Thursday, January 17, 2019

Variation on the Arbitration-Appeal Theme: A Dispute over Bilateral vs. Multilateral (multi-party) Arbitration

CLAIM-FRACTURING CUM APPELLATE GALORE

Natgasoline LLC v. Refractory Construction Services, Co. LLC, 14-17-00503-CV
(Tex.App. - Houston [14th Dist.] Dec. 18, 2018) (motion for rehearing and for en banc filed Jan 2, 2019) 

Not your typical scenario: Dispute over two competing bids to get into arbitration, one bilateral, the other encompassing all parties. Trial court in Galveston sent all parties to arbitration, but not everyone was happy. 

Next complication: Can all of the compel/deny issues be appealed immediately? Given the uncertainty, three vehicles were invoked by the same party to get into the court of appeals for a second opinion: (1) Notice of regular appeal, should the order compelling multi-party arbitration be deemed final; (2) notice of interlocutory (accelerated) appeal otherwise; and (3) petition for mandamus, in case appellate jurisdiction was found to be lacking. Let the court of appeals do the picking and choosing. After all, the first order of business is for the higher court to determine whether it has jurisdiction, or to what extent, as it turns out. And the issue of finality for purposes of appeal is a tricky one indeed. 
    
Leaving aside the matter of appellate jurisdiction, the issues in this case are by no means simple, and do not lend themselves to a short summary (see full text of opinion below). They illustrate the complexities that can arise in multi-party disputes, such as construction projects with multiple tiers of sub-contractors, when some contracts have arbitration clauses while others do not, and when the involved parties did not all sign the same contracts. It happens with some frequency in commercial disputes arising from large projects with numerous participants. It's a far cry from the notion that arbitration is a simpler, quicker, and cheaper way to resolve disputes. And when only some parties in a complex dispute over a troubled project or business deal have to arbitrate claims against each other while others do not, it creates additional problems that would otherwise be addressed through court rules governing interventions, third-party practice, and joinders. 

Unsurprisingly, arbitration-related appellate litigation has emerged as a new legal practice niche. And an active one it is indeed, with the state supreme court asked to weigh in on a regular basis. 

NATGASOLINE LLC AND ORASCOM E&C USA INC., Appellants,
v.
REFRACTORY CONSTRUCTION SERVICES, CO. LLC, Appellee.

No. 14-17-00503-CV.
Court of Appeals of Texas, Fourteenth District, Houston.
Opinion filed December 18, 2018.
Adam Quentin Voyles, McKenna Harper, for Crawford Industrial Services, LLC, Appellee.
Kay J. Hazelwood, Suzanna Caroline Bonham, for Natgasoline LLC and Orascom E&C USA Inc., Appellant.
Morgan G. Gullatt, Spencer G. Markle, for Refractory Construction Services, Co LLC, Appellee.
On Appeal from the 122nd District Court, Galveston County, Texas, Trial Court Cause No. 17-CV-0149.
Reversed and Remanded.
Panel consists of Justices Boyce, Christopher, and Busby.

OPINION

WILLIAM J. BOYCE, Justice.

This appeal arises from competing motions to compel arbitration in a dispute involving the construction of a methanol plant.
Refractory Construction Services, Co. LLC sued Crawford Industrial Services, LLC, Orascom E&C USA, Inc., and Natgasoline LLC to recover money allegedly owed to Refractory Construction under a construction contract. Crawford, a subcontractor, asserted cross-claims against contractor Orascom and plant owner Natgasoline.
Orascom and Natgasoline filed a joint motion to compel a bilateral Orascom-Crawford arbitration. Refractory Construction and Crawford jointly filed a competing motion to compel arbitration as to all parties and all claims.
The trial court denied Orascom's and Natgasoline's motion to compel and ordered a single arbitration proceeding involving all parties and all claims. Orascom and Natgasoline appealed. For the reasons below, we reverse the trial court's orders compelling a single arbitration proceeding and remand for further proceedings consistent with this opinion.

BACKGROUND

At issue are two construction contracts involving three signatories. One contract was between contractor Orascom and subcontractor Crawford (the "subcontract"). The second contract was between subcontractor Crawford and sub-subcontractor Refractory Construction (the "sub-subcontract"). The subcontract and sub-subcontract governed construction of Natgasoline's methanol plant in Beaumont, Texas.
Orascom and Crawford are the only signatories to the subcontract; only Refractory Construction signed the sub-subcontract between Refractory Construction and Crawford.
Both the subcontract and the sub-subcontract contain identical arbitration provisions:
11.3.3 ARBITRATION
If the matter is unresolved after submission of the matter to a mitigation procedure or mediation, a demand for arbitration may be served by either Party. Any arbitration shall be conducted in Harris County, Texas, United States of America in the English language. The arbitration shall be conducted in accordance with the Rules of Arbitration of the International Chamber of Commerce but excluding the emergency arbitrator appointment rules ("Rules") in effect on the date of this Agreement. The arbitration shall be presided over by three (3) arbitrators appointed in accordance with the Rules. Each arbitrator shall be fluent in English. The arbitrators' decision, which shall be in writing, shall be final, binding and conclusive upon the Parties and may be confirmed or embodied in any order or judgment of any court having jurisdiction. The foregoing agreement to arbitrate shall be specifically enforceable and the award rendered by the arbitrators shall be final and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof.
The subcontract and the sub-subcontract also contain identical provisions addressing multi-party disputes:
11.6 MULTI-PARTY PROCEEDING
All parties necessary to resolve a matter agree to be parties to the same dispute resolution proceeding. To the extent disputes between the CONTRACTOR and SUBCONTRACTOR involve in whole or in part disputes between the CONTRACTOR and the OWNER, at the sole discretion of the CONTRACTOR disputes between the SUBCONTRACTOR and the CONTRACTOR shall be decided by the same tribunal and in the same forum as disputes between the CONTRACTOR and the OWNER.
Both documents define "OWNER" as Natgasoline, "CONTRACTOR" as Orascom, and "SUBCONTRACTOR" as Crawford. In the sub-subcontract, Refractory Construction is defined as the "SUPPLIER SUBCONTRACTOR."
Refractory Construction sued Crawford, Orascom, and Natgasoline in February 2017 and asserted claims for payment allegedly owed to Refractory Construction under the sub-subcontract. Crawford asserted cross-claims against Orascom and Natgasoline. Orascom and Natgasoline asserted affirmative defenses against Refractory Construction and Crawford.
Orascom and Natgasoline filed a joint motion to compel bilateral arbitration between Orascom and Crawford under the subcontract. Orascom's and Natgasoline's motion also asked the trial court to stay trial court proceedings "in their entirety pending the completion of such mandatory alternative dispute resolution." While Orascom's and Natgasoline's motion to compel bilateral arbitration was pending, Refractory Construction and Crawford filed a joint motion to compel a single arbitration as to all parties and all claims.
The trial court signed an order on May 24, 2017, stating in relevant part as follows:
It is therefore, ORDERED, ADJUDGED, and DECREED that [Refractory Construction's and Crawford's] Motion to Compel Alternative Dispute Resolution as to All Claims and All Parties is in all things GRANTED.
Or, in the alternative, it is therefore, ORDERED, ADJUGED, and DECREED that [Orascom's and Natgasoline's] Motion to Stay the Entire Case Pending Alternative Dispute Resolution between [Orascom] and Crawford is in all things DENIED.
Orascom and Natgasoline filed a notice of appeal asserting that the trial court's May 2017 order "constitute[d] a final, appealable order." Orascom and Natgasoline alternatively perfected the appeal as an interlocutory appeal. In the further alternative, Orascom and Natgasoline asked this court to treat their appellate brief as a petition for writ of mandamus. Refractory Construction is the only party to appear as appellee; Crawford did not file an appearance on appeal or an appellate brief.
Upon receipt of the appeal, this court mailed a letter to the parties' counsel addressing appellate jurisdiction and stating that the appeal would be dismissed unless a response was filed "showing meritorious grounds for continuing the appeal." Orascom and Natgasoline filed a response asserting that appellate jurisdiction exists because this case involves (1) an appeal from a final judgment; or (2) a statutorily authorized interlocutory appeal; or (3) a mandamus proceeding.
Refractory Construction filed a motion to dismiss Orascom's and Natgasoline's appeal for lack of jurisdiction. After receiving Orascom's and Natgasoline's response, this court denied Refractory Construction's motion to dismiss.
The case was orally argued on May 7, 2018. After arguments were heard, this court issued an order abating the appeal to allow the trial court to clarify its intent with respect to the May 2017 order. The trial court signed a second order on June 6, 2018, stating that "it was the intent of the [trial court] to grant [Refractory Construction's and Crawford's] Motion to Compel Alternative Dispute Resolution as to All Claims and All Parties and that a single arbitration proceeding occur involving All Claims and all Parties . . ." (emphasis in original). Orascom's and Natgasoline's appeal was reinstated upon receipt of the trial court's June 2018 order. After the appeal was reinstated, the parties filed supplemental briefs addressing jurisdictional issues.

GOVERNING LAW

We must determine as a threshold matter whether the Federal Arbitration Act (the "FAA") or the Texas Arbitration Act (the "TAA") applies to this dispute. See generally 9 U.S.C.A. §§ 1-16 (West 2009); Tex. Civ. Prac. & Rem. Code Ann. §§ 171.001-.098 (Vernon 2011). The arbitration provisions at issue do not refer to the FAA or the TAA. The subcontract and sub-subcontract state that they "shall be governed by the Law in effect at the location of the Project." The project is located in Beaumont, Texas.
"If an arbitration agreement does not specify whether the FAA or the TAA applies, but states that it is governed by the laws of Texas, both the FAA and the TAA apply unless the agreement specifically excludes federal law." In re Devon Energy Corp., 332 S.W.3d 543, 547 (Tex. App.-Houston [1st Dist.] 2009, orig. proceeding)see also Roehrs v. FSI Holdings, Inc., 246 S.W.3d 796, 803 (Tex. App.-Dallas 2008, pet. denied). We apply this precept here. See In re Devon Energy Corp., 332 S.W.3d at 547Roehrs, 246 S.W.3d at 803.

ANALYSIS

We initially address whether we have appellate jurisdiction to review Orascom's and Natgasoline's appeal. We conclude that (1) Orascom's appeal can be heard under our interlocutory appellate jurisdiction; and (2) we lack appellate jurisdiction over Natgasoline's appeal.
The second part of our analysis examines whether the trial court's orders compelling a single arbitration proceeding comport with the subcontract's and sub-subcontract's arbitration provisions. We conclude that they do not.

I. Appellate Jurisdiction

Orascom and Natgasoline assert that appellate jurisdiction exists here because this proceeding is (1) an appeal from a final judgment; or (2) a statutorily authorized interlocutory appeal; or (3) a mandamus proceeding. We address these jurisdictional bases under Texas procedural law. See Bison Bldg. Materials, Ltd. v. Aldridge, 422 S.W.3d 582, 585 (Tex. 2012) (Texas courts apply Texas procedural law when the FAA governs the underlying dispute).

A. Final Judgment

An appeal generally may be taken only from a final judgment. Lehmann v. Har-Con Corp., 39 S.W.3d 191, 195 (Tex. 2001)Futch v. Reliant Sources, Inc., 351 S.W.3d 929, 931 (Tex. App.-Houston [14th Dist.] 2011, no pet.). When a conventional trial on the merits has not occurred, "an order or judgment is not final for purposes of appeal unless it actually disposes of all parties and all claims, or unless the order clearly and unequivocally states that it finally disposes of all parties and all claims." Gutierrez v. Stewart Title Co., 550 S.W.3d 304, 309 (Tex. App.-Houston [14th Dist.] 2018, no pet.). To determine whether an order constitutes a final judgment, we look at the language of the order and the record in the case. Futch, 351 S.W.3d at 931.
Orders compelling arbitration generally do not dispose of all parties and issues; instead, they "contemplate continuing resolution through the arbitration process." Brooks v. Pep Boys Auto. Supercenters, 104 S.W.3d 656, 660 (Tex. App.-Houston [1st Dist.] 2003, no pet.)see also John M. O'Quinn, P.C. v. Wood, Nos. 12-06-00151-CV, 12-06-00188-CV, 2006 WL 3735617, at *3 (Tex. App.-Tyler Dec. 20, 2006, orig. proceeding) (mem. op.) (when a trial court "compels arbitration without dismissing the case," it "retains continuing jurisdiction of the case until a final judgment or order is entered"). An order compelling arbitration is interlocutory unless it clearly states that it dismisses the entire case and therefore is final. See Brooks, 104 S.W.3d at 660see also Small v. Specialty Contractors, Inc., 310 S.W.3d 639, 642 (Tex. App.-Dallas 2010, no pet.).
In the context of a motion to compel arbitration, a "dismissal would usually be inappropriate because the trial court cannot dispose of all claims and all parties until arbitration is completed." In re Gulf Expl., LLC, 289 S.W.3d 836, 841 (Tex. 2009) (orig. proceeding). Retaining jurisdiction over the case permits the trial court to take any action necessary to facilitate the arbitration's completion. See id. ("During arbitration, a court order may be needed to replace an arbitrator, compel attendance of witnesses, or direct arbitrators to proceed promptly." (internal citations omitted)). Incorporating this reasoning, the TAA requires that an order compelling arbitration "include a stay of any proceeding." See Tex. Civ. Prac. & Rem. Code Ann. § 171.021(c).
The trial court's May 2017 order grants Refractory Construction's and Crawford's motion to compel arbitration; in the alternative, that order denies Orascom's and Natgasoline's "Motion to Stay the Entire Case Pending Alternative Dispute Resolution between [Orascom] and Crawford." The trial court's June 2018 order states that its May 2017 order was intended "to grant [Refractory Construction's and Crawford's] Motion to Compel Alternative Dispute Resolution as to All Claims and All Parties and that a single arbitration proceeding occur involving All Claims and all Parties . . ." (emphasis in original). Arguing that these two orders constitute a final judgment, Orascom and Natgasoline contend that the orders "unequivocally dispose[] of all claims and all parties" and are "clearly intended to dispose of the entire case and all pending motions."
We reject this contention. The orders do not state that they are final judgments, do not dismiss the case, and do not include language suggesting finality. The trial court's orders do not "clearly and unequivocally state[]" that they "finally dispose[] of all parties and all claims" in the proceeding. See Gutierrez, 550 S.W.3d at 309Small, 310 S.W.3d at 642.
Instead of disposing of all parties and all claims, the trial court's orders direct the parties to participate in a single arbitration proceeding. By compelling arbitration, the trial court reasonably could have "contemplate[d] continuing resolution" as necessary to facilitate the arbitration's completion. See Brooks, 104 S.W.3d at 660see also In re Gulf Expl., LLC, 289 S.W.3d at 841. Moreover, under the TAA, the trial court was required to stay the underlying proceeding in conjunction with the orders compelling arbitration. See Tex. Civ. Prac. & Rem. Code Ann. § 171.021(c). In the absence of any language indicating finality, the trial court's orders compelling arbitration do not constitute final judgments. See Gutierrez, 550 S.W.3d at 309Small, 310 S.W.3d at 642.
Orascom's and Natgasoline's appeal was not properly perfected as an appeal from a final judgment.

