Dallas Court of Appeals examines another "evident partiality" claim and finds waiver

Failure to timely object to arbitrator's disclosed business ties resulted in waiver of "evident partiality" as ground for vacature of arbitration award. Confirmation of award affirmed.
 

Skidmore Energy Inc.v . Maxus  (US)Exploration Company

(Tex.App. - Dallas, July 12, 2011)(Opinion by Justice Robert M. Fillmore)

Fifth Court of Appeals rejects claim of evident partiality based on business relationship and stock ownership where complaining party waited until after receiving an adverse arbitration decision to raise the issue. By failing to object prior to entry of an arbitration award by the panel majority, the panel holds, appellants waived the issue. Even if the objection would have been preserved, it should not have been sustained, the court opines in dicta, given that the arbitrator made relevant disclosures regarding the entity which was only tangentially connected to the dispute, and the parties were aware of it. The court also rejects that contention that the arbitrators exceeded their authority. Trial court's confirmation of arbitration award and denial of motion to vacate it is accordingly affirmed.  

OPINION 

        In a single issue, appellants Skidmore Energy, Inc. (Skidmore), and Johnny L. Patton, Jr., Patton Production Company, and Puls, Taylor & Woodson, L.L.P. (collectively referred to as Intervenors) contend the trial court erred by entering a judgment confirming an arbitration award that ordered appellants take nothing from appellee Maxus (U.S.) Exploration Company (Maxus). We affirm the trial court's judgment.

Background

        Skidmore and Maxus are oil and gas exploration companies. Maxus is a subsidiary of Repsol YPF. In 1996, Maxus and Skidmore executed a written agreement to jointly evaluate and acquire oil and gas exploration and production rights relating to offshore leases on federal blocks situated in the Gulf of Mexico (the 1996 Contract). Pursuant to the 1996 Contract, Maxus and Skidmore acquired a working interest in seven offshore leases on Green Canyon Blocks 140, 162, 206, and 492, Mississippi Canyon Blocks 491 and 492, and Garden Banks Block 361.
        On August 15, 1998, Skidmore and Maxus entered into an agreement to alter their business relationship (the 1998 Agreement). Under the 1998 Agreement, Skidmore agreed to assign all of its rights, titles, and interests in leases on Green Canyon Blocks 140, 162, 206, and 492, and Mississippi Canyon Blocks 491 and 492 to Maxus, and Maxus agreed to pay Skidmore $6,500,000 and to assign all of its rights, title, and interest in the lease on Garden Banks Block 361 to Skidmore. According to the 1998 Agreement, at the time of closing Maxus and Skidmore were to execute assignments of the leases using a form of assignment attached to the 1998 Agreement as Exhibit B. The Exhibit B form of assignment provided that in the event the assignee desired to surrender a lease subject of assignment prior to the expiration of the primary lease term, the assignee would give the assignor ninety days' notice of its intent to surrender the lease and offer to reassign the lease to the assignor (the notice and reassignment provision).
        On August 21, 1998, Skidmore executed six separate assignments in which it assigned all of its interests in the leases on Green Canyon Blocks 140, 162, 206, and 492, and Mississippi Canyon Blocks 491 and 492 to Maxus and Maxus executed an assignment of its interest in the lease on Garden Banks Block 361 to Skidmore. Skidmore retained a three percent overriding royalty interest in the oil and gas produced, saved, and marketed from the leases it assigned to Maxus, and Maxus retained the same overriding royalty interest in the oil and gas produced, saved and marketed from the lease it assigned to Skidmore. The assignments executed by Maxus and Skidmore did not contain the notice and reassignment provision.   See Footnote 1  Each of the assignments stated, “[t]his Assignment is expressly made and accepted subject to the following: . . . (2) The terms and provisions of that certain Agreement dated August 15, 1998 between Assignor and Assignee.”
        In October 1999, Skidmore surrendered the lease on Garden Bank Block 361 before the expiration of its primary term. Skidmore did not provide Maxus prior notice of its intent to relinquish the lease; nor did Skidmore offer to reassign the lease to Maxus. Maxus surrendered its interests in the leases on Green Canyon Blocks 162 and 206 in December 2002, its interests in the leases on Mississippi Canyon Blocks 491 and 492 in June 2002, and its interest in the lease on Green Canyon Block 140 in July 2002. Maxus did not give Skidmore prior notice of its intent to relinquish any of those leases; nor did Maxus offer to reassign any of those leases to Skidmore. 
        In November 2004, Skidmore learned Maxus relinquished its interests in the five leases. Skidmore notified Maxus of Skidmore's contention that Maxus had breached the 1998 Agreement. In May 2005, Skidmore filed suit against Maxus for breaching the terms of the 1998 Agreement by surrendering five of the leases subject of the agreement without giving Skidmore prior written notice of its intention to surrender the leases or providing Skidmore the opportunity to have the leases reassigned to it. Intervenors asserted the same breach of contract claim against Maxus.   See Footnote 2  Maxus asserted affirmative defenses of waiver, estoppel, and limitations, as well as a counterclaim for declaratory judgment that Maxus was not obligated to provide Skidmore notice and an opportunity to request reassignment prior to the relinquishment of any of the assigned leases. 
        Pursuant to a written arbitration agreement entered into after the lawsuit was filed, Skidmore, Intervenors, and Maxus submitted the claims asserted in the lawsuit to binding arbitration.   See Footnote 3  A majority of the three-member arbitration panel entered an award in favor of Maxus. Skidmore and Intervenors moved to vacate the award on the grounds that (1) two of the arbitrators, Martin McNamara and Shannon Ratliff, failed to make necessary pre-arbitration disclosures, and (2) the arbitration panel majority exceeded its authority. Maxus moved for judgment confirming the panel's award. The trial court denied the motion to vacate the arbitration award and signed a judgment confirming the award. Skidmore and Intervenors appeal the trial court's judgment confirming the arbitration award.

Standard of Review

        We review the trial court's confirmation of an arbitration award de novo, based on a review of the entire record. Statewide Remodeling, Inc. v. Williams, 244 S.W.3d 564, 567 (Tex. App.-Dallas 2008, no pet.). Arbitration of disputes is strongly favored under both federal and Texas law. Prudential Secs. Inc. v. Marshall, 909 S.W.2d 896, 898 (Tex. 1995) (orig. proceeding). Arbitration awards are entitled to great deference by the courts. Crossmark, Inc. v. Hazar, 124 S.W.3d 422, 429 (Tex. App.-Dallas 2004, pet. denied). “In Texas, review of arbitration awards is extraordinarily narrow.” Hisaw & Assocs. Gen. Contractors, Inc. v. Cornerstone Concrete Sys., Inc., 115 S.W.3d 16, 18 (Tex. App.-Fort Worth 2003, pet. denied). An arbitration award has the same effect as a judgment of a court of last resort and all reasonable presumptions are indulged in favor of the award. CVN Group, Inc. v. Delgado, 95 S.W.3d 234, 238 (Tex. 2002). The award is conclusive on the parties as to all matters of fact and law. Centex/Vestal v. Friendship W. Baptist Church, 314 S.W.3d 677, 683 (Tex. App.-Dallas 2010, pet. denied).

