Legoland Discovery Centre (Dallas), LLC v. Superior Builders, LLC , 531 S.W.3d 218 ( 2017 )

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).
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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
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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.
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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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