Court Opinion

ID: 3189195
Source: CourtListenerOpinion
Date Created: 2016-03-28 18:00:51.29734+00
Date Added: 2024-06-11T09:17:56.419701
License: Public Domain

Case: 15-30848      Document: 00513440649         Page: 1    Date Filed: 03/28/2016

           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT
                                                                            United States Court of Appeals
                                                                                     Fifth Circuit

                                                                                   FILED
                                    No. 15-30848                              March 28, 2016
                                  Summary Calendar
                                                                              Lyle W. Cayce
                                                                                   Clerk
PRECISION BUILDERS, INCORPORATED, doing business as Precision
Builders,

              Plaintiff - Appellee

v.

OLYMPIC GROUP, L.L.C.; MAURICE ROY HURST,

              Defendants - Appellants

                   Appeal from the United States District Court
                      for the Western District of Louisiana
                             USDC No. 5:13-CV-141

Before REAVLEY, SMITH, and HAYNES, Circuit Judges.
PER CURIAM:*
       The Olympic Group, L.L.C. (“Olympic”) and Maurice Roy Hurst
(collectively, “Defendants”) appeal from the district court’s summary denials of
their motions to stay proceedings and compel arbitration against Precision
Builders, Inc. (“Precision”), to set aside the entry of default and default
judgment against Olympic, and to dismiss the case pursuant to Federal Rule

       * Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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                                         No. 15-30848
of Civil Procedure 19 for failure to join an allegedly indispensable party.
Because we lack jurisdiction over the denials of the motions to set aside the
default judgment and to dismiss the case pursuant to Rule 19, we DISMISS
the Defendants’ appeals from those denials. For the reasons that follow, we
AFFIRM the district court’s denial of Defendants’ motion to stay proceedings
and compel arbitration, and we REMAND this case for further proceedings.
                                       I. Background 1
       Precision and Olympic entered into a subcontract agreement regarding
construction work on Barksdale Air Force Base, for which Olympic was the
general contractor.         In January 2013, Precision filed suit in federal court
against Olympic and other parties 2 under the Miller Act, 40 U.S.C. §§ 3131–
3134, for damages, costs, and attorneys’ fees related to Olympic’s alleged
failure to pay Precision for work performed under the subcontract. Olympic
filed a motion to dismiss for improper venue, claiming a forum selection clause
in the subcontract mandated litigation in state court. The district court denied
this motion, and Olympic filed an answer and counterclaim against Precision,
which Precision answered in November 2013. The district court then ordered
the parties to serve initial disclosures and begin discovery.
       In January 2014, the magistrate judge granted Precision’s motion to
amend its complaint to add Hurst and another party, 3 as Precision alleged they
should be personally liable for actions committed by or on behalf of Olympic.
Hurst answered the amended complaint in April 2014. Meanwhile, counsel for