Claim of Arbitrator's Evident Partiality

        Appellants contend the trial court erred when it denied the motion to vacate the arbitration award because of arbitrator McNamara's evident partiality. Appellants assert the arbitration award should have been vacated because McNamara failed to disclose material financial and business relationships with Maxus which manifested a reasonable impression of McNamara's partiality. 
        For an appellate court to have jurisdiction to review an arbitration award, an appellant must allege a statutory or common law ground to vacate the award. Hisaw, 115 S.W.3d at 19. The Texas Legislature has decreed that, on application of a party, a court shall vacate an award if the rights of the party were prejudiced by evident partiality of an arbitrator appointed as a neutral arbitrator. Tex. Civ. Prac. & Rem. Code Ann. § 171.088(a)(2)(A) (West 2011). A neutral arbitrator selected by the parties or their representatives exhibits evident partiality if he does not disclose facts which might, to an objective observer, create a reasonable impression of the arbitrator's partiality. Burlington N. R.R. Co. v. TUCO Inc., 960 S.W.2d 629, 636 (Tex. 1997).   See Footnote 4  The court emphasized that “evident partiality is established from the nondisclosure itself, regardless of whether the nondisclosed information necessarily establishes partiality or bias.” Id. (citing Commonwealth Coatings Corp. v. Cont'l Cas. Co., 393 U.S. 145, 147 (1968)). This standard reflects the supreme court's determination that courts should not undertake evaluations of partiality that are better left to the parties. TUCO, 960 S.W.2d at 636. When choosing a neutral arbitrator, the parties must weigh the competing factors of the arbitrator's knowledge and experience against his potential conflicts; parties can only perform that analysis if they have access to all of the information that could reasonably affect the arbitrator's partiality. Id. at 635. When disclosure is complete, the parties can make their determination concerning potential bias before the arbitration begins, a process that is more desirable than a court making the determination after an award is in place. See id. “While a neutral arbitrator need not disclose relationships or connections that are trivial, the conscientious arbitrator should err in favor of disclosure.” Id. at 637.
FACTUAL BACKGROUND

Factual Background

        According to the terms of the arbitration agreement entered into by appellants and Maxus, appellants appointed arbitrator Kit Cooke, and Maxus appointed arbitrator McNamara. After the two party-appointed arbitrators were selected, appellants proposed Ratliff as the third arbitrator, and Maxus accepted Ratliff as the third arbitrator.   See Footnote 5  Appellants and Maxus disagree as to whether party- appointed arbitrator McNamara was a neutral arbitrator and, consequently, whether evident partiality is an applicable statutory basis for review of the arbitration award. See Tex. Civ. Prac. & Rem. Code Ann. § 171.088(a)(2)(A).
        Appellants contend all of the arbitrators, including McNamara, were intended to be neutral arbitrators. Maxus contends that, as its party-appointed arbitrator, McNamara was not intended to be a neutral arbitrator. While there is nothing in the arbitration agreement that expressly indicates the party-appointed arbitrators were to be considered neutral arbitrators, the agreement specifies that “there shall be no ex parte communications at any time by any party or its representative with any of the arbitrators, except that each party may confer with its own party-appointed arbitrator with respect to selection of the third arbitrator.” McNamara testified at the hearing on Maxus' motion to confirm the arbitration award that he believed he was a neutral arbitrator.
        The arbitration agreement required the arbitrators to disclose all actual or perceived conflicts of interest and business relationships involving the dispute or the parties, including any professional or social relationships, past or present, with any party or its affiliates, and provide an oath or undertaking of impartiality in accordance with the “Code of Ethics for Arbitrators in Commercial Disputes promulgated by [the] joint committee of the American Arbitration Association and of the American Bar Association” (the AAA Code). The arbitration agreement provided that the arbitrators could have no affiliation or interests with either party and no financial or personal interest in the outcome of the arbitration.
         In accordance with the arbitration agreement, McNamara issued disclosures. He stated he had no direct or indirect financial or personal interest in the outcome of the arbitration. In addition to providing information obtained through the computerized conflicts system of the law firm at which he was employed, including information concerning past litigation in which his firm represented a client adverse to Skidmore, McNamara disclosed the following:

With respect to personal or professional relationships, while I do not believe it would affect my impartiality or independence as an arbitrator, I serve with Roberto Monti as a member of the Board of Directors of Transocean, Inc. Mr. Monti will be leaving that Board when a pending combination closes with Global SantaFe, which is expected to occur before year end. Prior to 2002, Mr. Monti served as CEO of YPF and, after the acquisition of YPF by Repsol, as EVP of Repsol YPF. To my best recollection, I have never had any discussion with Mr. Monti about the business of Maxus (U.S.) or any matters related in any way to the dispute in the present arbitration. To my best recollection, I am not acquainted with anyone else who is or has been in a position of responsibility with respect to any of the parties here.

McNamara stated his belief that none of the relationships he disclosed would affect his impartiality or independence as an arbitrator.   See Footnote 6  McNamara also signed an oath that he would faithfully and fairly hear, entertain, determine and make an award based upon his review of the law and evidence. He represented that he had “fully and completely made those disclosures that are required under the Code of Ethics for Arbitrators,” and that apart from those disclosures he was aware of no past or present relationship with the parties or their counsel, whether financial or professional, that required disclosure.
        During the course of the arbitration, certain demonstrative exhibits and testimony indicated that drilling equipment owned by Transocean, Inc. (Transocean) had been utilized by Maxus in 1999 in connection with the drilling of a well referred to as “Haymaker” on Green Canyon Block 162, a lease subject of the arbitration. On the third day of the four-day arbitration, Maxus' witness Delmar Rumph testified regarding the length of time required to obtain necessary studies, authorizations, and equipment and to drill a deepwater offshore oil well. Rumph illustrated his point by discussing the twenty-one month period required for planning, permitting and drilling the Haymaker well. In connection with his explanation of this process, Rumph utilized four slides showing a semi- submersible mobile offshore drilling unit (MODU) with the caption “Transocean Amirante Rig” appearing next to the Maxus logo. Rumph explained that Maxus leased the Transocean Amirante MODU from Transocean at a cost of about $150,000 per day. Rumph testified that Maxus contracted with Advanced Drilling Technologies, Incorporated (ADTI) to drill the Haymaker well ulitizing the Transocean Amirante MODU. According to Rumph, a pre-drilling meeting included Maxus, ADTI, and Transocean.
        No party or attorney objected or raised a question about McNamara's service as an arbitrator when the slides depicting the Transocean Amirante MODU were shown or when Rumph testified regarding use of the MODU in the context of drilling the Haymaker well. After the arbitration award, appellants asserted evident partiality of McNamara due to his service on the board of directors of Transocean, a company that had done intermittent business with Maxus and its parent company, Repsol YPF. Appellants also asserted after the arbitration award that while McNamara disclosed his membership on the Transocean board of directors, he should also have disclosed that he owned Transocean stock.         
        McNamara was deposed by appellants in post-award discovery. He indicated that at the time he made his pre-arbitration disclosures, he had no knowledge of any business relationship between Transocean and Maxus or Repsol YPF, but did not initiate an investigation into any relationship Transocean might have with Skidmore or Maxus. McNamara understood at the time of the arbitration that Maxus was a wholly-owned subsidiary of Repsol YPF. He indicated that he did not recall Skidmore or Maxus ever having been mentioned in connection with any Transocean board matter or included in any Transocean list of material clients. He testified that Transocean was and is the largest drilling company in the world with a market capitalization of about fifty billion dollars and a backlog of contracts worth between forty-two and forty-three billion dollars. McNamara would have assumed Transocean had done business with, or could have had some relationship with, almost any company involved in the offshore oil and gas business. However, he thought the potential for Transocean to have had a substantial relationship with a party to the arbitration as remote and not having an affect on him as an arbitrator. McNamara testified that if anyone had a concern about his service as an outside director of Transocean, he would have expected the concern to be raised in response to his disclosures. McNamara indicated that he assumed anyone knowing he was a director of Transocean, a publicly-held company, would have anticipated he owned stock in the company. 
        McNamara further testified that he was unaware of Transocean's involvement in drilling the Haymaker well until he saw the slides depicting the Transocean Amirante MODU in the arbitration hearing. McNamara did not think there was any point to mentioning again his relationship with Transocean; he assumed all of the parties knew of the Transocean involvement in the drilling of the Haymaker well because the well was drilled on a lease that was jointly held or that had “gone back and forth” between Maxus and Skidmore, and because the information would have been known to the parties by virtue of discovery exchanged in connection with the litigation. McNamara noted that there was no reaction or demonstration of surprise from the parties regarding the slides or Rumph's testimony referencing the Transocean Amirante MODU. Further, he testified that the fact the Transocean Amirante MODU was used in connection with drilling the Haymaker well was not relevant to the principal points being made by Rumph in his arbitration testimony. Rather, McNamara understood the purpose of Rumph's testimony about the Haymaker well was to describe the amount of time required to drill a deepwater offshore oil well in the Gulf of Mexico. McNamara testified that if he had not already made disclosure of his relationship with Transocean, he might have viewed the need for disclosure at the time of Rumph's testimony differently.   See Footnote 7                   

