Opinion
Civil Action No. 3:02-CV-2417-L.
October 13, 2004
ORDER
Before the court are Plaintiff AFD Fund's Motion for Summary Judgment, filed May 6, 2004; and Defendant James Hinton's Motion to Stay Litigation Pending Arbitration, filed September 13, 2004. Upon consideration of the motions, response, the summary judgment evidence, record on file, and the applicable authority, the court grants Plaintiff AFD Fund's Motion for Summary Judgment; and denies Defendant James Hinton's Motion to Stay Litigation Pending Arbitration. I. Factual and Procedural Background
Defendants did not file a timely response to Plaintiff's Motion for Summary Judgment nor did they file a reply to Plaintiff's response to Defendant's Motion to Stay. On September 14, 2004, approximately two and one-half months after their response was due, Defendants attempted to file a response, which the court directed the clerk of the court to strike and unfile. See Order, dated September 14, 2004. Defendants' failure to respond does not, of course, permit the court to enter a "default" summary judgment. Eversley v. MBank Dallas, 843 F.2d 172, 174 (5th Cir. 1988). The court is permitted, however, to accept Plaintiff's evidence as undisputed. Id.; Tutton v. Garland Indep. Sch. Dist., 733 F.Supp. 1113, 1117 (N.D.Tex. 1990). Moreover, Defendants' failure to respond means that they have not designated specific facts showing that there is a genuine issue for trial. "A summary judgment nonmovant who does not respond to the motion is relegated to [his] unsworn pleadings, which do not constitute summary judgment evidence." Bookman v. Schubzda, 945 F.Supp. 999, 1002 (N.D.Tex. 1996) (citing Solo Serve Corp. v. Westowne Assocs., 929 F.2d 160, 165 (5th Cir. 1991)). As Defendants' pleadings are not sworn to, they have no competent summary judgment evidence before the court.
Plaintiff AFD Fund ("AFD" or "Plaintiff") is the post-confirmation estate of AmeriServe Food Distribution, Inc. ("AmeriServe") and its debtor affiliates. Ameriserve was an authorized distributor of food and restaurant supplies to Burger King Corporation franchises. On January 8, 1999, James Hinton signed an agreement with AmeriServe ("the Supply Agreement"). According to the Supply Agreement, Ameriserve agreed to deliver food and other supplies to certain Burger King franchises owned and operated by Hinton, Inc. and James Hinton (collectively "Defendants"), and Defendants agreed to pay for the food and other supplies provided by AmeriServe.
A dispute arose under the Supply Agreement. Specifically, AmeriServe delivered food and supplies to the restaurants listed in the Supply Agreement for which it was never paid. As the Supply Agreement contains an arbitration clause, AFD initiated arbitration on October 16, 2001 seeking compensation for food and supplies provided by AmeriServe to Hinton, Inc., plus accrued interest as provided for in the Supply Agreement. Hinton, Inc. subsequently stipulated to entry of an award finding it liable to AFD in the amount of $225,000. Thereafter, the arbitrator issued a Stipulated Award ("Award"), dated April 30, 2002, directing Hinton, Inc. to pay $225,000 within thirty days. The arbitrator further provided that if the Award was not satisfied within thirty days, interest would accrue at the rate established under applicable law. Hinton, Inc. failed to pay the amount of the Award within thirty days.
On October 30, 2002, AFD filed a petition in state district court against Hinton, Inc. and James Hinton. Specifically, AFD requested that the court confirm the Award and enter a judgment against Hinton, Inc.; and also sought a judgment against James Hinton contending that he is jointly and severally liable for the total unpaid purchase price of food and supplies provided by AmeriServe, plus interest. On November 6, 2002, Defendants removed this case to federal district court based on diversity jurisdiction. On December 20, 2002, AFD filed its Brief in Support of its Application for Confirmation of Arbitration Award. On November 19, 2003, the court granted AFD's Application for Confirmation of Arbitration Award.
AFD states that the amount due from James Hinton totals $359,121.07 as of May 3, 2004, of which $225,000 plus interest is a joint and several debt with Hinton Inc.
On May 6, 2004, AFD filed a motion for summary judgment on its claim of joint and several liability against James Hinton and on its claim of attorney's fees pursuant to section 38.001 of the Texas Civil Practice and Remedies Code. On September 13, 2004, James Hinton moved to stay this case pending arbitration. The court now considers these motions.