B. Interlocutory Appeal

Orascom and Natgasoline assert that their appeal properly was perfected as an interlocutory appeal because the trial court's orders effected an unequivocal denial of Orascom's and Natgasoline's motion to compel a bilateral arbitration between Orascom and Crawford under the subcontract.
Appellate courts may consider appeals from interlocutory orders when a statute explicitly authorizes an appeal. Tex. A & M Univ. Sys. v. Koseoglu, 233 S.W.3d 835, 840 (Tex. 2007). The FAA and TAA permit an interlocutory appeal from an order denying a motion to compel arbitration. See 9 U.S.C.A. § 16; Tex. Civ. Prac. & Rem. Code Ann. § 51.016 (Vernon 2015), § 171.098(a)(1); see also In re Helix Energy Sols. Group, Inc., 303 S.W.3d 386, 395 n.7 (Tex. App.-Houston [14th Dist.] 2010, orig. proceeding).
When determining whether an order denies a motion to compel arbitration, "[t]he substance and function of the order viewed in the context of the record controls our interlocutory jurisdiction." McReynolds v. Elston, 222 S.W.3d 731, 738 (Tex. App.-Houston [14th Dist.] 2007, no pet.)see also Tex. La Fiesta Auto Sales, LLC v. Belk, 349 S.W.3d 872, 878 (Tex. App.-Houston [14th Dist.] 2011, no pet.). The FAA and TAA permit interlocutory appellate review of an order that denies a party's right to arbitrate in a specific manner under a specific contract. See Tex. La Fiesta Auto Sales, LLC, 349 S.W.3d at 878 (analyzing the FAA); McReynolds, 222 S.W.3d at 738 (analyzing the TAA). McReynolds and Texas La Fiesta guide our analysis here.
The parties in McReynolds were engaged in arbitration proceedings pursuant to their partnership agreement when the plaintiff sued to compel arbitration under a separate settlement agreement. 222 S.W.3d at 736-37. The trial court denied the plaintiff's motion to compel and the plaintiff appealed. Id. at 737. Asserting that the court lacked interlocutory appellate jurisdiction under the TAA, the defendant asserted that "the court's order did not deny the [plaintiff's] `right to arbitration' but merely allowed pending arbitration to continue." Id. at 738.
Rejecting the defendant's argument, McReynolds noted that the plaintiff's motion to compel sought "to enforce his express contractual right of arbitration under the Settlement Agreement," which included arbitrating before a different arbitrator. Id.Concluding that the trial court's order "denied [the plaintiff's] potential contractual right to arbitration under the Settlement Agreement," the court determined that the TAA granted interlocutory jurisdiction to review the trial court's order. Id. at 738-39.
The parties in Texas La Fiesta similarly signed two agreements that included separate arbitration provisions: an arbitration agreement and an employment contract. 349 S.W.3d at 875-76. After the plaintiff sued the defendants, the defendants moved to compel arbitration under the arbitration agreement. Id. at 876. The trial court denied in part the defendants' motion to compel, concluding that the arbitration agreement was superseded by the employment contract. Id. at 876-77. The trial court ordered the parties to arbitrate under the employment contract. Id. at 877.
The defendants appealed and the plaintiff challenged the court's appellate jurisdiction. Id. Noting that "the trial court's order did not compel arbitration under the arbitration agreement as the [defendants] requested," the court "conclude[d] that the trial court's order denied the [defendants'] their potential contractual right to arbitration . . . as provided in the arbitration agreement." Id. at 879. The appellate court therefore could review the defendants' appeal under the FAA's interlocutory jurisdiction provision. Id.
Here, as in McReynolds and Texas La Fiesta, the parties sought different arbitrations. Orascom and Natgasoline moved to compel arbitration under the subcontract only as between Orascom and Crawford. In contrast, Refractory Construction and Crawford moved to compel arbitration under the subcontract and sub-subcontract in a single proceeding encompassing all claims and all parties. The trial court ordered a single arbitration proceeding encompassing all claims and all parties; it denied Orascom's and Natgasoline's "Motion to Stay the Entire Case Pending Alternative Dispute Resolution between [Orascom] and Crawford."
The subcontract authorizes arbitration only between the "Parties" to the subcontract — namely, Orascom and Crawford. The subcontract does not permit Refractory Construction to inject itself into the arbitration proceeding between Orascom and Crawford.[1] By requiring all parties to arbitrate all claims in a single arbitration proceeding, the trial court effectively denied to Orascom its right under the subcontract to arbitrate only with Crawford. See Tex. La Fiesta Auto Sales, LLC, 349 S.W.3d at 879McReynolds, 222 S.W.3d at 738-39. We therefore have jurisdiction over Orascom's interlocutory appeal. See 9 U.S.C.A. § 16; Tex. Civ. Prac. & Rem. Code Ann. §§ 51.016, 171.098(a)(1).
Although the denial of Orascom's bilateral arbitration right under the subcontract authorizes an exercise of interlocutory jurisdiction, the same logic does not extend to Natgasoline. Unlike Orascom, Natgasoline is not a party to the subcontract or the sub-subcontract and is not entitled to enforce the arbitration provisions under the particular circumstances present here. See G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502, 524 (Tex. 2015) ("As a general rule, an arbitration clause cannot be invoked by a non-party to the arbitration contract." (internal quotation omitted)). Natgasoline does not seek to invoke its own asserted right to participate in arbitration — rather, it seeks only to compel arbitration between two other parties under contracts it did not sign. Natgasoline has not presented any argument or authority that would support recognizing interlocutory appellate jurisdiction in these circumstances. Because the trial court's orders compelling arbitration do not deny to Natgasoline any contractual rights with respect to arbitration, we lack jurisdiction over Natgasoline's attempted interlocutory appeal. See 9 U.S.C.A. § 16; Tex. Civ. Prac. & Rem. Code Ann. §§ 51.016, 171.098(a)(1); see also Tex. La Fiesta Auto Sales, LLC, 349 S.W.3d at 879McReynolds, 222 S.W.3d at 738-39.
We turn now to Refractory Construction's arguments challenging our interlocutory appellate jurisdiction.
Asserting that the trial court did not deny Orascom's and Natgasoline's motion to compel arbitration, Refractory Construction points out that the trial court's May 2017 order denies only Orascom's and Natgasoline's "Motion to Stay the Entire Case Pending Alternative Dispute Resolution between [Orascom] and Crawford." But our jurisdictional analysis is not limited to the express language of the trial court's order. We instead examine "[t]he substance and function of the order viewed in the context of the record." McReynolds, 222 S.W.3d at 738see also Tex. La Fiesta Auto Sales, LLC, 349 S.W.3d at 878. We also consider the trial court's June 2018 order signed in response to this court's request for clarification as to whether a single arbitration proceeding was contemplated. By ordering a single arbitration proceeding involving all claims and all parties, the trial court denied Orascom its right under the subcontract to arbitrate only with Crawford. See Tex. La Fiesta Auto Sales, LLC, 349 S.W.3d at 879McReynolds,222 S.W.3d at 738-39. This denial gives rise to interlocutory jurisdiction. See 9 U.S.C.A. § 16; Tex. Civ. Prac. & Rem. Code Ann. §§ 51.016, 171.098(a)(1).
Refractory Construction asserts that, even if Orascom's appeal can be construed as an interlocutory appeal from an order denying a motion to compel arbitration, Orascom nonetheless (1) failed to appeal within 20 days after the trial court's May 2017 order was signed; and (2) is not entitled to an extension of time for filing a notice of appeal.
We conclude that Orascom properly perfected its appeal from an interlocutory order. An appeal from an interlocutory order is accelerated. Tex. R. App. P. 28.1(a). "[I]n an accelerated appeal, the notice of appeal must be filed within 20 days after the judgment or order is signed[.]" Id. at 26.1(b). The time to file the notice of appeal may be extended if, within 15 days after the deadline for filing the notice of appeal, the appealing party files in the trial court a notice of appeal and files in the appellate court a motion to extend time for filing a notice of appeal. Id. at 10.5(b)(2), 26.3. A motion to extend time for filing a notice of appeal must state (1) the deadline for filing the item in question; (2) the facts relied on to reasonably explain the need for an extension; (3) the trial court; (4) the date of the trial court's judgment or appealable order; and (5) the case number or style of the case in the trial court. Id. at 10.5(b)(2).
Here, the trial court signed its order on May 24, 2017. Treating this as an appealable interlocutory order, Orascom's notice of appeal was due no later than 20 days later on June 13, 2017. Orascom filed its notice of appeal on June 23, 2017. Orascom's notice of appeal included a request for an extension of time:
[T]o the extent that a court may determine that the Judgment is not a final judgment, [Orascom and Natgasoline] alternatively notice this appeal as an interlocutory appeal under Texas Civil Practice & Remedies Code §§ 51.016 and/or 171.098(a)(1) and request an extension of time based on the good cause of the legal uncertainty, if any, as to whether the Judgment is not actually a final judgment.
Citing Texas Rule of Appellate Procedure 10.5(b)(2), Refractory Construction asserts that Orascom's request is "devoid of any reference to the deadline for its filing." Refractory Construction also asserts that "[t]here is no reasonable legal uncertainty" warranting an extension.
The notice's failure to reference the deadline for its filing does not defeat Orascom's request for an extension of time, and Refractory Construction cites no authority holding otherwise. Even an implied motion for an extension of time is effective so long as the appellant "come[s] forward with a reasonable explanation to support the late filing." Hykonnen v. Baker Hughes Bus. Support Servs., 93 S.W.3d 562, 563 (Tex. App.-Houston [14th Dist.] 2002, no pet.)see also Jones v. Funk, No. 14-16-00577-CV, 2016 WL 5400217, at *1 (Tex. App.-Houston [14th Dist.] Sept. 27, 2016, no pet.) (per curiam) (mem. op.). A reasonable explanation includes any plausible statement of circumstances that shows the failure to file within the required time period was not deliberate or intentional, but was the result of inadvertence, mistake, or mischance. Hykonnen, 93 S.W.3d at 563. "Any conduct short of deliberate or intentional noncompliance qualifies as inadvertence, mistake, or mischance — even if that conduct can be characterized as professional negligence." Id.
Orascom's notice provides a "reasonable explanation" for its untimely filing: uncertainty with respect to the finality of the trial court's May 24, 2017 order. This explanation suffices to show that Orascom's failure to file within the required time period was not deliberate or intentional. See id.see also Jones, 2016 WL 5400217, at *1. Orascom's motion for an extension of time was effective and makes its notice of appeal timely. SeeTex. R. App. P. 10.5(b)(2), 26.1(b), 26.3; see also Hykonnen, 93 S.W.3d at 563. We reject Refractory Construction's arguments challenging our interlocutory jurisdiction.
By ordering all parties to arbitrate all claims in a single proceeding, the trial court denied to Orascom its right under the subcontract to arbitrate only with Crawford. See Tex. La Fiesta Auto Sales, LLC, 349 S.W.3d at 879McReynolds, 222 S.W.3d at 738-39. But the same is not true for Natgasoline — the trial court's orders compelling arbitration do not divest any contractual arbitration rights belonging to Natgasoline. Therefore, under the FAA and TAA, we have jurisdiction to consider Orascom's interlocutory appeal. We lack jurisdiction to consider Natgasoline's attempted appeal. See 9 U.S.C.A. § 16; Tex. Civ. Prac. & Rem. Code Ann. §§ 51.016, 171.098(a)(1); see also Tex. La Fiesta Auto Sales, LLC, 349 S.W.3d at 879McReynolds, 222 S.W.3d at 738-39.
The final section of this jurisdictional analysis examines whether mandamus relief is available to Natgasoline. See CMH Homes v. Perez, 340 S.W.3d 444, 453 (Tex. 2011)(in an "uncertain legal environment," an appellant may in the alternative "request mandamus treatment of its appeal").

C. Mandamus

Insofar as Natgasoline seeks to undo the trial court's orders compelling a single arbitration proceeding by pursuing a petition for writ of mandamus, we conclude that any mandamus relief sought by Natgasoline would be moot. This is so because, as discussed more fully below, we reverse the trial court's orders compelling arbitration in an interlocutory appeal properly pursued by Orascom. Therefore, we decline to address Natgasoline's arguments with respect to its entitlement to mandamus relief.