            Eric Brown, a senior vice president and general counsel of Transocean was deposed in the post-award discovery. Brown testified that prior to the arbitration, the 1999 Transocean Amirante MODU contract between Transocean and Repsol YPF, the parent of Maxus, would never have been discussed with McNamara in his capacity as an outside director of Transocean. Brown testified that Maxus and Repsol YPF were not significant clients of Transocean in terms of revenue, either at the time of his deposition or at the time of the arbitration in 2007. Brown testified that the compensation Transocean received from Maxus and Repsol YPF from 2003 through 2007 was a relatively small percentage of its total revenues. In 2003, Transocean received compensation from Maxus and Repsol YPF in the amount of $ 2.96 million, which represented 12/100 of 1 percent of Transocean's total revenues. From 2004 through 2006, Transocean received no compensation from Maxus or Repsol YPF. In 2007, Transocean received compensation from Maxus and Repsol YPF in the amount of $8,387,000, of which $779,000 is in dispute, which represented either 12/100 or 14/100 of 1 percent of Transocean's total revenues.
        At the hearing of the motion to vacate the arbitration award, Kelly Puls, attorney for Intervenors, testified that he was aware from McNamara's disclosures that McNamara was on the board of directors of Transocean. He testified that he would never have agreed to an arbitrator who had a financial and business relationship with Maxus or Repsol YPF. When questioned about a 1999 email regarding the status of the Haymaker well, Puls confirmed that the Maxus arbitration exhibit was also designated as appellants' exhibit. That exhibit referenced ADTI finalizing the MODU contract with Transocean, and a meeting to be conducted with “ADTI, Transocean, and YPF-Maxus” personnel. Puls confirmed he knew before arbitration that a contractor used by Skidmore and Maxus had rented the Transocean Amirante MODU. When McNamara disclosed that he was a director of Transocean and Puls realized that Transocean had done business previously with Maxus, it did not concern Puls because he thought the business relationship was remote in time. Puls, who was also the attorney who filed the 2001 Fort Worth litigation, acknowledged that discovery produced by Maxus in that litigation indicated Maxus and Transocean had a business relationship.        

        In support of their motion to vacate the arbitration award, appellants also elicited testimony from Richard Faulkner as a tendered expert. Faulkner testified he has been active in the arbitration field for thirty years. In Faulkner's opinion, based on the AAA Code, McNamara did not make the disclosures that were required of a neutral arbitrator. Faulkner acknowledged that no statute in Texas codifies or incorporates the AAA Code, and that the code is aspirational for arbitrators conducting arbitrations in Texas.   See Footnote 8
         Faulkner was aware of McNamara's testimony that he did not know of any business relationship between Transocean and Maxus or Repsol YPF when he was appointed as an arbitrator. Faulkner acknowledged he had not seen anything that indicated knowledge on the part of McNamara concerning a relationship between Transocean and Maxus or Repsol YPF. Faulkner acknowledged that appellants did not ask for additional information from McNamara based on his disclosures and that, based on their knowledge of the prior business relationship between Transocean and Maxus or Repsol YPF, appellants could have objected to McNamara as an arbitrator at the time of his appointment. Faulkner acknowledged that McNamara could not disclose what he did not know, but Faulkner stated that he would expect McNamara, as a member of the board of directors of Transocean, to make a reasonable inquiry of the company before serving as an arbitrator and to ascertain whether or not the company was involved directly or indirectly with a party to the arbitration. Despite appellants' knowledge of Transocean's business relationship with Maxus/Repsol YPF based on the discovery in the 2001 Fort Worth litigation and appellants' designated exhibits in the arbitration, Faulkner stated that McNamara had a continuing duty to disclose a business relationship between Transocean and Maxus or Repsol YPF at the time the slides were presented by Rumph depicting the Transocean Amirante MODU used in connection with drilling the Haymaker well.

Findings of the Trial Court

        The trial court found that even if appellants were deemed to have asserted statutory grounds for vacating an arbitration award, appellants failed to establish those grounds, including the ground of evident partiality.   See Footnote 9  In addition to its finding of fact that arbitrator McNamara was not evidently partial and its conclusion of law that Skidmore failed to establish evident partiality as to McNamara, the trial court signed the following findings of fact:

15. Prior to the arbitration, Mr. McNamara disclosed that he serves on the Board of Directors of Transocean, Inc. (“Transocean”), a public company not involved in this lawsuit. He also disclosed that Robert Monti, a former officer of Maxus' parent company, Repsol YPF, also served on that Board. [Skidmore] and Intervenors did not object to Mr. McNamara despite these disclosures. Now, however, [Skidmore] and Intervenors complain that Mr. McNamara's failure to disclose his stock ownership in Transocean and his failure to disclose that Transocean has done business with Repsol YPF establish his evident partiality. Prior to the arbitration hearing, however, Mr. McNamara had no knowledge of any business relationship between Transocean and either Repsol YPF or Maxus, and had no knowledge of any connection between Transocean and the leases involved in this case.

16. [Skidmore] and Intervenors also complain that during the course of the arbitration hearing certain demonstrative exhibits were displayed that indicated Transocean had been the drilling contractor on a well drilled for Maxus in 1999 on one of the Federal Leases in this case, and that this should have caused Mr. McNamara to make a disclosure at that time of a possible business relationship between Transocean and Maxus. However, [Skidmore] and Intervenors were equally aware of the demonstrative exhibits and their implications, but did not object or raise any question relating to Mr. McNamara's continued service as an arbitrator. Moreover, at the hearing on the motion to vacate and the motion for judgment confirming arbitration award, the evidence established that [Skidmore] and Intervenors and their counsel had been aware of these facts for several years.          

Appellants have not raised specific challenges to the trial court's findings of fact.See McGalliard v. Kuhlmann, 722 S.W.2d 694, 696 (Tex. 1986) (When findings of fact are filed and unchallenged, they occupy same position and are entitled to the same weight as the verdict of a jury. They are binding on an appellate court unless the contrary is established as a matter of law or there is no evidence to support the finding.). Appellants assert, however, that evident partiality of McNamara warranted the trial court's vacating the arbitration award. We will construe that argument as attacking the trial court's findings of fact that arbitrator McNamara was not evidently partial.