II. Motion to Stay Litigation Pending Arbitration
James Hinton moves to stay this litigation pending his demand for arbitration. AFD counters that (1) James Hinton's motion to stay is untimely and therefore should be stricken; and (2) even if his motion is not stricken, it should be denied as James Hinton has waived his right to seek arbitration. The court denies AFD's request to strike the motion to stay as untimely and will instead address AFD's substantive ground for opposing the motion, namely, that James Hinton waived his arbitration rights by substantially invoking the litigation process.
There is a strong presumption against waiver of arbitration. Republic Ins. Co. v. Paico Receivables, LLC, ___ F.3d ___, 2004 WL 1905296, at *2 (5th Cir. Sept. 13, 2004); see, e.g., Lawrence v. Comprehensive Bus. Servs. Co., 833 F.2d 1159, 1164 (5th Cir. 1987) ("Waiver of arbitration is not a favored finding and there is a strong presumption against it."). A party alleging waiver carries a heavy burden. Paico Receivables, 2004 WL 1905296, at *2; Associated Builders v. Ratcliff Constr. Co., 823 F.2d 904, 905 (5th Cir. 1987). A court may find a party has waived its right to arbitrate when "the party seeking arbitration substantially invokes the judicial process to the detriment or prejudice of the other party." Paico Receivables, 2004 WL 1905296, at *2 (quoting Subway Equip. Leasing Corp. v. Forte, 169 F.3d 324, 326 (5th Cir. 1999)) (internal quotations omitted).
In its Petition, AFD sought to confirm the arbitration award against Hinton Inc. pursuant to both the Federal Arbitration Act ("FAA") and Texas General Arbitration Act ("TGAA"). In his motion to stay, James Hinton does not indicate under which Act he seeks relief. This, however, is of no moment, as the legal standard for determining waiver is the same under both the FAA and TGAA. See Sedillo v. Campbell, 5 S.W.3d 824, 826 (Tex.App.-Houston [14th Dist.] 1999, no pet.).
A party invokes the judicial process when it litigates the claim that it later seeks to arbitrate by, at a minimum, engaging "in some overt act in court that evinces a desire to resolve the arbitrable dispute through litigation rather than arbitration." Paico Receivables, 2004 WL 1905296, at *3 (quoting Subway, 169 F.3d at 329). Further, prejudice, in this context, "refers to 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." Paico Receivables, 2004 WL 1905296, at *4 (quoting Subway, 169 F.3d at 327). Although the determination of whether a party has waived its arbitration rights depends on the individual facts of the case, "[t]hree factors are particularly relevant when making a prejudice determination." Paico Receivables, 2004 WL 1905296, at *4 (citing Price v. Drexel Burnham Lambert, Inc., 791 F.2d 1156, 1159, 1162 (5th Cir. 1986)).
First, while discovery relating to non-arbitrable claims is not prejudicial, where the pretrial activity was related to all of the parties' claims, including those that were conceded to be arbitrable, arbitration would result in prejudice. . . . Second, the time and expense incurred in defending against a motion for summary judgment could prejudice the party opposing arbitration. . . . Third, a party's failure to timely assert its right to arbitrate a dispute is also relevant to the prejudice determination.Paico Receivables, 2004 WL 1905296, at *4 (citing Price, 791 F.2d at 1159, 1162) (internal citations omitted).
With this standard in mind, the court determines that AFD has demonstrated that James Hinton waived his right to arbitrate this matter. James Hinton first demanded arbitration on September 10, 2004, three weeks before the trial date, three days before the court's original deadline for filing pretrial materials, one day after the court vacated the pretrial materials deadline and pretrial conference setting so as to finalize its review of the pending motion for summary judgment, four months after AFD filed its motion for summary judgment, and almost two years after the petition was filed. Since the filing of the petition, James Hinton has removed the case to federal court, filed an answer, responded to discovery propounded pursuant to the Federal Rules of Civil Procedure, and attended mediation. James Hinton demands arbitration under the arbitration clause in the Supply Agreement, and it is undisputed that James Hinton was aware of this arbitration clause well before September 10, 2004, as he signed the Supply Agreement in January 1999 and the arbitration clause is referred to in Plaintiff's petition, which was filed in October 2002. In other words, James Hinton did not proceed in this litigation in ignorance of his right to arbitrate under the terms of the Supply Agreement. The undisputed evidence reveals that James Hinton was aware of the arbitration clause in the Supply Agreement from the inception of this litigation, but he did not choose to exercise his arbitration rights until the eve of trial, almost two years after the filing of the petition. Clearly, James Hinton did not promptly move to compel arbitration.