II. Review of the Trial Court's Orders Compelling a Single Arbitration Proceeding

We now turn to the merits of Orascom's authorized interlocutory appeal from the denial of its motion to compel a bilateral Orascom-Crawford arbitration under the subcontract.
We review the trial court's denial of a motion to compel arbitration under an abuse of discretion standard. In re Labatt Food Serv., L.P., 279 S.W.3d 640, 643 (Tex. 2009) (orig. proceeding); Branch Law Firm L.L.P. v. Osborn, 532 S.W.3d 1, 12 (Tex. App.-Houston [14th Dist.] 2016, pet. denied). We defer to the trial court's factual determinations if they are supported by the record; we review the trial court's legal determinations de novo. In re Labatt Food Serv., L.P., 279 S.W.3d at 643Branch Law Firm L.L.P., 532 S.W.3d at 12.
Under the FAA and TAA, a party seeking to compel arbitration must establish that (1) there is a valid arbitration agreement; and (2) the claims in dispute fall within the scope of that agreement. In re Rubiola, 334 S.W.3d 220, 223 (Tex. 2011) (orig. proceeding) (FAA); McReynolds, 222 S.W.3d at 739 (TAA).
The parties do not dispute that (1) a valid arbitration agreement exists between Orascom and Crawford under the subcontract; and (2) Crawford's claims against Orascom fall within the scope of the subcontract's arbitration provision. The parties dispute whether the subcontract or the sub-subcontract authorizes the trial court to deny a bilateral Orascom-Crawford arbitration in favor of a single arbitration proceeding involving all parties and all claims. Refractory Construction asserts three arguments to support a single arbitration proceeding.
1. Under the sub-subcontract and Texas Rule of Civil Procedure 39(a), Refractory Construction is a necessary party to an Orascom-Crawford arbitration proceeding.
2. Estoppel permits Refractory Construction to join a bilateral Orascom-Crawford arbitration proceeding under the subcontract.
3. Permitting Orascom and Crawford to arbitrate without Refractory Construction is contrary to public policy.
We conclude that these arguments do not authorize a single arbitration proceeding involving all parties and all claims. Therefore, the trial court erred in denying Orascom's motion to compel a bilateral Orascom-Crawford arbitration under the subcontract.

A. Refractory Construction is Not a Necessary Party to a Bilateral Orascom-Crawford Arbitration

Relying heavily on the sub-subcontract's "Multi-Party Proceeding" provision, Refractory Construction asserts that "all parties in the instant litigation should be and were properly ordered to arbitrate together." Orascom argues that the sub-subcontract does not support an interpretation that authorizes a single arbitration proceeding for all parties and all claims.
"Arbitration agreements are interpreted under traditional contract principles." J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003). If we can give the agreement's language a certain and definite meaning, the agreement is unambiguous and we construe it as a matter of law. Milner v. Milner, 361 S.W.3d 615, 619 (Tex. 2012). Our primary concern in construing an agreement is to ascertain the intent of the parties as expressed in the instrument. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 662 (Tex. 2005).
An agreement's terms are accorded their "plain and ordinary meaning" unless the agreement indicates that the parties intended a different meaning. Dynegy Midstream Servs., Ltd. P'ship v. Apache Corp., 294 S.W.3d 164, 168 (Tex. 2009). We presume that the parties intended each contract provision to have effect. Va. Power Energy Mktg., Inc. v. Apache Corp., 297 S.W.3d 397, 403 (Tex. App.-Houston [14th Dist.] 2009, pet. denied).
We examine and consider the agreement as a whole in an effort to harmonize and give effect to all provisions so that none are rendered meaningless. Branch Law Firm L.L.P.,532 S.W.3d at 12. "No single provision taken alone will be given controlling effect; rather, all the provisions must be considered with reference to the whole instrument." J.M. Davidson, Inc., 128 S.W.3d at 229.
Refractory Construction focuses its arguments in particular on the sub-subcontract's "Multi-Party Proceeding" provision. The first sentence of this provision states as follows: "All parties necessary to resolve a matter agree to be parties to the same dispute resolution proceeding."
This first sentence does not exist in isolation. To the contrary, it is followed immediately by another sentence applying this "Multi-Party Proceeding" provision "[t]o the extent disputes between [Orascom] . . . and [Crawford] . . . involve in whole or in part disputes between [Orascom] . . . and [Natgasoline] . . . ."
If a dispute between Orascom and Crawford also involves a dispute between Orascom and Natgasoline, then "at the sole discretion of [Orascom] . . . disputes between [Crawford] . . . and [Orascom] . . . shall be decided by the same tribunal and in the same forum as disputes between [Crawford] . . . and [Natgasoline] . . . ."
Arguing in favor of a single arbitration proceeding encompassing all parties and all claims, Refractory Construction first points to the sub-subcontract's definition of "Parties:"
The "Parties" are collectively the CONTRACTOR and the SUBCONTRACTOR including their SubSubcontractors.
Refractory Construction contends that this definition of "Parties," when read in conjunction with the first sentence of the sub-subcontract's "Multi-Party Proceeding" provision, supports the denial of a bilateral Orascom-Crawford arbitration in favor of a single arbitration proceeding involving all parties and all claims.
The sub-subcontract is unambiguous and we ascertain its meaning as a matter of law. See Milner, 361 S.W.3d at 619. Under these unambiguous terms we reject Refractory Construction's interpretation of the sub-subcontract — and with it, Refractory Construction's reliance upon the sub-subcontract to override the bilateral Orascom-Crawford arbitration mandated under the subcontract. We do so for two reasons.
First, the sub-subcontract defines "Parties" as a capitalized term that includes, collectively, contractor Orascom, subcontractor Crawford, and Orascom's and Crawford's sub-subcontractors. "Parties" as a capitalized term is employed in multiple sub-subcontract provisions, including those addressing the scope of the work, the progress schedule, indemnity, insurance, and bonds.
The sub-subcontract's "Multi-Party Proceeding" provision, in contrast, utilizes the word "parties" in its uncapitalized form. Ignoring the uncapitalized use of "parties" in favor of applying the defined, capitalized term would vitiate the sub-subcontract's distinction between "Parties" and "parties." We decline to apply an interpretation of the sub-subcontract that would render these distinctions meaningless. See Branch Law Firm L.L.P., 532 S.W.3d at 12Va. Power Energy Mktg., Inc., 297 S.W.3d at 403see also PopCap Games, Inc. v. MumboJumbo, LLC, 350 S.W.3d 699, 708 (Tex. App.-Dallas 2011, pet. denied) ("The use of different language in different parts of a contract generally means that the parties intended different things.").
Second, even if we were to apply the defined term "Parties" to the sub-subcontract's "Multi-Party Proceeding" provision, this provision still would not authorize Refractory Construction to compel a single arbitration proceeding encompassing all parties (including Refractory Construction) and all claims.
The subcontract and sub-subcontract contain identical "Multi-Party Proceeding" provisions, and we consider these contracts together to ascertain the "Multi-Party Proceeding" provisions' intended effect. See DeWitt Cty. Elec. Coop., Inc. v. Parks, 1 S.W.3d 96, 102 (Tex. 1999) ("Under generally accepted principles of contract interpretation, all writings that pertain to the same transaction will be considered together, even if they were executed at different times and do not expressly refer to one another."); Cleveland Constr., Inc. v. Levco Constr., Inc., 359 S.W.3d 843, 852-53 (Tex. App.-Houston [1st Dist.] 2012, pet. dism'd) (same).
The identical "Multi-Party Proceeding" provisions in both the subcontract and the sub-subcontract provide that Orascom has sole discretion to add a party to an arbitration proceeding between Orascom and Crawford. That additional party is Natgasoline. Neither the subcontract nor the sub-subcontract grants Refractory Construction a parallel right to add itself or another party to an arbitration proceeding between Orascom and Crawford, or to inject itself into the bilateral Orascom-Crawford arbitration mandated by the subcontract. Refractory Construction's overbroad interpretation of the provisions' first sentence cannot be harmonized with the second sentence's limited allocation of sole discretion to Orascom to add Natgasoline to an Orascom-Crawford arbitration. See J.M. Davidson, Inc., 128 S.W.3d at 229Branch Law Firm L.L.P., 532 S.W.3d at 12. Therefore, we reject Refractory Construction's interpretation of the sub-subcontract's "Multi-Party Proceeding" provision.
Refractory Construction also relies on Texas Rule of Civil Procedure 39 to support its contention that it is a necessary party to an Orascom-Crawford arbitration. But "absent a specific agreement[,] the rules of civil procedure and joinder of claims and parties do not apply in arbitration." Crossmark, Inc. v. Hazar, 124 S.W.3d 422, 434 (Tex. App.-Dallas 2004, pet. denied)see also In re F.C. Holdings, Inc., 349 S.W.3d 811, 816 (Tex. App.-Tyler 2011, orig. proceeding [mand. denied]).
The subcontract's and sub-subcontract's arbitration provisions do not invoke the Texas Rules of Civil Procedure; the provisions state that they are governed by the arbitration rules promulgated by the International Chamber of Commerce. Texas Rule of Civil Procedure 39 therefore does not provide a basis to compel a consolidated arbitration involving all parties and all claims.

B. Estoppel

Refractory Construction asserts that "equitable estoppel operates to estop [Orascom and Crawford], signatories to the subcontract, from arbitrating in [Refractory Construction's] absence."
The parties encompassed by an arbitration agreement generally are determined with reference to the parties' intent as expressed by the agreement's terms. Jody James Farms, JV v. Altman Group, Inc., 547 S.W.3d 624, 633 (Tex. 2018). Arbitration with a non-signatory may be required in several circumstances, including (1) incorporation by reference, (2) assumption, (3) agency, (4) alter ego, (5) estoppel, and (6) third-party beneficiary. Id.; see also Cotton Commercial USA, Inc. v. Clear Creek Ind. Sch. Dist.,387 S.W.3d 99, 104-04 & n.4 (Tex. App.-Houston [14th Dist.] 2012, no pet.). "Estoppel" encompasses two distinct bases for compelling arbitration with respect to non-signatories: direct benefits estoppel and intertwined claims estoppel. See Jody James Farms, JV, 547 S.W.3d at 637-40.
Despite its status as a non-signatory to the subcontract, Refractory Construction contends that it can join an Orascom-Crawford bilateral arbitration under the subcontract pursuant to the direct benefits and intertwined claims bases for estoppel. We examine each theory in turn.

1. Direct benefits estoppel

Under principles of direct benefits estoppel, "`a litigant who sues based on a contract subjects him or herself to the contract's terms . . . including the Arbitration Addendum." G.T. Leach Builders, LLC, 458 S.W.3d at 527 (quoting In re FirstMerit Bank, N.A., 52 S.W.3d 749, 755-56 (Tex. 2001) (orig. proceeding)). Direct benefits estoppel prevents a claimant from seeking benefits under a contract while simultaneously attempting to avoid the contract's obligations, such as an obligation to arbitrate disputes. In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 739 (Tex. 2005) (orig. proceeding). "Thus, a non-signatory plaintiff may be compelled to arbitrate if it seeks to enforce terms of a contract containing an arbitration provision." Id.
Direct benefits estoppel does not apply merely because a non-signatory's claim "relates to" a contract containing an arbitration agreement. G.T. Leach Builders, LLC, 458 S.W.3d at 527. Rather, the non-signatory must "seek to derive a direct benefit" from the agreement such that its claim "depend[s] on the existence of the contract and [would] be unable to stand independently without the contract." Id. at 527-28 (internal quotations omitted); see, e.g., Rachal v. Reitz, 403 S.W.3d 840, 847-48 (Tex. 2013) (by pursuing a suit based on a trust's terms and validity, the non-signatory beneficiary was barred by direct benefits estoppel from avoiding a trust's arbitration provision); In re FirstMerit Bank, N.A., 52 S.W.3d at 752-53, 755-56 (by suing based on the contract, the plaintiffs sought benefits that stemmed directly from the contract; the plaintiffs therefore were subject to the contract's arbitration provision). If a non-signatory's claims can stand independently of the underlying contract, then arbitration generally should not be compelled under a theory of direct benefits estoppel. In re Kellogg Brown & Root, Inc.,166 S.W.3d at 739-40.
To support its invocation of direct benefits estoppel as a basis for joining the bilateral Orascom-Crawford arbitration, Refractory Construction asserts that Orascom "call[s] for an interpretation of the sub-subcontract . . . which would provide Orascom with the sole discretion to join parties to an arbitration under the sub-subcontract" (emphasis in original). When Orascom asserts its interpretation of the sub-subcontract, Refractory Construction argues that Orascom "clearly seek[s] to derive direct benefits" from the sub-subcontract — benefits that in turn permit Refractory Construction to join a bilateral Orascom-Crawford arbitration under the subcontract.
We reject Refractory Construction's contention. Direct benefits estoppel prevents a party from asserting a claim under a contract and simultaneously avoiding the contract's obligations, such as an arbitration provision. See G.T. Leach Builders, LLC, 458 S.W.3d at 527In re Kellogg Brown & Root, Inc., 166 S.W.3d at 739. Here, Orascom asserts no claims against Refractory Construction under the sub-subcontract to which Orascom is not a signatory. Orascom therefore does not seek to derive a "direct benefit" from the sub-subcontract as necessary to invoke direct benefits estoppel. See G.T. Leach Builders, LLC, 458 S.W.3d at 527 (direct benefits estoppel prevents a plaintiff from asserting a claim that "depend[s] on the existence" of the contract but simultaneously avoiding the contract's arbitration provision); In re Kellogg Brown & Root, Inc., 166 S.W.3d at 739 ("a non-signatory plaintiff may be compelled to arbitrate if its claims are `based on a contract' containing an agreement to arbitrate").
Under these circumstances, Refractory Construction cannot invoke the sub-subcontract and direct benefits estoppel to justify a single arbitration proceeding involving all parties and all claims in place of the bilateral Orascom-Crawford arbitration specified under the subcontract.