Analysis

        On application of a party, a court shall vacate an award if the rights of the party were prejudiced by evident partiality of an arbitrator appointed as a neutral arbitrator. Tex. Civ. Prac. & Rem. Code Ann. § 171.088(a)(2)(A). The arbitration agreement of the parties does not explicitly indicate that the party-appointed arbitrators were to be considered neutral arbitrators. However, the arbitration agreement specifies that “there shall be no ex parte communications at any time by any party or its representative with any of the arbitrators, except that each party may confer with its own party-appointed arbitrator with respect to selection of the third arbitrator.” McNamara testified he believed he served in the capacity of a neutral arbitrator. While the trial court did not find that McNamara was a neutral arbitrator, the court's findings of fact nevertheless addressed appellants' contention of evident partiality on the part of McNamara. Assuming, without deciding, that McNamara was a neutral arbitrator, we likewise address appellants' contention of evident partiality on the part of McNamara under applicable law. See Tex. Civ. Prac. & Rem. Code Ann. § 171.088; TUCO, 960 S.W.2d at 636.
        Appellants suggest McNamara had an undisclosed interest in the arbitration because Transocean, on whose board of directors McNamara served, had a business relationship with Maxus/ Repsol YPF, and McNamara owned Transocean stock. McNamara served as an outside director on the board of Transocean, a company that had, unknown to McNamara at the time of his disclosures, done intermittent business with Maxus and its parent Repsol YPF. It is undisputed that appellants and their counsel had been aware for years prior to the arbitration that Maxus had done business with Transocean, including contracting with Transocean to utilize the Transocean Amirante MODU in connection with drilling the Haymaker well on one of the leases at issue in the arbitration. Despite the fact appellants had actual knowledge of the prior business dealings between Transocean and Maxus/Repsol YPF, appellants made no objection upon receipt of McNamara's disclosures or during the arbitration when the evidence referred to those business dealings. Further, as pointed out by Maxus, information concerning McNamara's ownership of Transocean stock, as a member of its board of directors, was publicly available in Transocean's periodic filings with the United States Securities and Exchange Commission and appellants were capable of obtaining that information at the time McNamara made the disclosure of his relationship with Transocean. Again, appellants made no objection upon receipt of McNamara's disclosures or during the arbitration concerning McNamara's Transocean stock ownership. 
        Appellants did not raise an objection of evident partiality of arbitrator McNamara until after the arbitration award by the panel majority. A party who knows or has reason to know of an arbitrator's alleged bias but remains silent pending the outcome of the arbitration waives the right to complain. Bossley v. Mariner Fin. Grp., Inc., 11 S.W.3d 349, 351-52 (Tex. App.-Houston [1st Dist.] 2000), aff'd, 79 S.W.3d 30 (Tex. 2002). “A party may not sit idly by during an arbitration procedure and then collaterally attack that procedure on grounds not raised before the arbitrator when the result turns out to be adverse.” Bossley, 11 S.W.3d at 351-52 (citing Babcock & Wilcox Co. v. PMAC, Ltd., 863 S.W. 225, 232 (Tex. App.-Houston [14th Dist.] 1993, writ denied)); see also Myer v. Americo Life, Inc., 315 S.W.3d 72, 76 (Tex. App.-Dallas 2009, pet. filed); Kendall Builders, Inc. v. Chesson, 149 S.W.3d 796, 806 (Tex. App.-Austin 2004, pet. denied) (having elected to proceed with arbitration in face of their knowledge regarding arbitrator, parties could not later complain after arbitration award). “[A] party who learns of a conflict before the arbitrator issues his or her decision must promptly object to avoid waiving the complaint.” TUCO, 960 S.W.2d at 637 n.9; Roehrs v. FSI Holdings, Inc., 246 S.W.3d 796, 806 (Tex. App.-Dallas 2007, pet. denied). We agree with the trial court that appellants have waived their complaint concerning McNamara's alleged evident partiality by failing to raise the issue prior to issuance of the arbitration award.
        But even if appellants had not waived their complaint, we conclude based upon the entirety of this record that McNamara did not fail to disclose facts which might, to an objective observer, create a reasonable impression of the arbitrator's partiality. See TUCO, 960 S.W.2d at 636. McNamara properly disclosed at the outset of the arbitration that he served on the Transocean board of directors. The undisputed evidence is that McNamara was unaware of an intermittent business relationship between Transocean and Maxus/Repsol YPF at the time he made his pre-arbitration disclosures. At the point during the arbitration that McNamara viewed demonstrative exhibits and heard testimony concerning a business relationship between Transocean and Maxus/Repsol YPF, it was apparent that the parties to the arbitration were aware of the business relationship. The intermittent business relationship between Transocean and Maxus/Repsol YPF produced compensation to Transocean that constituted no more than a very small portion of Transocean's annual revenue in 2003 and 2007. The trial court properly concluded that appellants' failed to establish evident partiality of McNamara. We conclude the trial court did not err in confirming the arbitration award in favor of Maxus and in denying appellants' motion to vacate the arbitration award based on appellants' claim of arbitrator McNamara's evident partiality. We overrule appellants' argument to the contrary in their sole issue.

Claim That Arbitrators Exceeded Their Powers 

[omitted --  click hot-line to go to separate blog post]   

Conclusion

        We overrule appellants' sole issue. We affirm the trial court's judgment.        

CASE DETAILS AND LINK TO DOCKET SHEET  

05-09-00402-CV AFFIRM - Docket Sheet
Skidmore Energy, Inc. Patton Production Co., Johnny L. Patton, Jr. and Puls, Taylor; Woodson, LLP v. Maxus (U.S.) Exploration Company
Opinion by: Justice Robert M. Fillmore
Case Type: CONTRACT  

No Waiver: In Re CitiGroup Global Markets, Inc. (Tex. May 16, 2008)