Further, AFD would be prejudiced if the court were to compel arbitration at this point in the litigation. AFD has not only incurred substantial attorney's fees in prosecuting this case, which included filing a motion for summary judgment, it has also engaged in trial preparation, as the trial is set on the court's October trial docket. Given the facts of this case as previously described, the court determines that James Hinton's conduct amounts to a knowing waiver of his arbitration rights. Accordingly, the court denies James Hinton's Motion to Stay Litigation Pending Arbitration.
III. Motion for Summary Judgment
A. Summary Judgment Standard
Summary judgment shall be rendered when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 323-25 (1986); Ragas v. Tennessee Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998). A dispute regarding a material fact is "genuine" if the evidence is such that a reasonable jury could return a verdict in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). When ruling on a motion for summary judgment, the court is required to view all inferences drawn from the factual record in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587 (1986); Ragas, 136 F.3d at 458. Further, a court "may not make credibility determinations or weigh the evidence" in ruling on motion for summary judgment. Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000); Anderson, 477 U.S. at 254-55.
Once the moving party has made an initial showing that there is no evidence to support the nonmoving party's case, the party opposing the motion must come forward with competent summary judgment evidence of the existence of a genuine fact issue. Matsushita, 475 U.S. at 586. Mere conclusory allegations are not competent summary judgment evidence, and thus are insufficient to defeat a motion for summary judgment. Eason v. Thaler, 73 F.3d 1322, 1325 (5th Cir. 1996). Unsubstantiated assertions, improbable inferences, and unsupported speculation are not competent summary judgment evidence. See Forsyth v. Barr, 19 F.3d 1527, 1533 (5th Cir.), cert. denied, 513 U.S. 871 (1994). The party opposing summary judgment is required to identify specific evidence in the record and to articulate the precise manner in which that evidence supports his claim. Ragas, 136 F.3d at 458. Rule 56 does not impose a duty on the court to "sift through the record in search of evidence" to support the nonmovant's opposition to the motion for summary judgment. Id.; see also Skotak v. Tenneco Resins, Inc., 953 F.2d 909, 915-16 n. 7 (5th Cir.), cert. denied, 506 U.S. 832 (1992). "Only disputes over facts that might affect the outcome of the suit under the governing laws will properly preclude the entry of summary judgment." Anderson, 477 U.S. at 248. Disputed fact issues which are "irrelevant and unnecessary" will not be considered by a court in ruling on a summary judgment motion. Id. If the nonmoving party fails to make a showing sufficient to establish the existence of an element essential to its case and on which it will bear the burden of proof at trial, summary judgment must be granted. Celotex, 477 U.S. at 322-23.
B. Analysis
1. Joint and Several Liability
AFD seeks a judgment against James Hinton, contending that he is jointly and severally liable for the total unpaid purchase price of food and supplies provided by AmeriServe, plus interest. "In the law of contracts, joint and several liability usually arises when two or more promisors in the same contract promise the same or different performances to the same promisee'" Pitman v. Lightfoot, 937 S.W.2d 496, 528 (Tex.App.-San Antonio 1996, writ denied) (citing Restatement (Second) of Contracts §§ 288, 289 (1981); Corbin on Contracts 928 (West 1951)). Under Texas law, "obligations of multiple parties to a contract are usually `joint and several.'" Pitman, 937 S.W.2d at 528 (citing Marynick v. Bockelmann, 773 S.W.2d 665, 668 (Tex.App.-Dallas 1989), rev'd on other grounds, 788 S.W.2d 569 (Tex. 1990); Guynn v. Corpus Christi Bank Trust, 620 S.W.2d 188, 190 (Tex.Civ.App. — Corpus Christi 1981, writ ref'd n.r.e.)). The determination of whether the contract imposes joint liability depends on the intentions of the parties, as determined by the plain language of the contract. Guynn, 620 S.W.2d at 190.