       1   The facts relevant to our disposition of this appeal are not in dispute.
       2   Precision also sued AF Global Revest Indemnity Trust and T. Glinton Harris
(collectively, the “Sureties”). The Trust issued a payment and performance bond to Olympic
for the construction project, signed by Harris as attorney for the Trust. The district court
entered default judgment against the Sureties and assessed attorneys’ fees against them,
and the Sureties did not appeal to contest that judgment, so we do not discuss them.
       3   Precision also moved to add Sandra Vicknair, who has not appeared in this appeal.
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Olympic moved to withdraw due to Olympic’s failure to pay outstanding
balances. The magistrate judge granted the motion to withdraw on April 16,
2014, and since business associations may appear in federal court only through
a licensed attorney, see Memon v. Allied Domecq QSR, 385 F.3d 871, 873 (5th
Cir. 2004), the magistrate judge gave Olympic until May 15, 2014, to enroll
new counsel.       If Olympic failed to do so, the magistrate judge warned,
Olympic’s answers might be stricken and the counterclaim dismissed for
failure to prosecute, potentially leading to a default judgment.
      With no indication that Olympic had obtained new counsel, Precision
moved to strike Olympic’s answer and counterclaim for failure to obtain
counsel and for failure to prosecute. On July 17, 2014, with no word from
Olympic, the district court granted the motion, struck Olympic’s answer, and
dismissed its counterclaim. On Precision’s motion, the clerk of court entered
default against Olympic on August 18, 2014. Precision filed a motion for
default judgment against Olympic, among others, on September 23, 2014,
appending evidence of the damages it claimed were due from Olympic, along
with a log showing its expenditure of $41,348.50 in attorneys’ fees related to
Olympic’s suit as of that date. When Olympic failed to respond to the motion,
the district court entered default judgment and assessed damages and
attorneys’ fees.    The court reserved Precision’s rights against Hurst and
another individual defendant.
      The case proceeded against Hurst and the other defendant, who
represented themselves pro se, with a bench trial scheduled for September
2015. The parties agreed to a scheduling order in March 2015, and accordingly
prepared pretrial objections and submissions, held a pretrial conference, and
submitted a proposed pretrial order and witness and exhibit lists.           On
September 13, 2015, attorney La Koshia R. Roberts moved to enroll as counsel
of record for Olympic and Hurst and requested a continuance. The district
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court allowed Roberts to enroll as counsel, but denied the motion for a
continuance. On September 16, 2015, with trial scheduled for September 30,
counsel for Olympic and Hurst filed the three motions at issue in this appeal:
(1) a motion to dismiss pursuant to Rule 19, (2) a motion to set aside entry and
default judgment against Olympic, and (3) a motion to stay proceedings and
compel arbitration between Precision, Hurst, and Olympic.              Following
Precision’s responses, the district court denied each motion summarily on
September 21, 2015. Hurst and Olympic filed a notice of appeal from those
orders, and the district court stayed the trial pending this appeal.
                     II. Jurisdiction and Standard of Review
      With certain exceptions, we generally possess jurisdiction only over
appeals from final orders. See 28 U.S.C. § 1291; Sw. Elec. Power Co. v. Certain
Underwriters at Lloyds of London (SWEPCO), 772 F.3d 384, 386 (5th Cir.
2014). We must raise the issue of jurisdiction on our own motion, if necessary.
SWEPCO, 772 F.3d at 386. Here, we possess jurisdiction over the denial of the
motion to compel arbitration pursuant to the Federal Arbitration Act (“FAA”),
9 U.S.C. §§ 1–16, which authorizes immediate appeals even from interlocutory
orders declining to compel arbitration. See 9 U.S.C. § 16; SWEPCO, 772 F.3d
at 386–87; MC Asset Recovery LLC v. Castex Energy, Inc. (In re Mirant Corp.),
613 F.3d 584, 588 (5th Cir. 2010). We review de novo a district court’s denial
of a motion to compel arbitration. In re Mirant Corp., 613 F.3d at 588. We
may affirm the district court on any ground raised by the parties below and
supported by the record. See Freudensprung v. Offshore Tech. Servs., Inc., 379
F.3d 327, 338 n.5 (5th Cir. 2004).
      We dismiss the appeals involving the denial of Defendants’ Rule 19
motion and motion to set aside default judgment, as we lack jurisdiction over
these interlocutory orders that have not been certified for immediate appeal by
the district court. “An order is final and appealable when it ends the litigation
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and leaves nothing for the court to do but execute the judgment.” Elizondo v.
Green, 671 F.3d 506, 509 (5th Cir. 2012). “A dismissal of claims against some,
but not all, defendants is not a final appealable judgment,” absent an entry of
judgment and a district court’s certification under Federal Rule of Civil
Procedure 54(b) that there is no justification for delaying an appeal. Id.; FED.
R. CIV. P. 54(b); cf. 28 U.S.C. § 1292 (providing jurisdiction over certain
interlocutory appeals not at issue here). The default judgment entered against
Olympic and other parties left pending Precision’s claims against Hurst and
another party, making it an interlocutory order. The interlocutory order was
not accompanied by a Rule 54(b) certification; in fact, in later staying the case,
the district court expressed doubt over whether its denial of the motion to set
aside the default judgment was “properly appealable.”             We thus lack
jurisdiction over the district court’s denial of Olympic’s motion to set aside the
default judgment. See Elizondo, 671 F.3d at 509; McLaughlin v. Miss. Power
Co., 376 F.3d 344, 350–51 (5th Cir. 2004).
      Additionally, in most circumstances, “[o]rders granting or denying
motions to add new parties to a pending suit are interlocutory and non-
appealable.” Melancon v. Texaco, Inc., 659 F.2d 551, 553 (5th Cir. Unit A Oct.
1981); 15B CHARLES ALAN WRIGHT, ARTHUR R. MILLER & EDWARD H. COOPER,
FEDERAL PRACTICE AND PROCEDURE § 3914.18 (2d ed. 1992) (“[O]rders
granting or denying joinder are not final.” (footnotes omitted)); Lincoln Prop.
Co. v. Roche, 546 U.S. 81, 90 (2005) (concluding that Rule 19 addresses “party
joinder, not federal-court subject-matter jurisdiction”).       This applies to
Defendants’ Rule 19 motion, and we accordingly dismiss Defendants’ appeal
from the denial of the Rule 19 motion. See Crowe & Dunlevy, P.C. v. Stidham,
640 F.3d 1140, 1148–49 (10th Cir. 2011); cf. DeMelo v. Woolsey Marine Indus.,
Inc., 677 F.2d 1030, 1035 n.12 (5th Cir. 1982).