Texas Supreme Court rejects arbitration waiver theory in suit brought by customers Contrary to its recent decision vacating an arbitration award in favor of homeowners in a residential construction dispute (in which it held consumers had waived arbitration by conducting extensive discovery), the Texas Supreme Court finds no waiver of contractual right to arbitrate in case in which corporate defendant had litigated in several forums, but had reserved right to move for arbitration in suit brought by investors, which it did on remand to state court. In Re CitiGroup Global Markets, Inc., No. 06-0886 (Tex. 2008) (per curiam) (arbitration compelled, no express or implied waiver of contractual right to arbitrate found) Also see --> Other per curiam decisions Texas Arbitration Case Law - Decisions ═════════════════════════════════════ In Re Citigroup Global Markets, Inc. (Tex. May 16, 2008) ═════════════════════════════════════ PER CURIAM Parties that “conduct full discovery, file motions going to the merits, and seek arbitration only on the eve of trial” waive any contractual right to arbitration. In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 764 (Tex. 2006). The relator here did none of those, but instead spent seven months removing the case to various federal courts before finally filing an answer in state court with a contemporaneous motion to compel arbitration. The courts below held the relator’s transfer efforts waived arbitration. 202 S.W.3d 477. We disagree, and thus conditionally grant mandamus relief. See In re Weekley, 180 S.W.3d 127, 130 (Tex. 2005) (“Mandamus relief is proper to enforce arbitration agreements governed by the FAA.”). Robert and Natalie Nickell had investment accounts with Citigroup Global Markets, Inc. (formerly known as Salomon Smith Barney, Inc.), and signed agreements to arbitrate any disputes “concerning or arising from” their accounts. The Nickells allegedly lost more than $4 million after they invested in WorldCom Inc. based on research reports by a Citigroup analyst. The Nickells sued Citigroup, which immediately removed the case to federal court on the ground that it related to WorldCom’s bankruptcy proceedings. In federal court, the Nickells moved to remand and Citigroup moved to transfer the case to a federal multidistrict litigation (“MDL”) court in New York managing similar WorldCom-related suits against Citigroup. Citigroup moved to stay proceedings in the federal court pending the MDL panel’s decision, specifically reserving its defense “that Plaintiffs arbitrate, not litigate, their claims.” The MDL panel conditionally transferred the case to the MDL court. The Nickells asked the panel to vacate the order, which the panel denied before transferring the case. Once in the MDL court, a stay order excused Citigroup from filing an answer or pleading any defenses. Undeterred by past failures, the Nickells filed another motion for remand in the MDL court. Undeterred by past successes, Citigroup gave up the jurisdictional battle and agreed to a remand of the case back to state court. In all, the parties spent about seven months shuttling between the federal forums managing WorldCom cases. Back in state court, Citigroup simultaneously filed an original answer and a motion to compel arbitration. The trial court denied the motion, and the court of appeals denied mandamus relief on the ground that Citigroup expressly waived arbitration by statements reflecting an intent to litigate the dispute. 202 S.W.3d at 483–84. The parties agree the Federal Arbitration Act applies. See 9 U.S.C. § 1 et seq. “[A] party waives an arbitration clause by substantially invoking the judicial process to the other party’s detriment.” Perry Homes v. Cull, ___ S.W.3d ___, ___ (Tex. 2007). Waiver is a legal question for the court based on the totality of the circumstances, and asks whether a party has substantially invoked the judicial process to an opponent’s detriment, the latter term meaning inherent unfairness caused by “a party’s attempt to have it both ways by switching between litigation and arbitration to its own advantage.” Id. at __. The court of appeals held that Citigroup expressly waived arbitration — not by its conduct transferring the case to the federal and MDL courts, but by statements in those motions suggesting it was doing so for the purposes of litigation, not arbitration. 202 S.W.3d at 484 (holding that “removal related conduct alone does not constitute waiver,” but placing reliance “primarily upon [Citigroup’s] written explanations for the removal and transfer.”). We need not decide whether the Nickells are correct that express waiver is governed by different rules than those that govern implied waiver, as we disagree that these statements rise to the level of an express waiver. Citigroup never opposed arbitration, nor did it expressly waive its arbitration rights. To the contrary, it reserved the right to request arbitration early on and so informed the Nickells. Its statements in various transfer pleadings about the case’s similarity to others already transferred, the potential savings in consolidated discovery, and the potential convenience of parties and witnesses in consolidated proceedings were required by statute to justify transfer to the MDL court. See 28 U.S.C. § 1407(a) (providing for MDL transfer of “civil actions involving one or more common questions of fact” if the transfer “will be for the convenience of parties and witnesses and will promote the just and efficient conduct of such actions”). Moreover, its statements about how much discovery could be avoided by transfer to the MDL court reflect an effort to avoid litigation activity rather than duplicate it. See In re Serv. Corp. Int’l, 85 S.W.3d 171, 175 (Tex. 2002) (“Relators’ efforts in moving to dismiss and staying discovery were to avoid litigation, not participate in it.”). Additionally, we disagree with the Nickells that transfer to an MDL court is necessarily inconsistent with seeking arbitration. Arbitration is possible for consolidated actions as well as individual ones. See Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444, 452–53 (2003). Courts can issue inconsistent orders on arbitration just as they can on discovery or other matters that MDL courts are designed to coordinate. Thus, Citigroup’s transfer to the MDL court does not indicate it had abandoned arbitration. Because Citigroup never expressly waived or objected to arbitration, the question here is whether it impliedly waived arbitration. Citigroup’s actions and statements in requesting transfer to the MDL court are certainly factors to be considered in the totality-of-the-circumstances test. See Perry Homes, ___ S.W.3d at ___. But they cannot be taken out of the context in which they were made or the remainder of Citigroup’s litigation conduct. There is no dispute that Citigroup’s actual litigation conduct (as opposed to statements of its intentions) was limited to jurisdictional transfers, not the merits. The Nickells concede Citigroup never sent or responded to any written discovery, conducted no depositions, filed no motions (or even an answer) relating to the merits before seeking arbitration, and engaged in no litigation conduct whatsoever other than transferring the case to the federal and MDL courts. In these circumstances, Citigroup’s statements about what discovery might be saved in the MDL court are simply not enough to show substantial invocation of the judicial process. Finally, the Nickells argue their contracts bind them to arbitration with Citigroup’s predecessors but not Citigroup. But each contract here specifically stated that its provisions “shall inure to the benefit of Smith Barney’s present organization, and any successor organization or assigns.” Citigroup established (and the Nickells do not dispute) that it is a successor organization to Smith Barney, and thus fell heir to the Nickells’ contracts and the arbitration clauses within them. Because the Nickells failed to show Citigroup waived its contractual right to arbitration, we conditionally grant Citigroup’s petition for writ of mandamus without hearing oral argument, see Tex. R. App. P. 52.8(c), and direct the trial court to compel arbitration. We are confident that the trial court will promptly comply, and our writ will issue only if it does not. OPINION DELIVERED: May 16, 2008 ============ Full case style: IN RE CITIGROUP GLOBAL MARKETS, INC. (F/K/A SALOMON SMITH BARNEY, INC.), CITIGROUP, INC., AND STACY OELSEN; from Dallas County; 5th district (05-05-01430-CV, 200 S.W.3d 742, 06-28-06) Without hearing oral argument, the Texas Supreme Court conditionally grants the petition for writ of mandamus. RELATED LINKS: 2008 Texas Supreme Court Opinions | Tex. 2008 arbitration decisions | Mandamus Decisions of the Tex. Sup. Ct.

Structured Capital Resources Corp v. Arctic Cold Storage LLC (Tex.App. - Tyler 2007)

