Supreme Court of Texas, No. 19-0263 (June 26, 2020)
Bonsmara contracted with Hart to feed and care for cattle. When a dispute arose about whether Hart was doing its job, Bonsmara sued. The Hart defendants moved to compel arbitration, as provided for in the parties’ contract. The trial court denied that motion and refused to send the matter to arbitration. Although the Hart defendants could have taken an interlocutory appeal of that order, they failed to do so within the prescribed timeframe. They sought mandamus relief after the deadline had expired for an interlocutory appeal, but—no surprise—the court of appeals rejected that petition without addressing the merits because there had been an adequate remedy by appeal. So, the case proceeded to a jury trial in the district court, which led to a judgment against the Hart defendants for several hundred thousand dollars. Undaunted, the Hart defendants appealed and included a challenge to the trial court’s denial of its motion to compel arbitration. Bonsmara argued the appellate courts lacked jurisdiction because the Hart defendants had blown their interlocutory appeal. But the court of appeals disagreed, and so did a majority of the Supreme Court.
The Supreme Court majority observed that the statute at issue “uses the permissive word ‘may,’ and nothing in the text of that section or related statutes indicates that a party’s choice not to pursue an appeal from an interlocutory order has any consequences for the longstanding jurisdictional principle that it may challenge the order on appeal from a final judgment.” Therefore, the majority said, a party has “discretion to pursue an interlocutory appeal of an arbitration order,” and “the party’s choice not to file an interlocutory appeal [does not] deprive an appellate court of ‘jurisdiction to review [that] order ... as part of the appeal of a final judgment in the case.’” Nor did the Hart defendants’ ill-fated mandamus, in which the court of appeals did not reach the merits of their complaint.
The dissenters argued that the majority’s rigid textual approach ignored the policies underlying the statutes, undermined the very purposes of arbitration, and led to an absurd result. But the majority responded that there were countervailing policy reasons supporting the result it reached and, more important, such concerns were for the Legislature, not the courts. Perhaps recognizing the reasoning and holding here would have broader applicability than its prior decision in Ebrom, the Court acknowledged that there could be non-statutory reasons why not pursuing an interlocutory appeal might lead to the forfeiture of post-judgment appeal in some cases. For example, the issue might be mooted by subsequent proceedings or events, as with respect to a temporary injunction. Or a party might be estopped, as with respect to an order appointing a receiver, where third parties dealt in good faith with the receiver in the interim. But such concerns were not at play here, the majority held.
Moving to the merits, the Court affirmed the appeals court’s ruling that the trial court had erred in denying the motion to compel arbitration. But both appellate courts had to deal with an issue not originally presented to the trial court: by proceeding to trial, had the Hart defendants waived their right to compel arbitration by “substantially invoking the litigation process to Bonsmara’s detriment”? No, said the Supreme Court. But its reasoning on this score was not altogether clear. The Court suggested Bonsmara may have waived the issue, saying that it had “never asserted this type of waiver in any court, including ours,” that such an argument would not affect jurisdiction in any event, and that the “doctrine therefore has no place in our analysis.” But then, during its merits discussion, the Court explained that by merely complying with the trial court’s order denying arbitration and participating in trial, the Hart defendants could not be said to have waived their right to appeal that decision—no more than would any party that complied with any other interim order pending final judgment.