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                          III. Motion to Compel Arbitration
       Defendants also appeal the district court’s denial of their motion to stay
proceedings and compel arbitration with Precision. Precision argues neither
Olympic nor Hurst may rely on the arbitration provision in the subcontract:
Olympic, because Precision’s claims against it have been adjudicated through
a default judgment, and Hurst, because he was not a party to the subcontract.
Precision also argues that both parties waived any ability to compel
arbitration.     We need not and do not decide whether Precision may be
compelled to arbitrate this dispute with both Hurst and Olympic or whether
the district court properly granted the default judgment against Olympic.
Even assuming arguendo that Hurst can invoke the arbitration agreement and
that the district court should not have granted the default judgment against
Olympic, 4 we conclude Hurst and Olympic have waived any rights to compel
arbitration. See Petroleum Pipe Ams. Corp. v. Jindal Saw, Ltd., 575 F.3d 476,
480 (5th Cir. 2009).
       A party seeking arbitration may waive it by “substantially invok[ing] the
judicial process to the detriment or prejudice of the other party.” Id. (quoting
Walker v. J.C. Bradford & Co., 938 F.2d 575, 577 (5th Cir. 1991)). A party
substantially invokes the judicial process by engaging in “some overt act in

       4    In rare cases, it is appropriate to take pendent appellate jurisdiction over
interlocutory rulings that are inextricably intertwined with independently appealable orders.
See, e.g., Thornton v. Gen. Motors Corp., 136 F.3d 450, 453–54 (5th Cir. 1998). We decline to
apply the doctrine of pendent appellate jurisdiction to examine the district court’s denial of
Defendants’ Rule 19 motion or the motion to set aside the default judgment. Review of those
orders is not necessary to ensure meaningful review of the order declining to compel
arbitration. See Swint v. Chambers Cty. Comm’n, 514 U.S. 35, 51 (1995); Byrum v. Landreth,
566 F.3d 442, 449–450 (5th Cir. 2009). Neither do the motions involve common factual and
legal issues. See Cutler v. Stephen F. Austin State Univ., 767 F.3d 462, 468 (5th Cir. 2014).
In this case, we may simply look through the district court’s ruling on the motion to set aside
the default judgment and, even assuming arguendo it was erroneous, we conclude Olympic
has waived any potential ability to assert arbitration. We thus decline to reach the merits of
the other motions appealed by Olympic and Hurst.
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court that evinces a desire to resolve the arbitrable dispute through litigation
rather than arbitration.” See Subway Equip. Leasing Corp. v. Forte, 169 F.3d
324, 329 (5th Cir. 1999). “Prejudice in the context of arbitration waiver refers
to delay, expense, and damage to a party’s legal position.” See Nicholas v. KBR,
Inc., 565 F.3d 904, 910 (5th Cir. 2009). Failing to demand arbitration and
instead engaging in pretrial activity inconsistent with an intent to arbitrate
allows the party opposing arbitration to more easily show prejudice. See id.;
Price v. Drexel Burnham Lambert, Inc., 791 F.2d 1156, 1161 (5th Cir. 1986). 5
           It is clear from the record in this case that Olympic and Hurst
substantially invoked the judicial process, evincing a desire to litigate such
that Precision would be prejudiced by an order compelling arbitration. 6 As
noted supra, Precision filed its complaint against Olympic and Hurst in
January 2013. Olympic filed a motion to dismiss the case for improper venue
several months later, relying on a forum selection clause in the subcontract
requiring suit to be brought in state court in Jefferson Parish, Louisiana.