Finding that right to arbitrate had not been waived, Tyler Court of Appeals orders trial court to abate case and compel arbitration. Structured Capital Resources Corporation v. Arctic Cold Storage, LLC and Mickey Cox, No. (Tex.App.- Tyler, Oct. 24, 2007)(Opinion by Chief Justice Worthen)(denial of motion to compel arbitration reversed, mandamus granted, interlocutory appeal also filed) Style: In Re Structured Capital Resources Corp., N0. 12-06-00413-CV Interlocutory Appeal and mandamus from 349th District Court of Anderson County OPINION Structured Capital Resources Corporation (SCR) seeks relief from the trial court’s order denying arbitration of its contract dispute with Arctic Cold Storage, LLC and Mickey Cox (collectively ACS). SCR has sought relief by petition for writ of mandamus based on the Federal Arbitration Act (FAA) and by interlocutory appeal based on the Texas Arbitration Act. We consolidate the two proceedings. Because the FAA is applicable and SCR did not waive its right to arbitration, we conditionally grant mandamus relief. We dismiss the interlocutory appeal for want of jurisdiction. Background On September 8, 2005, the parties entered into an agreement by which SCR, Global Positioning Standards LLC (GPS), and Parkway Financial were to arrange financing for ACS for a six percent placement fee. The contract provides for arbitration of disputes arising out of the agreement. On March 30, 2006, ACS closed on a loan for approximately $5,500,000.00, which SCR arranged pursuant to that agreement. At the insistence of the lender at closing, ACS deposited $330,000.00 for SCR’s fee in escrow with the title company. However, ACS refused to pay SCR the full six percent required by the agreement, offering instead a $50,000.00 settlement. SCR filed its original petition and application for temporary restraining order on April 11, 2006, alleging breach of contract and requesting the court prevent ACS from removing the funds from escrow. The trial court granted SCR’s request for emergency relief. Nonetheless, ACS transferred approximately $240,000.00 of the money out of escrow. SCR then asked the trial court for a temporary injunction ordering ACS to tender the money into the registry of the court. The trial court granted that request on May 8, 2006. ACS filed a counterclaim against SCR and a third party petition against Everette Hull, president of SCR. Trial was set for September 5, 2006. However, on August 2, GPS filed a plea in intervention claiming that ACS breached the loan brokerage agreement with GPS. ACS counterclaimed against GPS. At the request of GPS, the trial date was postponed to October 2, 2006. On August 24, 2006, the parties attended mediation. Mediation was not successful. On September 5, SCR moved to abate the proceedings, requesting the trial court order arbitration. The trial court denied the motion to abate on September 22, 2006. SCR filed both a petition for writ of mandamus and an interlocutory appeal in this court complaining of the trial court’s action. Jurisdiction By statute, the denial of a motion to compel arbitration under the Texas Arbitration Act is appealable. See Tex. Civ. Prac. & Rem. Code Ann. § 171.098 (Vernon 2005); In re Valero Energy Corp., 968 S.W.2d 916, 916 (Tex. 1998) (orig. proceeding). However, mandamus is appropriate when a state court erroneously denies a motion to compel arbitration under the federal scheme. In re Valero Energy Corp., 968 S.W.2d at 916. At oral argument, the parties agreed that the Federal Arbitration Act controls in this case. Therefore, we dismiss SCR’s interlocutory appeal, our number 12-06-00355-CV, for want of jurisdiction and consider only the petition for writ of mandamus. Standard of Review Mandamus is proper to correct a clear abuse of discretion when there is no adequate remedy by appeal, as when a party is erroneously denied its contracted for arbitration rights under the FAA. In re D. Wilson Constr. Co., 196 S.W.3d 774, 780 (Tex. 2006) (orig. proceeding). A clear abuse of discretion occurs when the trial court errs in analyzing or applying the law to the facts or when the trial court has but one reasonable decision and does not make that decision. Walker v. Packer, 827 S.W.2d 833, 840 (Tex. 1992) (orig. proceeding). Denial of Motion to Abate for Arbitration In its sole issue, SCR contends the trial court abused its discretion in denying its motion to abate for arbitration because SCR did not waive the right to arbitrate. It asserts that it sought emergency relief to preserve the status quo until it could arbitrate the dispute, but did not request the court to resolve the case on the merits, and it engaged in minimal litigation only. SCR argues that it did not substantially invoke the judicial process and ACS did not prove it was prejudiced by SCR’s acts. Applicable Law The party resisting arbitration has the burden to present evidence on its defense to the arbitration agreement, including the defense of waiver. In re Oakwood Mobile Homes, Inc., 987 S.W.2d 571, 573 (Tex. 1999) (orig. proceeding). Whether a party’s conduct waives its arbitration rights is a question of law and depends on the individual facts and circumstances of each case. Id. at 574; Southwind Group, Inc. v. Landwehr, 188 S.W.3d 730, 735 (Tex. App.–Eastland 2006, orig. proceeding). Waiver may be implied or express, but it must be intentional. See EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 89 (Tex. 1996) (orig. proceeding). Because public policy favors resolving disputes through arbitration, there is a strong presumption against the waiver of contractual arbitration rights. In re Oakwood, 987 S.W.2d at 574. Accordingly, we resolve any doubts about waiver in favor of arbitration. Id. Waiver may be found when it is shown that a party acted inconsistently with its right to arbitrate and such actions prejudiced the other party. Id. A party waives an arbitration clause when it substantially invokes the judicial process to the other party’s detriment. In re Bank One, N.A., 216 S.W.3d 825, 827 (Tex. 2007) (orig. proceeding). Substantially invoking the judicial process may occur when the party seeking arbitration has filed motions going to the merits to obtain a final resolution of the dispute. See In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 764 (Tex. 2006) (orig. proceeding); Williams Indus., Inc. v. Earth Dev. Sys. Corp., 110 S.W.3d 131, 135 (Tex. App.–Houston [1st Dist.] 2003, no pet.). Substantially Invoking the Legal Process ACS asserts that SCR substantially invoked the legal process by pursuing the court order that kept $330,000.00 out of ACS’s reach. We disagree. SCR’s request that the funds be placed in the court’s registry was presented as a request for an injunction. ACS points out that this is not the proper procedure. An order requiring the deposit of funds into the registry of a court cannot be characterized as an appealable temporary injunction, even if entered in response to a motion for injunctive relief. Faddoul, Glasheen & Valles, P.C. v. Oaxaca, 52 S.W.3d 209, 212 (Tex. App.– El Paso 2001, no pet.). However, it is entirely permissible for a trial court to order disputed funds paid into the registry of the court until its ownership is determined if there is evidence that the funds are in danger of being lost or depleted. Castilleja v. Camero, 414 S.W.2d 431, 433 (Tex. 1967) (orig. proceeding). Central to the question before us is the fact that merely placing the funds into the court’s registry does not settle the question of who the funds belong to, and therefore such an order cannot be considered an order on the merits. The same result ensues if the court’s order placing the money into the court’s registry were actually an injunction. The purpose of a temporary injunction is to preserve the existing condition until a final hearing can be had on the merits. Cave v. Montgomery, 259 S.W.2d 924, 926 (Tex. Civ. App.