2. Intertwined claims estoppel

Refractory Construction asserts that the theory of intertwined claims estoppel prevents Orascom and Crawford from arbitrating without Refractory Construction because Refractory Construction's "claims are so intertwined with the subcontract."
In Merrill Lynch Investment Managers v. Optibase, Ltd., 337 F.3d 125 (2nd Cir. 2003),the Second Circuit discussed an "alternative estoppel theory," also called "intertwined-claims theory." Id. at 131. Intertwined claims estoppel may permit a non-signatory to compel arbitration when (1) the non-signatory has a close relationship with a signatory to a contract with an arbitration agreement, and (2) the non-signatory's claims are "intimately founded in and intertwined with the underlying contract obligations." See In re Merrill Lynch Trust Co. FSB, 235 S.W.3d 185, 193 (Tex. 2007) (orig. proceeding); see also Jody James Farms, JV, 547 S.W.3d at 639. This estoppel formulation has not been adopted by the Supreme Court of Texas. See Jody James Farms, JV, 547 S.W.3d at 639In re Merrill Lynch Trust Co. FSB, 235 S.W.3d at 193.
Limiting the application of intertwined claims estoppel, the Second Circuit has clarified that the theory does not apply "whenever a relationship of any kind may be found among the parties to a dispute and their dispute deals with the subject matter of an arbitration contract made by one of them." Sokol Holdings, Inc. v. BMB Munai, Inc., 542 F.3d 354, 359 (2nd Cir. 2008). Instead, the Second Circuit decisions that compel arbitration on the basis of intertwined claims "typically involve some corporate affiliation between a signatory and non-signatory, not just a working relationship." Jody James Farms, JV, 547 S.W.3d at 640 (citing Sokol Holdings, Inc., 542 F.3d at 359-61).
Declining to adopt intertwined claims estoppel in Jody James Farm, JV, the Supreme Court of Texas noted that the defendants "may have an entangled business relationship" with respect to the transaction at issue, but no evidence "show[ed] them to be anything other than independent and distinct entities." Id. To compel arbitration based on intertwined claims estoppel, "the relationship must be closer than merely independent participants in a business transaction." Id.
Here, too, the evidence does not show that Orascom, Crawford, and Refractory Construction are "anything other than independent and distinct entities" that contracted to participate in a construction project. See id. Intertwined claims estoppel cannot arise solely from this working relationship. See id.see also Merrill Lynch Investment Managers, 337 F.3d at 131In re Merrill Lynch Trust Co. FSB, 235 S.W.3d at 193. Because the parties are "merely independent participants in a business transaction," intertwined claims estoppel does not authorize a single arbitration proceeding involving all parties and all claims. See Merrill Lynch Inv. Managers, 337 F.3d at 131Jody James Farms, JV, 547 S.W.3d at 639In re Merrill Lynch Trust Co. FSB, 235 S.W.3d at 193.

C. Public Policy

Refractory Construction asserts that an arbitration between Orascom and Crawford without Refractory Construction's participation would permit its "rights to be adjudicated in its absence" and would leave Refractory Construction "with effectively no remedy."
Although arbitration is favored under public policy, it also is a creature of contract and "cannot be ordered in the absence of an agreement to arbitrate." Cedillo v. Immobiliere Jeuness Establissement, 476 S.W.3d 557, 564 (Tex. App.-Houston [14th Dist.] 2015, pet. denied)see also In re Kellogg Brown & Root, Inc., 166 S.W.3d at 738.
Here, the subcontract mandates a bilateral Orascom-Crawford arbitration proceeding. Neither the subcontract nor the sub-subcontract permits Refractory Construction to override this mandate in favor of a single arbitration proceeding involving all parties and all claims. Refractory Construction's estoppel arguments also do not provide a basis to compel a consolidated arbitration proceeding. Standing alone, Refractory Construction's policy arguments do not support denying a bilateral Orascom-Crawford arbitration under the subcontract in favor of a single proceeding involving all parties and all claims. See In re Kellogg Brown & Root, Inc., 166 S.W.3d at 738Cedillo, 476 S.W.3d at 564. We reject Refractory Construction's public policy arguments.

CONCLUSION

In their notice of appeal and before this court, Orascom and Natgasoline assert that appellate jurisdiction exists here because this proceeding is (1) an appeal from a final judgment; or (2) a statutorily authorized interlocutory appeal; or (3) a mandamus proceeding. We conclude that we have jurisdiction to consider Orascom's interlocutory appeal and lack appellate jurisdiction over Natgasoline's appeal.
Considering the merits of Orascom's authorized interlocutory appeal, we conclude that the trial court erred in denying Orascom's motion to compel a bilateral Orascom-Crawford arbitration under the subcontract, and in ordering instead a single arbitration proceeding involving all parties and all claims. We reverse the trial court's May 24, 2017 and June 6, 2018 orders and remand for further proceedings consistent with this opinion.

[1] The subcontract's "Multi-Party Proceeding" provision grants limited discretion to involve other parties in an arbitration proceeding, but this discretion is vested solely in Orascom and extends only to disputes between Orascom and Natgasoline. Orascom and Natgasoline do not assert any claims against each other in the underlying proceeding. Therefore, this provision does not authorize Refractory Construction to join an arbitration between Orascom and Crawford.

Tuesday, December 4, 2018

Fifth Circuit finds right to arbitration waived where adjudication on the merits had already been sought in court and had succeeded in part - Forby vs. One Technologies, L.P., No. 17-10883 (5th Cir. Nov. 28, 2018)

Company sought to divert DTPA case against it to arbitration when court wouldn't dismiss it in its entirety. 

NO FULL-THROATED SECOND BITE AT THE APPLE 
IN ARBITRATION

Appellate cases finding that a party has waived the right to arbitration through its litigation conduct are exceedingly rare. On Nov. 28, 2018, however, the Fifth Circuit determined that such a waiver had occurred, and reversed the district court’s grant of a motion to compel, which will have the effect of the case having to be tried in court, if it is not settled on remand. Forby vs. One Technologies, L.P., No. 17-10883 (5th Cir. Nov. 28, 2018). The case involves a claim of deceptive trade practices predicated on representations made on the company's website. 

In reversing the order to compel arbitration, the Fifth Circuit and the district court parted ways on the second element of the waiver test; -- whether there was prejudice to the opposing party. The court below had concluded that the prejudice was not severe enough, but the reviewing court reached the contrary conclusion, holding that the party moving for arbitration should not get a second bite at the apple, having already sought relief on the merits in court, and having been successful in part. 

The first prong of the waiver test -- substantial invocation of the judicial process -- was clearly satisfied. Prior to seeking a decision on the merits, One Technologies had obtained a case transfer to Texas for the express purpose of having the arbitration take place in Texas. This was based on the argument that the court in which the case against it had been filed (SD of Illinois) was not the proper forum because it could not order an arbitration to take place outside its own district. Once the case was in the Texas federal court, however, One Technologies did not promptly move to compel arbitration, but sought a dismissal on the merits instead. Only when it did not receive all of the relief it sought in court, did it invoke the arbitration clause.  

The Fifth Circuit acknowledged that delay alone was not dispositive of the waiver issue, but concluded that One Tech “demonstrated a desire to resolve the dispute in litigation rather than arbitration” by pursuing and partially obtaining a dismissal of the Plaintiff’s claims against it with prejudice. Distinguishing the case from those in which no merits ruling was sought, or where a motion to compel was filed in the alternative, the higher court agreed with the district court that One Tech had substantially invoked the judicial process. But it disagreed with the district court on the prejudice prong of the waiver test, and reversed the order to compel arbitration entered by the trial court. 

SECOND BITE AT THE ARBITRATION APPLE WITH A TWIST 

The procedural facts in the case presented an interesting variation on the second-bite-at-the-apple argument. 

The standard version is well known: A litigant should not be allowed to first try to win in litigation, and then only turn to arbitration if the results are not favorable. Here, the results were partially favorable (partial dismissal on one cause of action). So this case differs from others in that One Tech did not merely attempt to obtain a favorable result in litigation and failed. Much rather, it scored a partial win. But it also did not succeed in part. (If it had, the case would be over and the Fifth Circuit might have seen an appeal on the merits). 

In essence, the company was able to test its defenses to the action against it in court and – as the opinion puts it – “check the district court’s temperature” on a critical issue. 

Unlike the district court below, the Fifth Circuit panel found that the Plaintiff’s legal position was damaged as a result of One Tech’s conduct. 

The higher court pointed out that the partial denial of One Tech’s motion to dismiss did not resolve the critical issue, and that therefore it would have to be “relitigated” in a different forum upon the grant of the motion to compel after the district court had not already reviewed the merits of the arguments for dismissal of the Plaintiff’s claims on the merits. Relitigating an issue, of course, implicates additional burdens and costs that would not be incurred otherwise. 
When a party will have to re-litigate in the arbitration forum an issue already decided by the district court in its favor, that party is prejudiced. Nicholas, 565 F.3d at 911; see also Petroleum Pipe, 575 F.3d at 482 (citing Kramer v. Hammond, 943 F.2d 176, 179 (2d Cir. 1991) ("Prejudice can be substantive, such as when a party loses a motion on the merits and then attempts, in effect, to relitigate the issue by invoking arbitration."). 
The bottom line: A party should not get to learn that the district court is not receptive to its arguments and then be allowed a “second bite at the apple through arbitration.”    

The Fifth Circuit's opinion was written by U.S. District Judge Al Bennett, sitting by assignment. Bennett had previously served as a state district court judge in Harris County (Houston). 

ARB-WAIVER-BY-LITIGATION COMPLAINT ALSO PENDING IN THE TEXAS SUPREME COURT 

A case involving similar facts is currently pending in the Texas Supreme Court on a mandamus petition. See IN RE VANTAGE DRILLING INTERNATIONAL, VANTAGE DEEPWATER DRILLING, INC., AND VANTAGE ENERGY SERVICES, INC. (In re Vantage Tex. 2019) Tex. No. 18-0626 (briefing on the merits requested 11/16/2018). 

In the Vantage case, a law firm had moved to compel arbitration to get a fee dispute with clients transferred out of a state district court in Houston only after a significant amount of discovery had already taken place, and after the trial judge had made some comments from the bench expressing doubts about the soundness of its legal position. 

Unlike the scenario in Forby v. One Tech, however, the trial court had not yet made a ruling on the merits of the parties’ claims (a ruling on a motion for summary judgment was potentially forthcoming) and the interpretation of the judge’s comments in open court was subject to different interpretations. As in Forby v One Tech, the state district court judge granted the motion to compel arbitration, but did not dismiss the case, leaving the parties that had been ordered to arbitration only mandamus as a remedy to challenge the order. An interlocutory appeal would have been available from and order denying a motion to compel, not not from one granting it. n 

Opinion of the Houston Court of Appeals: In re Vantage, No. 01-17-00592-CV, 555 S.W.3d 629 (Tex.App.- Houston [1st Dist.] June 5, 2018) (denying mandamus relief denied, with one justice dissenting).  
Trial Court: Cause No. 2016-27737; Martinez Partners, LLP v. Offshore Group Investment Limited d/b/a Vantage Drilling International, Vantage Deepwater Drilling, Inc., and Vantage Energy Services, Inc.; In the 133rd District Court of Harris County, Texas; Hon. Jaclanel McFarland presiding.

 Forby vs. One Technologies, L.P., No. 17-10883 (5th Cir. Nov. 28, 2018)
 Forby vs. One Technologies, L.P., No. 17-10883 (5th Cir. Nov. 28, 2018)
The district court's determination that One Tech did not waive its right to arbitration was in error. We hold that One Tech substantially invoked the judicial process and that Forby was prejudiced thereby. Accordingly, the order of the district court finding Forby had not suffered enough prejudice to establish waiver is REVERSED. The district court's order granting One Tech's motion to compel arbitration is VACATED. The case is hereby REMANDED to the district court for further proceedings consistent with this opinion.

VICKIE FORBY, individually and on behalf of all others similarly situated in Illinois, Plaintiff-Appellant,
v.
ONE TECHNOLOGIES, L.P., ONE TECHNOLOGIES MANAGEMENT, L.L.C.; ONE TECHNOLOGIES CAPITAL, L.L.P., Defendants-Appellees.

No. 17-10883.
United States Court of Appeals, Fifth Circuit.
Filed November 28, 2018.

Appeal from the United States District Court for the Northern District of Texas.
Before: GRAVES and COSTA, Circuit Judges, and BENNETT, District Judge.[*] .

ALFRED H. BENNETT, District Judge.

Plaintiff-Appellant Vicky Forby ("Forby") appeals the district court's grant of Defendant-Appellee One Technologies, L.P.'s ("One Tech") motion to compel arbitration. Forby contends that the district court erred in finding she was not prejudiced by One Tech's substantial invocation of the judicial process. For the reasons set forth below, we conclude that the district court erred when it found One Tech had not waived its right to arbitration because Forby had not demonstrated that she was prejudiced. Accordingly, we reverse the district court's judgment.

I.

On April 24, 2015, Forby filed a class action in Illinois state court that was later removed to the United States District Court for the Southern District of Illinois on July 14, 2015. Forby brought claims against One Tech for violation of the Illinois Consumer Fraud and Deceptive Business Practices Act ("ICFA") and unjust enrichment under Illinois law. In the notice of removal, One Tech did not reference arbitration but rather argued that Forby's claims were baseless, and that no class should be certified. On July 21, 2015, One Tech filed a motion to dismiss for failure to state a claim and, in the alternative, moved to transfer the case for forum non conveniens, arguing that Forby's claims were subject to arbitration in Texas and that an Illinois district court could not compel arbitration outside of the confines of its district. On September 4, 2015, One Tech filed an opposed motion to stay discovery until the Illinois district court ruled on the motion to dismiss. On March 25, 2016, the Illinois district court issued a Memorandum and Order transferring the case to the Northern District of Texas.