       5  In their reply brief, Defendants cite both federal and Louisiana law in arguing that
they did not waive any right to arbitration. We utilize state-law principles that govern the
formation of contracts to determine whether any agreement to arbitrate has been formed.
See Grigson v. Creative Artists Agency L.L.C., 210 F.3d 524, 531 (5th Cir. 2000). Once formed,
the arbitration agreement in this case became subject to the FAA; accordingly, federal
standards govern certain issues, including whether a party has waived a right to compel
arbitration. See, e.g., Nicholas, 565 F.3d at 907–08; In re Mirant Corp., 613 F.3d at 588–89.
We therefore apply federal standards to determine whether Defendants have waived any
right to compel arbitration in this case.
       6  Although the district court did not explicitly address whether Olympic and Hurst
waived arbitration, the parties fully briefed the issue before the district court and before us,
and we may affirm the district court on any ground supported by the record. See
Freudensprung, 379 F.3d at 338 n.5. We find this record sufficient to conclude that waiver
occurred. See Tristar Fin. Ins. Agency, Inc. v. Equicredit Corp. of Am., 97 F. App’x 462, 463–
66 (5th Cir. 2004) (examining the record and concluding no waiver of an arbitration
agreement occurred, where the district court summarily denied a motion to compel
arbitration and “made no underlying findings of fact”); cf. Woodmen of the World Life Ins. Co.
v. Lewis, 118 F. App’x 826, 831 (5th Cir. 2004) (resolving an issue the district court did not
reach because we found “the record before us complete as to this question” and that “a remand
would only prolong unnecessary litigation”).
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Olympic attached the subcontract to its motion. Of course, the subcontract
includes an arbitration clause that mandates arbitration in Jefferson Parish.
Yet, Olympic did not refer to the arbitration provision in its briefing before the
district court. After the court denied Olympic’s motion to dismiss for improper
venue, Olympic filed an answer and counterclaim in October 2013, again
failing to mention any intent to arbitrate.            Precision answered the
counterclaim the next month, and discovery began. In January 2014, Precision
amended its complaint, which Hurst answered several months later, without
reserving or asserting any right to arbitration. While failing to assert the right
to demand arbitration in an answer or counterclaim does not necessarily waive
the right, standing alone, see Price, 791 F.2d at 1161; Nicholas, 565 F.3d at 908
& n.3, Defendants’ actions here went far beyond simply defending themselves
against Precision’s lawsuit. Failing to immediately demand or reserve the
right to arbitration is one thing. See Steel Warehouse Co. v. Abalone Shipping
Ltd. of Nicosai, 141 F.3d 234, 236, 238 (5th Cir. 1998). Waiting until just two
weeks before a scheduled bench trial to give any hint of an arbitration demand
is another. See Republic Ins. Co. v. PAICO Receivables, LLC, 383 F.3d 341,
344–47 (5th Cir. 2004).
      In April 2014, over one year after the litigation began, Olympic’s counsel
withdrew. From then until September 2015, Olympic filed nothing in the case.
Nevertheless, Precision litigated against Hurst and expended resources on a
motion for default judgment against Olympic. Attorneys’ fee logs attached to
that motion reveal that the parties had already engaged in significant
discovery and that Precision claimed over $40,000 in attorneys’ fees in May
2014. During the next year, Hurst and Precision prepared for a bench trial,
taking depositions and submitting exhibit and witness lists. In August 2015,
the trial court held hearings and the parties agreed to a scheduling order,
participated in a pretrial conference, and submitted a detailed proposed
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pretrial order with stipulated facts and contested issues of fact and law. On
September 13, 2015, with trial to commence on September 30, Olympic’s
counsel moved to enroll. On September 16, 2015, over two-and-a-half years
after suit was filed, Olympic and Hurst moved to compel arbitration. Until
this point, none of Olympic or Hurst’s filings mentioned arbitration, and
Defendants’ filings and pretrial preparations evinced an intent to litigate the
dispute with Precision.     We therefore conclude that Olympic and Hurst
substantially invoked the judicial process. See Nicholas, 565 F.3d at 909–10;
Miller Brewing Co. v. Fort Worth Distrib. Co., 781 F.2d 494, 497 (5th Cir. 1986).
      We conclude prejudice also resulted here from Defendants’ unexplained
failure to assert the right to arbitrate until the middle of pretrial proceedings,
two weeks before trial, over two years after the filing of the lawsuit. See
Nicholas, 565 F.3d at 910–11; cf. Storey v. Shearson-Am. Exp., 928 F.2d 159,
163 (5th Cir. 1991) (finding no waiver where “neither discovery nor motion
practice occurred before [the defendant] invoked its arbitration right.”).
Precision incurred significant attorneys’ fees and costs from the filing of suit
in January 2013 until May 2014, as described above. Those costs mounted as
Hurst continued in the litigation for over a year thereafter without invoking
the arbitration clause. As described, Hurst and Precision completed many of
the necessary preparations for a bench trial until, two weeks before the trial
was scheduled to begin, Olympic and Hurst moved for arbitration. The years-
long delay, discovery, motions practice, pretrial preparations, and expense
would certainly result in prejudice to Precision if the district court ordered
arbitration at this late stage. See Nicholas, 565 F.3d at 910–11; Republic, 383
F.3d at 346–47; Miller Brewing, 781 F.2d at 497–98. We therefore conclude
that, even assuming arguendo Olympic and Hurst could properly assert any
right to arbitration in September 2015, they have waived their ability to do so.

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We affirm the district court’s denial of Defendants’ motion to compel
arbitration.
                              IV. Conclusion
      For lack of jurisdiction, we DISMISS Defendants’ appeals from the
district court’s denial of their Rule 19 motion and motion to set aside the
default judgment against Olympic. For the reasons stated, we AFFIRM the
district court’s denial of Defendants’ motion to stay proceedings and compel
arbitration, and we REMAND the case for further proceedings in accordance
with this opinion.

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