ARBITRATION AGREEMENT WAIVED BY LITIGATION CONDUCT

Ideal Roofing, Inc. v. Armbruster
Dallas Court of Appeals, No. 05-13-00446-CV (November 18, 2013)
Justices Bridges, Fillmore (Opinion), and Lewis

Because public policy favors arbitration of disputes, the law imposes a strong presumption against waiver of contractual arbitration rights. In this case involving alleged construction defects, the Court concluded the presumption was overcome, and the appellant had waived its right to arbitration by “substantially invoking the judicial process to the detriment of appellees.” The Court of Appeals therefore affirmed the trial court’s order denying the appellant’s motion to compel arbitration.

Plaintiffs Mike and Nery Armbruster sued Ideal Roofing for damages to their residence allegedly caused by Ideal’s defective installation of a roof. About four months after suit was filed, Ideal’s counsel sent a letter to the Armbrusters pointing out an arbitration clause in the parties’ contract. Nevertheless, Ideal did not move to compel arbitration until 14 months later. The trial court denied the motion, and Ideal filed an interlocutory appeal. The Court of Appeals pointed out that, in the 14 months after Ideal was clearly aware of the arbitration clause, the parties exchanged written discovery, Ideal filed a dispositive motion on the merits and set it for hearing twice, Ideal deposed one of the plaintiffs and the plaintiffs’ expert, Ideal inspected the plaintiffs’ roof, the parties attended two days of mediation, and trial was set and re-set three times. By the time Ideal filed its motion, trial was four months away. The appeals court concluded, based on “the totality of the circumstances,” that this litigation activity satisfied the Perry Homes standard for waiver of arbitration rights.

The Court also concluded the plaintiffs carried their burden to demonstrate they were prejudiced by Ideal’s litigation conduct. The Court noted the plaintiffs reside in Dallas, while the arbitration agreement requires arbitration in Houston; the plaintiffs incurred expenses of discovery and experts that could not necessarily be utilized in arbitration; the plaintiffs incurred expenses by participating in mediation; and the plaintiffs were ready to proceed to trial before Ideal attempted to compel arbitration. The Court considered these circumstances sufficient to establish prejudice and therefore affirmed.

Print