After the case was transferred, One Tech retained new counsel, who filed an unopposed extension of time to answer the complaint to "investigate [Forby's] claims and prepare an appropriate response." On May 9, 2016, One Tech filed a 12(b)(6) motion to dismiss, asking the Texas district court to dismiss all of Forby's claims with prejudice. The motion to dismiss did not mention arbitration. Forby filed her response to One Tech's motion to dismiss. In its reply to Forby's response, One Tech once again did not mention compelling arbitration. On March 31, 2017, the district court denied the motion to dismiss with respect to Forby's ICFA claim concerning the deceptiveness of One Tech's website and granted the motion as to the unjust enrichment claim—dismissing that claim with prejudice.

On April 17, 2017, four days after attending a Rule 26(f) conference and receiving Forby's requests for production, One Tech finally filed its motion to compel arbitration. Additionally, that same day, One Tech filed an expedited motion to stay all discovery pending the resolution of the motion to compel. On April 24, 2017, the district court conducted a hearing and granted the motion to stay.

On July 7, 2017, the district court issued an order granting One Tech's motion to compel arbitration and dismissed the case with prejudice. The district court found that One Tech had substantially invoked the judicial process but that Forby had not suffered prejudice. Specifically, the district court stated that Forby had "suffered some prejudice" but not to "the extent required by existing precedent in the," concluding that "the only prejudice that Forby has adequately demonstrated is delay, and delay alone is insufficient . . . ." Forby now appeals the decision of the district court.

II.

We review the district court's determination of a motion to compel arbitration de novo, but review any factual findings underlying that determination for clear error. Janvey v. Alguire, 847 F.3d 231, 240 (5th Cir. 2017).

III.

"Although waiver of arbitration is a disfavored finding," the right to arbitrate—like all contract rights—is subject to waiver. Nicholas v. KBR, Inc., 565 F.3d 904, 907 (5th Cir. 2009). "[A] party waives its right to arbitrate if it (1) `substantially invokes the judicial process' and (2) thereby causes `detriment or prejudice' to the other party." Al Rushaid v. Nat'l Oilwell Varco, Inc., 757 F.3d 416, 421 (5th Cir. 2014) (quoting Miller Brewing Co. v. Fort Worth Distrib. Co., 781 F.2d 494, 497 (5th Cir.1986)).

A.

We first examine whether One Tech substantially invoked the judicial process. To invoke the judicial process, a party "must, at the very least, engage in some overt act in court that evinces a desire to resolve the arbitrable dispute through litigation rather than arbitration." In Re Mirant, 613 F.3d 584, 589 (5th Cir. 2010) (quoting Subway Equip. Leasing Corp. v. Forte, 169 F.3d 324, 326 (5th Cir. 1999)). "A party waives arbitration by seeking a decision on the merits before attempting to arbitrate." Id. (quoting Petroleum Pipe Ams. Corp. v. Jindal Saw, Ltd., 575 F.3d 476, 480 (5th Cir. 2009)). 

"A dismissal with prejudice for failure to state a claim is a decision on the merits and essentially ends the plaintiff's lawsuit." Id. (quoting Mahone v. Addicks Util. Dist. of Harris County, 836 F.2d 921, 940 (5th Cir. 1988)).

One Tech was fully aware of its right to compel arbitration when it filed its 12(b)(6) motion to dismiss. After all, it presented the right to arbitration as the reason it sought to transfer the case from Illinois to Texas. However, once in Texas, One Tech did not move to compel arbitration even in the alternative to its motion to dismiss. Rather, it pursued and partially obtained a dismissal with prejudice of Forby's claims. One Tech's action of moving to dismiss Forby's claims with no mention of compelling arbitration demonstrated a desire to resolve the dispute in litigation rather than arbitration.

The cases One Tech cites in which courts found no invocation of the judicial process are distinguishable from its full-throated attempt to win this case on the merits in federal court. Some of those cases found that the party seeking arbitration did not invoke the judicial process because its motion to dismiss was filed concurrently with a motion to seek arbitration. See, e.g., Keytrade USA, Inc. v. Ain Temouchent M/V, 404 F.3d 891, 897 (5th Cir. 2005) (motion for summary judgment filed concurrently with motion to compel arbitration). In others, the party seeking arbitration did not wait for the court's merit ruling—and thus get a sense of the court's view of the case—before moving to compel arbitration. Pacheco v. PCM Const. Servs., L.L.C., 602 F. App'x 945, 948 (5th Cir. 2015) (motions to dismiss dealt with narrow ancillary issues and had not been ruled on when the motion to compel arbitration had been filed.). Even further afield are cases in which the party seeking arbitration never sought a merits ruling in court but only delayed or raised procedural concerns. See Gulf Guar. Life Ins. Co. v. Conn. Gen. Life Ins. Co., 304 F.3d 476, 485 (5th Cir. 2002)Sedco, Inc. v. Petroleos Mexicanos Mexican Nat'l Oil Co., 767 F.2d 1140 (5th Cir. 1985). In contrast, One Tech sought a full dismissal on the merits—prejudice attaches to a Rule 12(b)(6) dismissal. Its conduct thus fits squarely within our caselaw recognizing that the judicial process is invoked when a party "seek[s] a decision on the merits before attempting to arbitrate." Petroleum Pipe, 575 F.3d at 480see also Mirant, 613 F.3d at 589. Accordingly, the district court was correct in finding One Tech substantially invoked the judicial process.

B.

"In addition to invocation of the judicial process, the party opposing arbitration must demonstrate prejudice before we will find a waiver of the right to arbitrate." Nicholas, 565 F.3d at 910. Prejudice "refers to the inherent unfairness in terms of delay, expense, or damage to a party's legal position that occurs when the party's opponent forces it to litigate an issue and later seeks to arbitrate that same issue." Republic Ins. Co. v. PAICO Receivables, L.L.C., 383 F.3d 341, 346 (5th Cir. 2004) (quoting Subway Equip., 169 F.3d at 327)). It is true that delay in asserting the right to arbitrate alone will not result in waiver. Nicholas, 565 F.3d at 910 (citing Gulf Guar. Life Ins. Co. v. Conn. Gen. Life Ins. Co., 304 F.3d 476, 484 (5th Cir. 2002)). However, "such [a] delay `does bear on the question of prejudice, and may, along with other considerations, require a court to conclude that waiver has occurred.'" Id. (quoting Republic Ins., 383 F.3d at 346 (citation omitted)). When a party fails to demand arbitration and engages in activity inconsistent with the intent to arbitrate, the party later opposing a motion to compel may more easily show that its position has been prejudiced. Id.

One Tech received a transfer to Texas for the sole purpose of compelling arbitration but waited thirteen months before moving to compel arbitration while it attempted to obtain a dismissal with prejudice from the district court. The district court correctly concluded that Forby experienced prejudice from One Tech's delay in invoking arbitration. "A party cannot keep its right to demand arbitration in reserve indefinitely while it pursues a decision on the merits before the district court." Mirant, 613 F.3d at 591. However, the district court failed to find prejudice for damage to Forby's legal position or from additional expenses incurred litigating her case in the district court.[1]

The district court erred in concluding that Forby failed to establish prejudice to her legal position. When a party will have to re-litigate in the arbitration forum an issue already decided by the district court in its favor, that party is prejudiced. Nicholas, 565 F.3d at 911see also Petroleum Pipe, 575 F.3d at 482 (citing Kramer v. Hammond, 943 F.2d 176, 179 (2d Cir. 1991) ("Prejudice can be substantive, such as when a party loses a motion on the merits and then attempts, in effect, to relitigate the issue by invoking arbitration."). A party does not get to learn that the district court is not receptive to its arguments and then be allowed "a second bite at the apple through arbitration." Petroleum Pipe, 575 F.3d at 482.

One Tech's motion to dismiss included the attachment of declarations and exhibits detailing One Tech's website and went directly to the merits of Forby's ICFA claim. Specifically, the motion requested that the district court find the disclosures present on One Tech's website meant that the website was not deceptive as a matter of law. The district court was not receptive to One Tech's argument and declined to find that the website was not deceptive as a matter of law. To be sure, the Rule 12 ruling did not finally resolve whether the website was deceptive. However, it was not a motion seeking dismissal because of a technical pleading deficiency—it asked the court to look at the key question the case presents concerning adequacy of the website disclosures. If this case were to proceed to arbitration, Forby would have to re-litigate whether One Tech's website was deceptive in front of an arbitrator after One Tech already tested its arguments with a district court judge. Furthermore, One Tech's agreement not to seek a Rule 12 dismissal in the arbitration would not eliminate the prejudice from withdrawing this dispute from the court where its attempt at early dismissal failed. One Tech was able to check the district court's temperature on the disclosure issue. It should not now be able to move the case to a forum that might prove more favorable. Therefore, we find that Forby's legal position was damaged by One Tech's delay in moving to compel arbitration. Accordingly, the district court erred in finding Forby was not prejudiced.

IV.

For the foregoing reasons, the district court's determination that One Tech did not waive its right to arbitration was in error. We hold that One Tech substantially invoked the judicial process and that Forby was prejudiced thereby. Accordingly, the order of the district court finding Forby had not suffered enough prejudice to establish waiver is REVERSED. The district court's order granting One Tech's motion to compel arbitration is VACATED. The case is hereby REMANDED to the district court for further proceedings consistent with this opinion.

[*] District Judge for the Southern District of Texas, sitting by designation.

[1] The district court concluded that it could not determine whether Forby incurred significant legal expenses because she did not "state the costs she incurred while responding to" One Tech's motion to dismiss. This Court does not require a party to put on specific "evidence in terms of dollars and cents of its litigation costs" to determine that the party suffered an increase in legal expenses. Nicholas, 565 F.3d at 910. Whether a party suffered an increase in legal expenses due to a delay in the invocation of arbitration can be discerned from the litigation activities the parties engaged in prior to the motion to compel arbitration. Id.see also Janvey v. Alguire,847 F.3d 231, 244 (5th Cir. 2017). However, with no factual finding concerning Forby's legal expenses, the Court cannot say that the district court clearly erred on this point.

IN RE VANTAGE DRILLING INTERNATIONAL, VANTAGE DEEPWATER DRILLING, INC., AND VANTAGE ENERGY SERVICES, INC., Relators.

No. 01-17-00592-CV.
Court of Appeals of Texas, First District, Houston.
Opinion issued June 5, 2018. 
  
Robert Arthur, Whitney Rawlinson, Christopher Paul Hanslik, for Vantage Drilling International, Vantage Deepwater Drilling, Inc., and Vantage Energy Services, Inc., Relator.
Christian `Chris' P. Di Ferrante, for Martinez Partners, LLP, Real party in interest.
Original Proceeding on Petition for Writ of Mandamus.
Panel consists of Justices Keyes, Brown, and Lloyd.

OPINION

RUSSELL LLOYD, Justice.

Vantage Drilling International and its affiliates (collectively, "Vantage") petition for a writ of mandamus directing the trial court[1] to vacate its order compelling arbitration of all claims currently asserted between them and Martinez Partners, LLP. Vantage asserts that the trial court clearly abused its discretion in compelling arbitration because (1) Martinez Partners waived arbitration and (2) a final appeal would be inadequate to review the alleged waiver. Because Vantage has not shown the inadequacy of a final appeal, we deny the petition.

Background

Martinez Partners, a law firm, represented Vantage in a Foreign Corrupt Practices Act investigation and related matters, but the engagement was terminated, and Vantage hired a new law firm. Vantage did not pay some of Martinez Partners' legal fees, so Martinez Partners sued Vantage on a sworn account. The parties' engagement agreements contain arbitration clauses.
Martinez Partners filed its suit in Harris County district court. Vantage answered and counterclaimed for breach of contract, breach of fiduciary duty, and money had and received. Vantage's counterclaims were partially based on an allegation of improper mark-ups. Martinez Partners had engaged a document-review vendor to assist in the representation. According to Vantage, Martinez Partners paid the vendor at fixed hourly rates for the vendor's attorney document reviewers and then passed those costs through to Vantage at higher hourly rates without disclosing to Vantage that the attorney document reviewers were not Martinez Partners employees.

The parties litigated for eleven months, including extensive document discovery into the lawsuit's merits. Nine months into the lawsuit, during a hearing on a discovery motion, Vantage's allegation that Martinez Partners failed to disclose that the document reviewers were not Martinez Partners employees was referred to. The trial court commented to Martinez Partners' counsel, "that will be real interesting at trial because in that case, I think you may have a problem. . . . That's going to be interesting if y'all try it, an interesting issue." Vantage soon thereafter filed a motion for partial summary judgment on its cause of action for breach of fiduciary duty.

In month eleven of the lawsuit, Martinez Partners filed a motion to compel arbitration. Vantage responded, arguing that Martinez Partners had waived arbitration either explicitly, in comments its attorney made to the trial court, or impliedly, by substantially invoking the litigation process instead of seeking to initiate arbitration. The engagement letters signed by both parties establish that the Federal Arbitration Act ("FAA") governs the arbitration clauses.

The trial court ordered the parties to arbitrate all claims asserted in the lawsuit and stayed the lawsuit pending the arbitration's outcome. Vantage petitioned for mandamus, and Martinez Partners responded.

Final Appeal is Adequate for Reviewing Vantage's Waiver Argument

Vantage contends that an appeal after a final judgment is inadequate to review its assertion that Martinez Partners waived arbitration. The dissent agrees with the position that arbitration was waived. However, we do not address the waiver argument because Vantage has an adequate remedy by appeal.

