5 Leggett

did not provide any proof of such pre-litigation conduct. Furthermore, in the e-

mail between counsel discussed above, Leggett’s counsel stated that arbitration

did not “trouble” Leggett because “[a]ll breach of contract remedies, including

recovery of [counsel’s] attorney’s fees, [were] available in arbitration.”

      4
       Leggett did not provide evidence concerning any money or time he spent
in pursuing his breach of contract claim before Geo-Tech filed its motion to
compel arbitration.
      5
       On appeal, Leggett states,

      More than five years ago, [Leggett] sought the services of . . . Geo-
      Tech for repair of the foundation of his home. But [Geo-Tech] failed
      to resolve these foundation problems. Over the next several years,
      Geo-Tech strung [Leggett] along, always promising they would be
      able to fix both the foundation problems for which they were
      originally hired [and] the damages they . . . caused in their faulty
      attempts at repair.

             After years of promises and failed repairs, [Leggett] filed suit.

             [Footnotes omitted.]

                                          14
      Thus, we cannot conclude that the record establishes Leggett’s prejudice

from Geo-Tech’s delay in seeking arbitration after the parties engaged in pre-

litigation disputes or after Leggett filed his original petition. See id.; Nw. Constr.

Co., 248 S.W.3d at 848.

      For all these reasons, we cannot conclude that Leggett satisfied either of

the requirements to defeat the strong presumption against a waiver of arbitration.

See RSL Funding, 499 S.W.3d at 430; G.T. Leach Builders, LLC, 458 S.W.3d at

511–12; Nw. Constr. Co., 248 S.W.3d at 848.

                                    Conclusion

      Based on the reasons stated above, we conclude that the trial court

abused its discretion by denying Geo-Tech’s motion to compel arbitration. See

Tex. Civ. Prac. & Rem. Code Ann. §§ 171.001(a), .021(a); BBVA Compass Invs.

Solutions, 456 S.W.3d at 717.       We sustain Geo-Tech’s sole issue.         Having

sustained Geo-Tech’s sole issue, we reverse the trial court’s order denying Geo-

Tech’s motion to compel arbitration, and we remand this cause to the trial court

for further proceedings consistent with this opinion.

                                                    /s/ Terrie Livingston

                                                    TERRIE LIVINGSTON
                                                    CHIEF JUSTICE

PANEL: LIVINGSTON, C.J.; WALKER and MEIER, JJ.

DELIVERED: March 30, 2017

                                         15