–Amarillo 1953, writ ref’d n.r.e.). A proper request for temporary injunctive relief is not a request for a final disposition. See id. Further, the FAA does not preclude a court from issuing injunctive relief, including a preliminary injunction, to preserve the status quo during the process of arbitration, where the contract at issue reflects a consensus of the parties that such relief was contemplated. RGI, Inc. v. Tucker & Assocs., Inc., 858 F.2d 227, 230 (5th Cir. 1988). Moreover, while disallowed in at least two circuits, the issuance of preliminary injunctions as a means of preserving the status quo pending arbitration is permitted in several federal circuits, even in the absence of a prior agreement by the parties to use injunctive relief. See Speedee Oil Change Sys., Inc. v. State Street Capital, Inc., 727 F. Supp. 289, 291 (E.D. La. 1989). Ultimately, a preliminary injunction can be used to prevent injury and, in the process, protect the integrity of the applicable dispute resolution process. See Ortho Pharm. Corp. v. Amgen, Inc., 882 F.2d 806, 814 (3rd Cir. 1989). From SCR’s perspective, a temporary injunction, or court order, to maintain the status quo, that is, keep the money from disappearing, was desirable whether it was going to trial or arbitration. Requesting either a temporary injunction or an order requiring the deposit of disputed funds into the court’s registry is not inconsistent with the right to arbitrate. We cannot use SCR’s request for injunctive relief to infer that it intentionally relinquished its right to arbitration. See In re D. Wilson Constr. Co., 196 S.W.3d at 783 (party that filed a suit to obtain injunctive relief to preserve evidence in a personal injury case pending in a separate court, where it also filed cross actions, did not waive its right to arbitrate). Prejudice to ACS SCR propounded three discovery documents including requests for disclosure, interrogatories, and production, and a fourth document merely requesting identification of items previously requested but not produced. In furtherance of its own claims, ACS presented nine discovery requests to SCR, Hull, and GPS. The record does not contain most of ACS’s requests or any responses from any party. The parties began, but did not finish, the deposition of Everette Hull. Taking unfair advantage of discovery proceedings that would not have been available in arbitration might constitute sufficient prejudice to infer waiver. Tenneco Resins, Inc. v. Davy Int’l, AG, 770 F.2d 416, 421 (5th Cir. 1985). However, when only a minimal amount of discovery has been conducted, which may also be useful for the purpose of arbitration, the court should not ordinarily infer waiver based on prejudice to the party opposing the motion to stay litigation. Id; see also In re D. Wilson Constr. Co., 196 S.W.3d at 783; In re Vesta, 192 S.W.3d at 763; In re Bruce Terminix Co., 988 S.W.2d at 704-05. The parties’ agreement states that arbitration is to be conducted in accordance with the rules and procedures of the American Arbitration Association. Those rules permit the arbitrator to allow discovery. See In re Bruce Terminix Co., 988 S.W.2d at 704-05. There is nothing to indicate that the discovery propounded by SCR, if responded to at all, would not be useful in arbitration. See In re Vesta,192 S.W.3d at 763. There is no indication that SCR obtained sensitive documents or information through the discovery process that it would not have been able to obtain in the arbitration proceeding. Williams Indus., Inc., 110 S.W.3d at 140. Counsel for ACS stated on the record that, as of the date of the hearing on the motion for arbitration, ACS had incurred “in the neighborhood of $35,000.00 in attorney’s fees in this lawsuit.” No evidence of fees or costs was presented. Nothing shows how much of the attorney’s fees was attributable to SCR’s complained of actions. See Williams Indus., Inc., 110 S.W.3d at 140. Much of the costs incurred by ACS necessarily resulted from its prosecution of its own claims against SCR, Hull, and GPS. See In re Vesta, 192 S.W.3d at 763. Further, there is no evidence that the time and funds expended would not have been expended or inured to ACS’s benefit in arbitration. See Transwestern Pipeline Co. v. Horizon Oil & Gas Co., 809 S.W.2d 589, 593 (Tex. App.–Dallas 1991, writ dism’d w.o.j.). Generalized complaints about delay and expense, absent explanations and evidentiary support, will not establish prejudice. See Williams Indus., Inc., 110 S.W.3d at 139. To support its argument that SCR waived arbitration, ACS relies on the case of Marble Slab Creamery, Inc. v. Wesic, Inc., 823 S.W.2d 436 (Tex. App.–Houston [14th Dist.] 1992, no writ). Marble Slab was both the plaintiff and the proponent of arbitration. Over the course of approximately eight months, Marble Slab obtained a temporary injunction, the defendant filed counterclaims and a third party suit, and the defendant was ordered to submit to mediation, participated in depositions, and responded to requests for admissions, requests for production, and interrogatories. Marble Slab requested arbitration a little over a month before the trial date. The court described Marble Slab’s actions as the “active pursuit of its legal remedies” and held those actions sufficient to constitute waiver of its right to compel arbitration. Id. at 438. At first blush, it would appear that Marble Slab supports ACS’s position. However, we decline to follow Marble Slab. There, the time period between filing suit and requesting arbitration was twice as long as in the instant case. Moreover, the court listed generally the types of discovery the parties had participated in but did not specifically state the extent of discovery. Due to the lack of specificity in the opinion, we cannot determine that the facts in Marble Slab are sufficiently analogous to the facts here to justify reliance on that case. ACS did not meet its burden to prove that SCR substantially invoked the judicial process to ACS’s prejudice thereby waiving its right to arbitrate. Therefore, ACS has not overcome the strong presumption against waiver of SCR’s contractual arbitration rights. See In re Oakwood, 987 S.W.2d at 574. Conclusion We conclude that SCR’s conduct, as a matter of law, did not result in the waiver of its arbitration rights. Accordingly, the trial court abused its discretion by denying SCR’s motion to compel arbitration. Therefore, we conditionally grant mandamus relief on SCR’s motion to abate and compel arbitration. We trust that the trial court will promptly vacate its order of September 22, 2006 denying SCR’s motion to abate and compel arbitration and issue an order granting the motion to abate and compel arbitration. The writ will issue only if the trial court fails to comply with this court’s opinion and order within ten days. The trial court shall furnish this court, within the time for compliance with this court’s opinion and order, a certified copy of its order evidencing such compliance. We dismiss SCR’s interlocutory appeal for want of jurisdiction. JAMES T. WORTHEN Chief Justice Opinion delivered October 24, 2007. Panel consisted of Worthen, C.J., Griffith, J., and Hoyle, J. (PUBLISH)