I. Standard of Review and Applicable Law

A. Mandamus standard and adequacy of final appeal

A petitioner must meet both prongs of a two-part test in order to be entitled to mandamus: "To be entitled to mandamus, a petitioner must show that the trial court clearly abused its discretion and that the relator has no adequate remedy by appeal." In re Gulf Expl., LLC, 289 S.W.3d 836, 842 (Tex. 2009) (orig. proceeding) (internal quotation omitted). Mandamus issues "to preserve important substantive and procedural rights from impairment or loss, [and] allow[s] the appellate courts to give needed and helpful direction to the law that would otherwise prove elusive in appeals from final judgments." See id. at 843 (first alteration in original; second added).
"In the context of orders compelling arbitration, even if a petitioner can meet the first requirement, mandamus is generally unavailable because it can rarely meet the second." Id. at 842. "There is no definitive list of when an appeal will be `adequate,' as it depends on a careful balance of the case-specific benefits and detriments of delaying or interrupting a particular proceeding." Id.; see also In reMcAllen Med. Ctr., Inc., 275 S.W.3d 458, 464 (Tex. 2008) (orig. proceeding) ("Whether a clear abuse of discretion can be adequately remedied by appeal depends on a careful analysis of costs and benefits of interlocutory review"). Neither the FAA nor the Texas General Arbitration Act ("TGAA") encourage immediate review of orders compelling arbitration. As a direct result, "any balancing must tilt strongly against mandamus review." In re Gulf Expl., 289 S.W.3d at 842. "[T]he balance will generally tilt toward reviewing orders compelling arbitration only on final appeal." Id. at 843.

The required balancing tilts heavily against granting mandamus even if requiring the parties to wait for a final appeal results in wasted time and money: "Of course, if an order compelling arbitration is wrong, the parties may waste time and money in arbitration. But standing alone, delay and expense generally do not render a final appeal inadequate." Id. at 842.

If an order compelling arbitration is found to have been error, the attorneys' fees spent on the arbitration are generally recoverable because arbitration generally involves prosecuting contract claims: "[A]rbitration clauses are usually contractual and cover contractual claims. A party that prevails on a contractual claim can recover its fees and expenses, even if they were incurred in collateral proceedings like arbitration." Id. at 842-43.

B. Mandamus review under the FAA and TGAA

When the FAA applies to an arbitration clause, Texas courts must align appellate review under Texas procedure as consistently as possible with appellate review under federal procedure. In re Poly-America, L.P., 262 S.W.3d 337, 345 (Tex. 2008) (orig. proceeding). "Although mandamus review is generally available in federal courts to review non-appealable interlocutory rulings, mandamus is granted only in exceptional cases." Id.; see also In re Palacios, 221 S.W.3d 564, 565 (Tex. 2006) (orig. proceeding) (per curiam).

If a trial court compels arbitration and dismisses the underlying lawsuit, under both federal and Texas procedure, a party generally may seek review of the order compelling arbitration by directly appealing the final judgment of dismissal. See In re Palacios, 221 S.W.3d at 565. However, if the trial court compels arbitration and stays the underlying lawsuit, interlocutory relief through mandamus is generally unavailable, and a petitioner for mandamus must meet a "particularly heavy" burden. See id.; In re Gulf Expl., 289 S.W.3d at 842-43 (describing strong "tilt" against mandamus review of orders compelling arbitration).

Interlocutory appeals of orders compelling arbitration are disfavored under both the FAA and the TGAA. The FAA expressly forbids them. 9 U.S.C. § 16(b)(2), (3) (2016). Texas law impliedly forbids them because the TGAA expressly allows interlocutory appeals of orders denying arbitration with no similar allowance for orders compelling arbitration and because the above-referenced provision of the FAA is expressly incorporated into Texas law. See TEX. CIV. PRAC. & REM. CODE ANN. §§ 51.016 (West 2015) (permitting interlocutory appeals of arbitration-related matters only to the extent they would be permitted by 9 U.S.C. § 16), 171.098(a)(1) (West 2011) (expressly permitting appeal of an order denying an application to compel arbitration); Perry Homes v. Cull, 258 S.W.3d 580, 586 & n.11 (Tex. 2008).

The strong federal presumption in favor of arbitration extends to cases involving a litigant's alleged waiver of arbitration. The FAA "establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983) (emphasis added). The same preference for arbitration applies in waiver cases under the TGAA. See Ellis v. Schlimmer, 337 S.W.3d 860, 862 (Tex. 2011) (per curiam) ("Further, courts should resolve any doubts as to the agreement's scope, waiver, and other issues unrelated to its validity in favor of arbitration."); Cantella & Co. v. Goodwin, 924 S.W.2d 943, 944 (Tex. 1996) (per curiam) ("Federal and state law strongly favor arbitration. . . . Once a party seeking to compel arbitration establishes that an agreement exists under the FAA, and that the claims raised are within the agreement's scope, the trial court has no discretion but to compel arbitration and stay its proceedings pending arbitration." (internal quotation omitted)).

C. Reviewing orders compelling arbitration and reviewing orders denying arbitration involve different standards.

The appellate standards for reviewing an order compelling arbitration are inherently different from those involved in interlocutory review of an order denying arbitration under either the FAA or the TGAA. The Supreme Court of Texas has recognized this dissimilarity: "[T]he FAA generally permits immediate appeal of orders hostile to arbitration . . . but bars appeal of interlocutory orders favorable to arbitration. . . . [M]ost states (including Texas) have adopted the Uniform Arbitration Act, which like the FAA authorizes immediate appeal only from orders denying arbitration." In re Gulf Expl., 289 S.W.3d at 839 (internal quotation omitted); see also In re Palacios, 221 S.W.3d at 566 ("We recognize there is some one-sidedness in reviewing only orders that deny arbitration, but not orders that compel it. Yet both the Federal and Texas acts leave little uncertainty that this is precisely what the respective legislatures intended.") (citing 9 U.S.C. § 16; TEX. CIV. PRAC. & REM. CODE § 171.098).

This dissimilarity is not an anomaly; it is a conscious choice. It is a result of the legislative preference for discouraging interlocutory review of orders compelling arbitration: "[The FAA's] ban on interlocutory appeals of orders compelling arbitration was added by Congress in 1988 to prevent arbitration from bogging down in preliminary appeals. We have held that routine mandamus review of such orders in state court would frustrate this federal law." Perry Homes, 258 S.W.3d at 586.

The legislative preference for arbitration makes access to mandamus relief more difficult in part because arbitration is represented to be a lower-cost, faster alternative to jury trials: "Because arbitration is intended to provide a lower-cost, expedited means to resolve disputes, mandamus proceedings will often, if not always, deprive the parties of an arbitration agreement's intended benefits when a compel-and-stay order is at issue; accordingly, courts should be hesitant to intervene." In re Poly-America, 262 S.W.3d at 347.

Our Supreme Court imposed this heavy burden on parties seeking interlocutory review of orders compelling arbitration knowing full well that it could result in a waste of the parties' resources to require the parties to arbitrate and only later have the referral to arbitration reviewed by a court:
We agree that post-arbitration review of referral may create . . . a huge waste of the parties' resources. But if review is available before arbitration, parties may also waste resources appealing every referral when a quick arbitration might settle the matter. Frequent pre-arbitration review would inevitably frustrate Congress's intent to move the parties to an arbitrable dispute out of court and into arbitration as quickly and easily as possible.
Perry Homes, 258 S.W.3d at 587 (internal quotations omitted).
With all this in mind, we turn to the balancing of case-specific benefits and detriments of interrupting or delaying this referral to arbitration. See In re Gulf Expl., 289 S.W.3d at 842.

II. The case-specific benefits of interrupting or delaying this referral to arbitration do not outweigh the detriments.

Vantage contends that the case-specific benefits of interrupting or delaying the referral of this case to arbitration demonstrate that it has no adequate remedy by appeal. Vantage contends that it will spend more time and money to arbitrate the case instead of continuing to litigate. It also contends that the time and money it has already spent in litigating would be wasted. Finally, it contends both that Martinez Partners should not be given its preference for arbitration because Martinez Partners' conduct is an impermissible tactical decision that prejudices Vantage and that the prejudice would be further compounded by waiting for a post-arbitration appeal.

A. Avoiding further delay and expense

This purported benefit is, on its own, no benefit at all under our Supreme Court's precedents. It is well-established that avoiding further delay and expense that would occur without mandamus intervention is no basis on its own for holding that a final appeal would be inadequate. See In re Gulf Expl., 289 S.W.3d at 842Frontera Generation L.P. v. Mission Pipeline Co., 400 S.W.3d 102, 114-15 (Tex. App.-Corpus Christi 2012, no pet.) (denying mandamus because final appeal would be adequate in spite of alleged risk that power plant belonging to litigant would have to remain shut down during arbitration). This is true in the arbitration context even assuming the possibility of "a huge waste of the parties' resources." See Perry Homes, 258 S.W.3d at 587accord In re Gulf Expl., 289 S.W.3d at 842.

This purported benefit, then, does not advance Vantage's position.

B. Time and money already spent would be wasted

This purported benefit has three problems.

First, most, if not all, of the attorneys' fees Vantage has spent in the litigation may be recoverable. Vantage pleaded a claim for attorneys' fees. Attorneys' fees are not unrecoverable simply because the parties arbitrate the claim rather than litigating it. See In re Gulf Expl., 289 S.W.3d at 842-43 ("A party that prevails on a contractual claim can recover its fees and expenses, even if they were incurred in collateral proceedings like arbitration."). Vantage is suing on a contract and defending a contract suit, and its attorneys' fees incurred in pursuing that claim, or in pursuing or defending against sufficiently interrelated claims, may ultimately be recoverable. See, e.g., Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 313-14 (Tex. 2006)Brockie v. Webb, 244 S.W.3d 905, 910 (Tex. App.-Dallas 2008, pet. denied).

Second, Vantage contends that its time spent in paper discovery is now wasted because the parties must arbitrate. However, Vantage has not shown that it will not be able to benefit from this paper discovery in the arbitration. Any evidence discovered so far could be admissible in the arbitration hearing, and, thus, may very well have not been wasted. See, e.g., Ellis v. Schlimmer, No. 13-09-00426-CV, 2011 WL 3821969, at *3 (Tex. App.-Corpus Christi Aug. 24, 2011, no pet.) (mem. op.) ("The modicum of discovery accomplished related to the merits of the case and could therefore be useful in arbitration.").

Third, Vantage relies in large part on In re Prudential Insurance Co. of America,148 S.W.3d 124 (Tex. 2004) (orig. proceeding). In In re Prudential Insurance, the parties to a commercial lease litigated a dispute under the lease. Despite having agreed to waive the right to a jury trial for any dispute under the lease, the tenant nonetheless requested a jury trial. The landlord, Prudential, moved to quash the request for a jury trial, the trial court denied the motion, the Court of Appeals denied Prudential mandamus relief, and Prudential petitioned for mandamus in the Texas Supreme Court. The Supreme Court granted mandamus and directed the trial court to grant Prudential's motion to quash the jury-trial request, holding that Prudential lacked an adequate remedy by appeal. The Court held that the contractual waiver of jury trial that the tenant had agreed to could never be recovered if Prudential were made to litigate the dispute before a jury:
In no real sense can the trial court's denial of Prudential's contractual right to have [tenant] waive a jury ever be rectified on appeal. If Prudential were to obtain judgment on a favorable jury verdict, it could not appeal, and its contractual right would be lost forever. If Prudential suffered judgment on an unfavorable verdict, Prudential could not obtain reversal for the incorrect denial of its contractual right "unless the court of appeals concludes that the error complained of . . . probably caused the rendition of an improper judgment". Even if Prudential could somehow obtain reversal based on the denial of its contractual right, it would already have lost a part of it by having been subject to the procedure it agreed to waive.
In re Prudential Ins. Co., 148 S.W.3d at 138. No analogous loss of contracted-for rights is at risk here. Indeed, Vantage agreed to arbitrate. Leaving the trial court's order compelling arbitration undisturbed enforces the parties' contracted-for arbitration rights.

The extreme cases that In re Prudential Insurance cited as demonstrating an inadequate remedy by appeal are distinguishable from this case. Generally, avoiding further expense and delay is, on its own, no basis for granting mandamus. An exception to that rule was identified in In re Prudential Insurance. It involved granting mandamus relief to protect a defendant from having to "defend[] the claims of more than 8,000 plaintiffs in litigation that would last for years." Id. at 136. There is no similar danger in Vantage's case. The court also noted that a grant of mandamus was necessary to correct a trial-court order that would "not only cost the carrier money but `radically skew[ed] the procedural dynamics of the case' by requiring the defendant to fund the plaintiff's prosecution of her claims." Id. (alteration in original). There is no risk of that in this case. The Court further noted that mandamus was necessary to correct a trial court, who "on its own motion and without any authority whatever, split two cases into sixteen and transferred venue of fourteen of them to other counties." Id. Mandamus was necessary there because of "the complete lack of authority for the trial court's order, and the impact on the legal system. We simply could not justify putting the civil justice system itself to the trouble of grinding through proceedings that were certain to be `little more than a fiction.'" Id. at 137. In contrast, the trial court here, instead of lacking authority to compel arbitration, was simply enforcing the parties' agreement to arbitrate. The only proceedings in the civil-justice system that Vantage can point to as being "little more than a fiction" is a potential future final appeal by Vantage in which Vantage invokes, and succeeds on, its objection to arbitration. The Supreme Court found this kind of relief to be adequate in Perry Homes. Vantage has not shown that its case is one of "those rare cases" where arbitration improperly compelled merits mandamus relief. See In re Gulf Expl., 289 S.W.3d at 843.