In re Southwestern Bell (Tex. 2007)

In re SWBT Co., No. 05-0511 (Tex. Jun. 12, 2007)(Johnson)(public agency, primary jurisdiction, arbitration) ════════════ In re Southwestern Bell Telephone Company, L.P., Relator ═══════════════════════ On Petition for Writ of Mandamus ═══════════════════════ Justice Johnson delivered the opinion of the Court. The issue in this case is whether the Public Utility Commission has primary jurisdiction to resolve threshold questions about the meaning and effect of certain telephone interconnection agreements between Southwestern Bell Telephone Company and the plaintiff local exchange telephone service carriers. We conclude that it does, and conditionally grant mandamus relief. I. Background In 1996, Congress opened local telephone service to competition by enacting the Federal Telecommunications Act (FTA). Telecommunications Act of 1996, Pub. L. No. 104‑104, 110 Stat. 56. Telephone companies that provide local calling services are referred to as local exchange carriers or LECs. Certain LECs such as relator Southwestern Bell Telephone Company historically held a monopoly in providing the services and are referred to as incumbent LECs or ILECs. Sw. Bell Tel. Co. v. Pub. Util. Comm’n, 208 F.3d 475, 477 (5th Cir. 2000). Historically, the ILECs owned extensive telecommunication networks. AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 371 (1999) (noting that ILECs “owned, among other things, the local loops (wires connecting telephones to switches), the switches (equipment directing calls to their destinations), and the transport trunks (wires carrying calls between switches) that constitute a local exchange network”). LECs such as plaintiffs in the trial court, who are real parties in interest here, compete with ILECs and are called competitive local exchange carriers (CLECs). The FTA requires each ILEC to share its network with competitors. Sw. Bell Tel. Co., 208 F.3d at 477. The FTA allows a CLEC to access an ILEC’s network in three ways: by purchasing local telephone services at wholesale rates for resale to end users; by leasing elements of the incumbent’s network on an unbundled basis; and by interconnecting its own facilities with the ILEC’s network. AT&T Corp., 525 U.S. at 371. Under the FTA, interconnection agreements must be approved by the Public Utility Commission (PUC). See 47 U.S.C. § 252(e) (2001). CLECs may, but need not, separately negotiate contracts with the ILEC. If a CLEC chooses not to separately negotiate a contract, the FTA also allows it to adopt (1) an existing agreement that any other CLEC has entered into with the ILEC, or (2) a standard-form “T2A” agreement developed by Southwestern Bell and other CLECs. If parties cannot reach an agreement when negotiating the terms of an interconnection agreement, then either party can ask the PUC to arbitrate the unresolved issues. See 47 U.S.C. §§ 252(b), (c). Each of the CLEC plaintiffs in this case contracted with Southwestern Bell by adopting either the T2A agreement or an existing previously negotiated agreement. The interconnection agreements entered into by the parties provided that Southwestern Bell would charge the plaintiff CLECs between $5.00 and $25.00 for certain services. After the plaintiffs and Southwestern Bell entered into their interconnection agreements, the PUC conducted two arbitrations to set rates for other CLECs’ interconnection agreements when those CLECs were unable to agree on negotiated prices with Southwestern Bell. Those proceedings are referred to as the “Mega-Arb” and “AccuTel”[1] arbitrations. In the Mega-Arb and AccuTel proceedings the PUC set rates for certain services to be supplied by Southwestern Bell at prices between $2.56 and $5.00. The plaintiffs in this case had contracted to pay between $5.00 and $25.00 for the same services. Following the PUC’s decisions in the Mega-Arb and AccuTel proceedings, the plaintiffs brought suit, asserting that Southwestern Bell had been overcharging them because the rates in their contracts were substantially higher than the rates set in the Mega-Arb and AccuTel arbitration proceedings. The causes of action asserted by plaintiffs include (1) Deceptive Trade Practices Act (DTPA)[2] violations, (2) unjust enrichment/money had and received, (3) violations of Texas anti-trust laws, and (4) fraud. Southwestern Bell removed the suit to federal court, but the federal court remanded the case. The plaintiffs and Southwestern Bell both moved for summary judgment in state court. In the alternative, Southwestern Bell also sought referral to the PUC on the basis that the PUC had primary jurisdiction to decide threshold issues regarding the interconnection agreements. The motions were denied. Southwestern Bell then sought, but was denied, mandamus relief from the Thirteenth Court of Appeals. Southwestern Bell now requests this Court to issue a writ of mandamus directing the trial court to (1) refer the issues regarding the interconnection agreements to the PUC and (2) abate the case while the PUC reviews the issues referred. The PUC has filed an amicus brief in support of Southwestern Bell’s position. II. Mandamus Standards In order to obtain mandamus relief a relator must show that the trial court clearly abused its discretion and that the relator has no adequate remedy by appeal. In re Prudential Ins. Co. of Am., 148 S.W. 3d 124, 135‑36 (Tex. 2004). A trial court abuses its discretion if it fails to analyze or apply the law correctly. In re Kuntz, 124 S.W.3d 179, 181 (Tex. 2003). An adequate remedy by appeal does not exist under circumstances such as those presented by this matter if trial is erroneously permitted to go forward because allowing the trial to proceed would interfere with the important legislatively mandated function and purpose of the PUC. In re Entergy Corp., 142 S.W.3d 316, 321 (Tex. 2004); see also State v. Sewell, 487 S.W.2d 716, 719 (Tex. 1972) (noting the importance of administrative agencies and concluding that the judicial system should avoid improper restraints on administrative proceedings). III. Analysis — Primary Jurisdiction Southwestern Bell argues that referral to the PUC and abatement of the suit is required because the PUC has primary jurisdiction over questions regarding interpretation and enforceability of the parties’ interconnection agreements. We agree.[3] Primary jurisdiction “allocate[s] power between courts and agencies when both have authority to make initial determinations in a dispute.” Subaru of Am. v. David McDavid Nissan, Inc., 84 S.W.3d 212, 221 (Tex. 2002). Trial courts should defer to appropriate administrative agencies when (1) the agency is staffed with experts trained in handling complex problems within the agency’s purview, and (2) great benefit is derived from the agency’s uniform interpretation of laws within its purview and the agency’s rules and regulations when courts and juries might reach differing results under similar fact situations. Id. Both requirements are met in this case. The PUC is staffed with experts who routinely consider the validity and enforceability of interconnection agreements. In addition to approving the interconnection agreements in the first instance, the PUC also retains authority to interpret and enforce the interconnection agreements when disputes arise about their meaning or effect. Sw. Bell Tel. Co. v. Pub. Util. Comm’n, 208 F.3d 475, 479‑80 (5th Cir. 2000) (“[T]he [FTA’s] grant to the state commissions of plenary authority to approve or disapprove these interconnection agreements necessarily carries with it the authority to interpret and enforce the provisions of agreements that state commissions have approved.”). State commissions have been said to act as “deputized federal regulators” under the FTA and have developed expertise in enforcing and interpreting the requirements of the FTA. MCI Telecomms. Corp. v. Illinois Bell Tel. Co., 222 F.3d 323, 344 (7th Cir. 2000). In addition to the PUC’s having expertise in interpreting interconnection agreements, its uniform interpretation of the agreements provides great benefit. Conflicting jury verdicts and rulings by different courts in regard to same or similar situations and fact patterns could result in disparate treatment of the CLECs and ILEC. Disparate treatment of companies and lack of uniform decisions regarding contractual obligations could inhibit competition, compromise the PUC’s ability to perform its regulatory duties under the FTA, and frustrate Congress’s goal of providing opportunity for competition in the local-calling market. See H.R. Rep. No. 104‑458, at 113 (1996), reprinted in 1996 U.S.C.C.A.N. 124 (noting that Congress enacted the FTA to promote competition in all telecommunications markets, including the local service market). Furthermore, many CLECs have identical interconnection agreements because the FTA allows each CLEC to adopt an agreement that another CLEC has entered into with the ILEC. See 47 U.S.C. § 252(I) (2001). Given Congress’s intent to promote competition and standardize the interconnection agreements, there is considerable benefit in obtaining uniform interpretation of those agreements. See Subaru of Am., 84 S.W.3d at 221. Plaintiff CLECs assert that the PUC lacks primary jurisdiction in this case because it lacks the power to adjudicate the plaintiffs’ tort, DTPA, and antitrust claims. We disagree. Although the PUC cannot grant all the relief that the plaintiffs request, the PUC is authorized to make initial determinations regarding the validity of the interconnection agreements and their interpretation. We have held that “when the primary jurisdiction doctrine requires a trial court to defer to an agency to make an initial determination, the court should abate the lawsuit and suspend finally adjudicating the claim until the agency has an opportunity to act on the matter.” Butnaru v. Ford Motor Co., 84 S.W.3d 198, 208 (Tex. 2002). Once the PUC has made its determinations regarding the interconnection agreements, then the trial court may proceed with its adjudicative function. Plaintiffs further assert that referring the case to the PUC will provide no benefit because the previous arbitration proceedings resolved the question of what rates Southwestern Bell is authorized to charge. Again, we disagree. The arbitration decisions set rates for the future in situations where other CLECs and the ILEC could not agree between themselves what those rates should be. The proceedings did not address the validity and enforceability of different rates between parties who agreed upon those different rates. We therefore conclude that the PUC has primary jurisdiction over questions regarding the validity and enforceability of the interconnection agreements. IV. Analysis — Waiver Plaintiff CLECs contend that mandamus relief is not warranted in this case because Southwestern Bell (1) waited too long to seek a hearing on primary jurisdiction, and (2) waited too long before pursuing mandamus relief after the trial court refused to abate the case. Plaintiffs rely primarily on Rivercenter Assocs. v. Rivera, 858 S.W.2d 366, 367 (Tex. 1993). In Rivercenter, we held that “[a]lthough mandamus is not an equitable remedy, its issuance is largely controlled by equitable principles,” and one such principle is that “‘[e]quity aids the diligent and not those who slumber on their rights.’” Id. (quoting Callahan v. Giles, 155 S.W.2d 793, 795 (Tex. 1941)). In that case, Rivercenter sought mandamus relief to quash a jury trial demand because the parties had contractually agreed to waive a jury. We held that relief was not appropriate when Rivercenter was sent notice on the day the jury demand was filed, yet for no apparent reason delayed filing its motion to quash for over four months. We disagree for two reasons. First, the record in this case does not reflect unexplained delay in asserting the primary jurisdiction issue. Southwestern Bell raised the issue in federal court, then raised it again in the state trial court on April 25, 2003 — less than a month after the federal court remanded the case. Second, the CLECs do not contend that Southwestern Bell substantially invoked the litigation process to the CLECs’ prejudice. In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 763 (Tex. 2006). And, delay alone does not generally establish waiver. Id. Southwestern Bell filed, on September 13, 2004, its separate motion for summary judgment, or in the alternative, motion to defer to the PUC based on primary jurisdiction.[4] The trial court heard argument on the motion on December 2, 2004 and orally denied it at that time. The trial court entered a written order on April 18, 2005. Southwestern Bell filed its petition for writ of mandamus in the court of appeals less than one month later. These facts do not present a situation in which Southwestern Bell failed to timely assert the issue of primary jurisdiction or is barred by prejudicial delay from asserting that the PUC has primary jurisdiction. See id. To the contrary, Southwestern Bell raised the issue of primary jurisdiction promptly, sought a hearing within the timeframe set by the scheduling order, and sought mandamus relief soon after its motion was denied. V. Conclusion We hold that the trial court abused its discretion in refusing to abate the case to allow the PUC to exercise its primary jurisdiction. We further hold that (1) permitting trial to go forward before the PUC completes its exercise of primary jurisdiction would interfere with the important legislatively mandated function and purpose of the PUC in the construct established by the FTA, and (2) there is no adequate remedy by appeal if trial proceeds before the PUC completes exercise of its primary jurisdiction. Accordingly, we conditionally grant mandamus relief. The trial court is directed to abate the case and proceed in accordance with this opinion. We are confident that the trial court will comply; the writ will issue only if it fails to do so. ________________________________________ Phil Johnson Justice OPINION DELIVERED: June 1, 2007 [1] AccuTel was originally a plaintiff in the underlying proceeding in this case. The trial court severed AccuTel’s claim. [2] Tex. Bus. & Com. Code §§ 17.41-63. [3] Southwestern Bell also argues that abatement and referral to the PUC is warranted because the PUC has exclusive jurisdiction over threshold issues. Because Southwestern Bell seeks only abatement and not dismissal of the case, we decide the case based on primary jurisdiction and do not reach the question of exclusive jurisdiction. [4] The mandamus record does not contain the trial court’s scheduling order. However, Southwestern Bell asserts, and the CLECs do not dispute, that Southwestern Bell filed its motion in accordance with the trial court’s scheduling order.