C. Martinez Partners' impermissible tactical conduct

Vantage also contends that overturning the trial court's order would avoid the inherent unfairness and prejudice caused by Martinez Partners' belated invocation of arbitration. Vantage contends that Martinez Partners was happy to litigate until the trial court made a comment that Vantage alleges could be interpreted as doubting the strength of Martinez Partners' case. Vantage points to no authority that litigating with such an alleged insight is to be valued above Congress's and the Texas Legislature's preference for arbitration as a vehicle for settling disputes. The judiciary's role among the other branches of government requires that we give deference to legislative priorities such as arbitration. See In re Gulf Expl., 289 S.W.3d at 842 ("[I]n balancing these matters, our place in a government of separated powers requires us to consider also the priorities of the other branches of Texas government. Legislative acts encouraging or discouraging interlocutory review must weigh heavily in the balance of benefits and detriments. Here, as both the federal and state arbitration acts pointedly exclude immediate review of orders compelling arbitration, any balancing must tilt strongly against mandamus review." (internal quotation omitted)). Intervening via mandamus does harm to those priorities.

Vantage asserts that its position is supported by Perry Homes and Tuscan Builders, LP v. 1437 SH6 L.L.C., 438 S.W.3d 717 (Tex. App.-Houston [1st Dist.] 2014, pet. denied)Perry Homes, however, demonstrates just how high the bar for waiver is set.[2]
Tuscan Builders was an interlocutory appeal from a denial of a motion to compel arbitration. Tuscan Builders, 438 S.W.3d at 718. Appeal from a denial is specifically permitted and favored by both the FAA and the TGAA. Therefore, Tuscan Builders necessarily involved different appellate standards for review than does this case. Further, there was no analysis of the adequacy of final appeal in Tuscan Builders.[3] Cf. In re Gulf Expl., 289 S.W.3d at 839In re Palacios, 221 S.W.3d at 566.

Given the heavy tilt in favor of arbitration that stems from the legislative priorities expressed in the FAA, the TGAA, and cases applying them, it appears that the detriments of disrupting the arbitration outweigh any benefits. See In re Gulf Expl.,289 S.W.3d at 842. We resolve any doubts in favor of arbitration by declining to issue mandamus overruling the trial court's order compelling arbitration. See Moses H. Cone Mem'l Hosp., 460 U.S. at 24-25Ellis, 337 S.W.3d at 862.

III. Vantage's remaining cases are distinguishable.

Vantage relies on two arbitration mandamus cases—In re Sthran, 327 S.W.3d 839 (Tex. App.-Dallas 2010, orig. proceeding), and In re Villanueva, 311 S.W.3d 475(Tex. App.-El Paso 2009, orig. proceeding [mand. dism'd]). They are both distinguishable.

In re Sthran is distinguishable because final appeal was found to be inadequate for reasons not present in Vantage's case. Sthran's husband had died in a nursing home. Sthran sued the nursing home for negligence. The trial court compelled arbitration under the nursing home's admission contract. Sthran petitioned for a writ of mandamus directing the trial court to vacate its order compelling arbitration. The court of appeals conditionally granted Sthran's petition, reasoning that Sthran had no adequate remedy by appeal because Sthran had not brought a contract claim and because "delay and expense in cases in which arbitration clauses cover contractual claims `generally do not render a final appeal inadequate.'" In re Sthran, 327 S.W.3d at 846 (quoting In re Gulf Expl., 289 S.W.3d at 843). Because Sthran's negligence action sounded in tort, forcing Sthran to wait for an appeal was an inadequate remedy because "it is not clear that any fees and expenses incurred as a result of arbitration will be recoverable." In re Sthran, 327 S.W.3d at 846. Even if the improperly compelled arbitration could be undone on final appeal, the fees and expenses that Sthran would have to incur in arbitrating would never be recoverable because she asserted a tort cause of action. Had Sthran brought a contract action instead, the hypothetical arbitration fees and expenses could have been recoverable.

Second, Sthran's was "one of those `rare cases' when legislative mandates might be construed to conflict." Id. A provision of the Medical Liability Act entitled Sthran to notice of the admission contract's arbitration clause, but no such notice was provided. The court discussed how In re Gulf Exploration approves mandamus review for orders compelling arbitration in order to "preserve important substantive and procedural rights from impairment and loss. . . ." In re Sthran, 327 S.W.3d at 846 (quoting In re Gulf Expl., 289 S.W.3d at 843). The court agreed with Sthran that, because the admission contract did not comply with the Medical Liability Act's notice provision, her statutory right to notice could be protected only by mandamus.

Vantage cannot rely on In re Sthran because, first, Martinez Partners and Vantage both assert contract actions, and Vantage is asserting and defending against interrelated counterclaims. Vantage's legal expenses may later be shown to have advanced both its contract action and one or more of its other causes of action. Cf. Tony Gullo Motors I, 212 S.W.3d at 313-14Brockie, 244 S.W.3d at 910. If, on final appeal, the referral to arbitration is found to be error, Vantage may seek to recover the arbitration fees and expenses it may have incurred. Further, Vantage identifies no statutory provisions whose enforcement would be impaired by an order compelling arbitration.
In re Villanueva is also distinguishable. Villanueva asserted a tort claim and not a contract claim. Further, Villanueva sued his employer for an on-the-job injury, and the trial court compelled arbitration under Villanueva's employment contract. The court of appeals held that the authority to compel arbitration came from Texas common law, not the FAA or TGAA. That was significant because "[m]andamus is the appropriate procedure by which we may review the trial court's ruling on a motion to compel arbitration under the common law." In re Villanueva, 311 S.W.3d at 481. The court then held that Texas common law rendered the arbitration clause void and unenforceable. Id. at 482.

However, Texas common law does not govern Vantage's case. Both parties agree that either or both of the FAA and the TGAA govern. Though mandamus may be appropriate for regularly reviewing orders compelling arbitration under Texas common law, see In re Villanueva, 311 S.W.3d at 481, it is generally not favored in most situations involving arbitration under the two statutes. See In re Gulf Expl.,289 S.W.3d at 842.

Vantage also cites In re Team Rocket, L.P., 256 S.W.3d 257 (Tex. 2008) (orig. proceeding), which is a mandamus case that did not involve arbitration. It therefore did not address the strong preference for arbitration that In re Gulf Explorationemphasizes. Instead, the grant of mandamus there concerned litigants' statutory venue rights. A family had filed wrongful-death claims in Harris County, but venue was transferred to Williamson County. The family then nonsuited their case and re-filed the same lawsuit in Fort Bend County. The Fort Bend County court refused to transfer venue to Williamson County, and the defendants petitioned for a writ of mandamus. The court conditionally granted the writ to protect the defendants' statutory venue rights: "To say that the Fort Bend County trial court, which violated statutory venue procedure and [TEX. R. CIV. P.] 87(5), committed reversible error while declining to correct the injustice would compromise the integrity of the venue statute and result in an irreversible waste of resources." In re Team Rocket, 256 S.W.3d at 263.

The danger of "compromis[ing] the integrity of the" waiver doctrine is much less compelling here than the danger of compromising statutory venue rights was in In re Team Rocket. Perry Homes stands for the proposition that, in most cases, waiver of arbitration can be adequately addressed on final appeal. In contrast, the proper application of the venue statute in In re Team Rocket could not have been protected without mandamus because the defendants would have been forced to litigate in a forum where venue was improper. In re Team Rocket, like In re Sthran,involved using mandamus to preserve statutory rights, but Vantage asserts no statutory rights that require mandamus protection.

Vantage may challenge the referral to arbitration after the arbitration is completed as contemplated by both In re Gulf Exploration and Perry Homes. Because final appeal is adequate for Vantage, it is not entitled to mandamus relief.

Conclusion

We deny the petition for mandamus.[4]

DISSENTING OPINION

KEYES, J., dissenting.

I respectfully dissent from the majority opinion denying Vantage Drilling International's (Vantage's) petition for writ of mandamus, which requests that we direct the trial court to vacate its order compelling arbitration in this case. The majority opinion effectively annuls the important procedural protection of waiver of the right to arbitrate by substantial litigation conduct.

The majority opinion fails even to acknowledge, much less to apply, the test of waiver of the right to arbitrate by substantial litigation conduct established by the Texas Supreme Court in Perry Homes v. Cull[1] and reaffirmed in Henry v. Cash Biz, LP.[2] The majority then effectively annuls this important procedural right by concluding that Vantage has an adequate remedy by appeal. I would hold that Vantage has demonstrated just the opposite. By approving the trial court's order sending this case to arbitration, the majority allows the real party in interest to take the spoils of its abusive discovery practices over almost a year and its insight into the trial court's skeptical perception of its case gained through litigation conduct into its newly-sought arbitration proceedings, thereby avoiding the trial court's ruling on Vantage's motion for partial summary judgment filed against it and creating a new playing field.

As this case satisfies every factor of the Perry Homes and Henry test for waiver of arbitration by litigation conduct, and as Vantage has shown that it lacks an adequate remedy by appeal, I conclude that compelling arbitration of this case violates important substantive and procedural rights of the respondent that cannot be protected through any other legal mechanism than reversal of the trial court's order. I would hold that Vantage has shown a clear abuse of discretion by the trial court. Therefore, I would grant the petition.

Background

Martinez Partners, a law firm, represented Vantage in a Foreign Corrupt Practices Act investigation and related matters, but the engagements were terminated, and Vantage hired a new law firm. Vantage did not pay some of Martinez Partners' legal fees, so Martinez Partners sued Vantage and related entities (collectively, "Vantage") on a sworn account. The parties' engagement agreements contained arbitration clauses.

Martinez Partners—the movant below for arbitration—filed suit against Vantage in Harris County district court. Vantage answered and counterclaimed for breach of contract, breach of fiduciary duty, and money had and received.

The parties litigated for eleven months, including engaging in extensive document discovery into the lawsuit's merits. Martinez Partners amended its pleadings twice, propounded extensive written discovery, and pursued numerous motions to compel additional discovery. It also added an individual defendant and then nonsuited that defendant in response to a motion to dismiss, and it sought discovery on the motion to dismiss. It later sought sanctions against Vantage's counsel in connection with the dismissed claim. It served ten sets of merits-based written discovery on each of the three defendants. It attempted to avoid providing reciprocal discovery in response to Vantage's requests by disclaiming any obligation to search its principal's email account for communications responsive to Vantage's requests for production, and it rejected Vantage's request to make that principal available to be deposed. Only after an oral ruling from the trial court did Martinez Partners produce communications responsive to Vantage's requests.
At one point, Martinez Partners moved to compel the production of billing information about Vantage's new attorneys. During a hearing on that motion— Martinez Partners' second motion to compel—the key issue in the case arose: whether Texas law provides an offset to Martinez Partners' claims for unpaid invoices based on what Vantage claimed was the undisputed and undisclosed mark-up of almost half a million dollars that Martinez Partners had applied to third-party charges invoiced to Vantage. The trial court expressed doubt about Martinez Partners' legal position, telling Martinez Partners' counsel that "that will be real interesting at trial because in that case, I think you may have a problem. . . . That's going to be interesting if y'all try it, an interesting issue." Vantage soon thereafter filed a motion for partial summary judgment on its cause of action for breach of fiduciary duty.

Martinez Partners then filed a motion to compel arbitration under both Texas and federal arbitration statutes. Vantage responded, arguing that Martinez Partners had waived arbitration either explicitly, in comments it made to the trial court, or impliedly, by having substantially invoked the litigation process instead of seeking to initiate arbitration. While that motion was pending, Martinez Partners continued to press Vantage for supplemental document production and served more production requests. After the trial court heard preliminary argument on the arbitration issue, Martinez Partners served yet another set of production requests on Vantage.

The trial court ordered that the parties arbitrate all claims that had been asserted in the lawsuit and stayed the lawsuit pending the arbitration's outcome. Vantage petitioned for a writ of mandamus, and Martinez Partners responded. Vantage claims it spent almost $110,000 on Martinez Partners' discovery and incurred approximately $195,000 in legal fees in litigation prior to the trial court's order compelling arbitration.

Analysis

Vantage contends in its petition for a writ of mandamus that Martinez Partners waived the right to arbitrate by its conduct in litigation and that an appeal after a final judgment is inadequate to review its waiver argument. Applying the waiver standards promulgated by the Texas Supreme Court, I agree.

A. Standard of Review of Order Granting Motion to Compel Arbitration

The majority has set out at length the high standard for obtaining reversal of an order granting arbitration. Essentially, when both the Federal Arbitration Act (FAA) and the Texas General Arbitration Act (TGAA) apply to an arbitration clause, as here, Texas courts must align the availability of appellate review under Texas procedure as consistently as possible with availability of appellate review under federal procedure. In re Poly-America, L.P., 262 S.W.3d 337, 345 (Tex. 2008) (orig. proceeding). "Although mandamus review is generally available in federal courts to review non-appealable interlocutory rulings, mandamus is granted only in exceptional cases." Id.
However, despite the strong federal and state barriers to mandamus review of an order granting arbitration, "[e]ven when an order is not reviewable by interlocutory appeal, that does not always preclude review by mandamus." In re Gulf Expl., LLC, 289 S.W.3d 836, 842 (Tex. 2009) (orig. proceeding). "To be entitled to mandamus, a petitioner must show that the trial court clearly abused its discretion and that the relator has no adequate remedy by appeal." Id. (internal quotation omitted). "There is no definitive list of when an appeal will be `adequate,' as it depends on a careful balance of the case-specific benefits and detriments of delaying or interrupting a particular proceeding." Id.; see also In re McAllen Med. Ctr., Inc., 275 S.W.3d 458, 464 (Tex. 2008) (orig. proceeding) ("Whether a clear abuse of discretion can be adequately remedied by appeal depends on a careful analysis of costs and benefits of interlocutory review."). "[S]tanding alone, delay and expense generally do not render a final appeal inadequate." In re Gulf Expl.,289 S.W.3d at 842.

Mandamus "may be essential to preserve important substantive and procedural rights from impairment or loss, [and] allow the appellate courts to give needed and helpful direction to the law that would otherwise prove elusive in appeals from final judgments.'" In re Gulf Expl., 289 S.W.3d at 843 (quoting In re Prudential Ins. Co.,148 S.W.3d 124, 136 (Tex. 2004)).

B. Waiver of Arbitration by Substantial Litigation Conduct

Here, the issue is waiver of arbitration by substantial litigation conduct. This is precisely the kind of important procedural right the Texas Supreme Court held in In re Gulf Exploration and in In re Prudential that mandamus "may be essential to preserve . . . from impairment or loss" and may "allow the appellate courts to give needed and helpful direction to the law" that would elude analysis on appeal from a final judgment. See id.; In re Prudential Ins. Co., 148 S.W.3d at 136.
The issue of waiver of arbitration by substantial litigation conduct is an issue for the courts rather than the arbitrators. Perry Homes v. Cull, 258 S.W.3d 580, 598 (Tex. 2008). "[A] party waives an arbitration clause by substantially invoking the judicial process to the other party's detriment or prejudice." Id. at 589-90. "[T]his hurdle is a high one" because of the strong presumption against waiver of arbitration. Id. at 590. However, "`allowing a party to conduct full discovery, file motions going to the merits, and seek arbitration on the eve of trial' would be sufficient" to constitute waiver. Id. (quoting In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 764 (Tex. 2006)). Arbitration can be waived if the parties have agreed to resolve a dispute in court; and "[s]uch waiver can be implied from a party's conduct, although that conduct must be unequivocal." Id. at 593.

To establish implied waiver of the right to arbitrate by substantial invocation of the judicial process, "the [non-movant] ha[s] the burden to prove that (1) [the party moving for arbitration] substantially invoked the judicial process in a manner inconsistent with its claimed right to compel arbitration, and (2) the [non-movant] suffered actual prejudice as a result of the inconsistent conduct." Henry v. Cash Biz, LP, ___ S.W.3d ___, No.16-0854, 2018 WL 1022838, *4 (Tex. Feb. 23, 2018) (citing G.T. Leach Builders, LLC v. Sapphire V.P., L.P., 458 S.W.3d 502, 511-12 (Tex. 2015), and Perry Homes, 258 S.W.3d at 589-90).

How much invocation of the litigation process is "substantial" depends on the context and is similar to estoppel. Perry Homes, 258 S.W.3d at 593. For instance, "[a] party who enjoys substantial direct benefits by gaining an advantage in the pretrial litigation process should be barred from turning around and seeking arbitration with the spoils." Id. However, "[e]ven substantially invoking the judicial process does not waive a party's arbitration rights unless the opposing party proves that it suffered prejudice as a result." Id. (quoting In re Bruce Terminix Co.,988 S.W.2d 702, 704 (Tex. 1998) (orig. proceeding)).

C. The Totality of the Circumstances Test for Waiver by Substantial Litigation Conduct

Waiver of the right to compel arbitration by litigation conduct must be decided on a case-by-case basis under a totality-of-the-circumstances test established by the Texas Supreme Court in Perry Homes and recently reiterated in Henry. See id. at 591. The relevant factors established in Perry Homes include:
• when the movant knew of the arbitration clause;
• how much discovery has been conducted;
• who initiated it;
• whether it related to the merits rather than arbitrability or standing;
• how much of it would be useful in arbitration; and
• whether the movant sought judgment on the merits.
Id. at 591-92. The supreme court has recently reaffirmed this test in Henry, stating:
Here, the factors generally examined to determine waiver—how much discovery has been conducted, who initiated it, and whether it relates to the merits; how much time and expense has been incurred in litigation; and the proximity in time between a trial setting and the filing of the motion seeking arbitration—may serve as guideposts.
2018 WL 1022838, at *4.

Under Perry Homes and Henry, the courts will defer to the trial court's factual findings if they are supported by the evidence, but where there is "no factual dispute . . . regarding whether the [movant] initially opposed arbitration, whether they conducted extensive merits discovery, or whether they sought arbitration late in the litigation process," and where the only remaining question is the legal question of whether the movant's conduct prejudiced the non-movant, the appellate courts may decide the issue of waiver as a matter of law. Perry Homes,258 S.W.3d at 598.

To determine whether a party has substantially invoked the judicial process, "courts consider a wide variety of factors and look to the specifics of each case." Henry, 2018 WL 1022838, at *4; G.T. Leach Builders, LLC, 458 S.W.3d at 512. "The necessary conduct must go beyond merely filing suit or seeking initial discovery." Henry, 2018 WL 1022838, at *4 (citing Perry Homes, 258 S.W.3d at 590). The courts will find waiver only in "the most unequivocal of circumstances." Id. (citing Perry Homes, 258 S.W.3d at 595-96).

The court in Henry cited Perry Homes as a case that was illustrative of unequivocal waiver, noting that "the plaintiffs waived the right to arbitrate by participating in extensive discovery including hundreds of requests for production and interrogatories, then requesting arbitration fourteen months after filing suit and only four days prior to the scheduled trial date." Id. The court contrasted the substantial invocation of the judicial process by the plaintiffs in Perry Homes with the much lesser participation by plaintiffs in other cases in which arbitration was subsequently granted. Id. (citing G.T. Leach Builders, LLC, 458 S.W.3d at 512(holding plaintiffs did not waive arbitration by asserting counterclaims; seeking change of venue; filing motions to designate responsible third parties, for continuance, and to quash depositions; designating experts; and waiting six months to move for arbitration), In re Fleetwood Homes of Tex., L.P., 257 S.W.3d 692, 694 (Tex. 2008) (orig. proceeding) (holding party did not waive arbitration by noticing deposition, serving written discovery, and waiting eight months to move for arbitration), and In re Bruce Terminix Co., 988 S.W.2d at 703-04 (holding arbitration was not waived by sending eighteen interrogatories and nineteen requests for production and waiting six months to seek arbitration)).
In Perry Homes, the plaintiffs initially opposed arbitration, complaining at length about the incompetence, bias, and unfairness of arbitration, and they asked the court to deny Perry Homes' motion to compel arbitration. 258 S.W.3d at 595-96. They then noticed six designees for deposition on nine issues with an attachment requesting sixty-seven categories of documents and noticed the depositions of three of Perry Homes' experts, requesting twenty-four categories of documents. Id.The Texas Supreme Court concluded, "There is simply no question on this record that [the plaintiffs] conducted extensive discovery about every aspect of the merits." Id. at 596. After having initially opposed arbitration, the plaintiffs moved for arbitration fourteen months after filing suit and shortly before the trial setting, which the supreme court found to be "very late in the trial process" and after most of the discovery had been completed. Id. The court also concluded that it was "also unquestionably true that this conduct prejudiced [the non-movant defendant, Perry Homes]." Id. at 597.

The supreme court concluded, "Such manipulation of litigation for one party's advantage and another's detriment is precisely the kind of inherent unfairness that constitutes prejudice under federal and state law." Id. After finding prejudice to Perry Homes, the supreme court reversed the court of appeals' judgment, vacated the $800,000 award the plaintiffs had obtained in arbitration, and remanded the case to the trial court "for a prompt trial." Id. at 585, 601.

D. Application of the Perry Homes Factors to Order Compelling Arbitration in This Case

The abusive manipulation of the proceedings in this case by Martinez Partners is virtually identical to that in Perry Homes, and the prejudice to Vantage is just as great as the prejudice to the non-movant in Perry Homes under the relevant factors:
• There is no question that Martinez Partners knew of the arbitration clauses in both its and Vantage's engagement agreements;
• Martinez Partners itself filed the litigation;
• The parties litigated for eleven months, including extensive document discovery into the lawsuit's merits;
• Martinez Partners amended its pleadings twice, propounded extensive written discovery, and pursued numerous motions to compel additional discovery;
• It also added an individual defendant and then nonsuited that defendant in response to a motion to dismiss and sought discovery on that motion;
• It sought sanctions against Vantage's counsel in connection with the dismissed claim;
• It served ten sets of merits-based written discovery on each of the three defendants; and it attempted to avoid providing reciprocal discovery in response to Vantage's requests by disclaiming any obligation to search its principal's email account for communications responsive to Vantage's requests for production, rejected Vantage's request to make him available to be deposed, and only produced communications responsive to Vantage's requests after an oral ruling from the court;
• Martinez Partners filed a motion to compel arbitration under both Texas and federal arbitration statutes only after the trial court expressed doubt about its legal position at a hearing on its second motion to compel when the key issue in the case arose: whether Texas law provides an offset to Martinez Partners' claims for unpaid invoices based on what Vantage claims was the undisputed and undisclosed mark-up of almost half a million dollars that Martinez Partners applied to third-party charges invoiced to Vantage;
• Martinez Partners moved for arbitration only after summary judgment had been filed against it; and
• Even after the trial court heard preliminary argument on arbitration, Martinez Partners served yet another set of production requests on Vantage, with all of its previous requests for document production and motions to compel.
Martinez Partners' litigation conduct satisfies every one of the factors set out by the Texas Supreme Court in Perry Homes for courts to consider in determining whether a party has waived arbitration and is at least as egregious, if not moreegregious, than the litigation conduct found by the supreme court in Perry Homesto constitute waiver of arbitration. See id. at 591-92. Thus, I would conclude that Vantage Drilling established an abuse of discretion by the trial court.

E. Lack of Adequate Remedy by Appeal

I would likewise hold that the prejudice to Vantage under the circumstances here cannot be remedied on appeal. Whether an appellate remedy is adequate is a practical, prudential determination based on a balancing of public and private interests. See In re Prudential, 148 S.W.3d at 136. The Texas Supreme Court has held:
Mandamus review of significant rulings in exceptional cases may be essential to preserve important substantive and procedural rights from impairment or loss, allow the appellate courts to give needed and helpful direction to the law that would otherwise prove elusive in appeals from final judgments, and spare private parties and the public the time and money utterly wasted enduring eventual reversal of improperly conducted proceedings.
Id. Here, these factors favor granting mandamus relief.

Any appeal of an eventual arbitration award would be clearly inadequate to compensate Vantage for Martinez Partners' litigation conduct adverse to the right to compel arbitration. Martinez Partners has effectively bought itself a new forum in which it has all the advantages of the vast amount of abusive discovery it obtained from Vantage, as well as the advantage of its own resistance to discovery, and the new forum's lack of familiarity with the circumstances that led the trial court to express skepticism as to Martinez Partners' case and Vantage to file summary judgment against it. I would conclude that this an "exceptional case" in which mandamus relief is "essential to preserve important substantive and procedural rights from impairment or loss[.]" See id.

Regarding the considerations of wasted time and money, I further observe that, in this case, there is no rapid, inexpensive alternative to traditional litigation. And all of the conditions for granting mandamus from an order compelling arbitration established in Perry Homes are met. There is "no factual dispute . . . regarding whether [Martinez Partners] initially opposed arbitration, whether [it] conducted extensive merits discovery, or whether [it] sought arbitration late in the litigation process." See Perry Homes, 258 S.W.3d at 598. Despite an arbitration clause in its agreement with Vantage, Martinez Partners brought this litigation, conducted extensive merits discovery for almost a year, engaged vigorously in the litigation process at great expense to Vantage, and, only when the trial court questioned its ability to prevail at trial and summary judgment had been filed, moved for arbitration while continuing to litigate and to seek additional discovery up to the date its motion to compel arbitration was granted. See id.; see also In re Prudential, 148 S.W.3d at 136 (holding that mandamus relief may be essential to "spare private parties and the public the time and money utterly wasted enduring eventual reversal of improperly conducted proceedings").
The only question remaining to determine the adequacy of Vantage's remedy by appeal is whether Martinez Partners' conduct prejudiced Vantage. See id. And the clear answer to that question under In re Prudential is "yes," in that the loss of the important procedural right to waiver of arbitration under circumstances such as those present in this case "radically skew[s] the procedural dynamics of the case" and causes "the irreversible waste of judicial and public resources." See 148 S.W.3d at 136-37.

Vantage's loss of the entire benefit of Martinez Partners' unequivocal waiver of the right to arbitrate by the trial court's order compelling arbitration requires the conclusion that the trial court clearly abused its discretion and that Vantage has no adequate remedy by appeal.

Conclusion

I would conditionally grant the petition for mandamus.

[1] The underlying case is Cause No. 2016-27737; Martinez Partners, LLP v. Offshore Group Investment Limited d/b/a Vantage Drilling International, Vantage Deepwater Drilling, Inc., and Vantage Energy Services, Inc.; In the 133rd District Court of Harris County, Texas; Hon. Jaclanel McFarland presiding.
[2] "To date, we have never found such a waiver. . . ." Perry Homes, 258 S.W.3d at 590.
[3] The same is true for Okorafor v. Uncle Sam & Associates, Inc., 295 S.W.3d 27 (Tex. App.-Houston [1st Dist.] 2009, pet. denied), on which Vantage also relies. That case reviewed an order denying arbitration. See above at section I.C.
[4] We also deny as moot Vantage's pending Motion for Temporary Relief.
[2] ___ S.W.3d ___, No. 16-0854, 2018 WL 1022838 (Tex. Feb. 23, 2018).

WESTLAW CITE: In re Vantage Drilling Int'l, No. 01-17-00592-CV, ___ S.W.3d ___, ___, 2018 WL 2666945, at *4 (Tex. App.-Houston [1st Dist.] June 5, 2018, orig. proceeding)