The entire contract should be examined in an effort to harmonize and give effect to all the provisions in the contract so that none will be rendered meaningless. See Ogden v. Dickinson State Bank, 662 S.W.2d 330, 335 (Tex. 1983); Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983). "Unless two provisions in the agreement are necessarily repugnant or contradictory, the parties are presumed to have intended each one to accomplish some particular purpose." Ogden, 662 S.W.2d at 335. If, after applying rules of construction, the term is susceptible to more than one reasonable meaning, it is ambiguous. D.E.W., Inc. v. Local 93, Laborers' Int'l Union, 957 F.2d 196, 199 (5th Cir. 1992) (applying Texas law). The determination whether a contract term is ambiguous is a matter of law. Id. A contract is unambiguous if the court can give it a definite legal interpretation, Coker, 650 S.W.2d at 393, and is not rendered ambiguous simply because the parties disagree over its interpretation. See Praeger v. Wilson, 721 S.W.2d 597, 600 (Tex.App. — Ft. Worth 1986, writ ref'd n.r.e.). "The interpretation of an unambiguous insurance contract is a question of law." Utica Nat'l Ins. Co. v. Fidelity Cas. Co., 812 S.W.2d 656, 661 (Tex.App.-Dallas, 1991, writ denied).
The court determines that the provisions of the Supply Agreement are unambiguous. Specifically, the Supply Agreement provides, in relevant part, as follows:
THIS AGREEMENT (hereinafter "Agreement"), is made the 8(th) day of January 1999(,) by and between AmeriServe Food Distribution, Inc., a Delaware corporation, (hereinafter "Seller"), and Hinton, Inc., James Hinton, 250 Berry Hill Road, Suite 211, Columbia, SC 29210 (hereinafter "Buyer").RECITALS
A. Buyer is the owner and operator of certain Burger King ® restaurants (Restaurants) identified on Exhibit A attached hereto() and has the authority to enter in this Agreement on behalf of all individuals who are franchisees for the listed restaurants who shall be jointly and severally bound under this agreement.
* * *
THEREFORE, in consideration of the premises, and of the mutual agreements contained herein, the parties hereto agree as follows:
1. SUBJECT MATTER OF AGREEMENT. Buyer hereby agrees to purchase continuously from Seller, and Seller hereby agrees to distribute and sell continuously to (hereinafter collectively referred to as "supply") Buyer all of certain Burger King ® approved food, paper, dairy, produce, premium, and other products required by Seller in accordance with the terms and conditions contained herein.
* * *
Pl. App. at 5. The Supply Agreement is signed by James Hinton under the heading that reads "BUYER: Hinton(,) Inc. (James Hinton)." Pl. App. at 13. The Supply Agreement clearly identifies James Hinton as a "Buyer," and nowhere in the Supply Agreement does he limit his involvement as acting only on behalf of Hinton, Inc. As a "Buyer," James Hinton is liable for the total unpaid purchase price of food and supplies provided by AmeriServe, plus interest.
Moreover, even if James Hinton had signed the Supply Agreement only on behalf of Hinton, Inc. and therefore did not individually qualify as a "Buyer," which he does, James Hinton admits that he "is an individual who was a franchisee, as of January 8, 1999, for the restaurants listed at Exhibit A to the Supply Agreement. Pl. App. at 26. The Supply Agreement unequivocally states that franchisees for the listed restaurants are jointly and severally bound under the agreement. As a franchisee, James Hinton is also liable for the total unpaid purchase price of food and supplies provided by AmeriServe, plus interest.
For the reasons herein stated, there are no genuine issues of material fact with respect to James Hinton's joint and several liability. Accordingly, AFD is entitled to summary judgment on this issue.
2. Attorney's Fees
AFD seeks attorney's fees pursuant to § 38.001 of the Tex. Civ. Rem. Prac. Code. As the prevailing party on its underlying breach of contract claim, AFD is entitled to reasonable and necessary attorney's fees under § 38.001. Grapevine Excavation, Inc. v. Maryland Lloyds, 35 S.W.3d 1, 5 (Tex. 2000). Based on the current state of the record, the court is unable to determine the reasonableness and necessity of the services performed. Neither the number of hours expended nor the hourly rates of the attorneys and paralegals who worked on the case is included. Further, no time sheets or invoices are included. Without documentation, the court cannot make the necessary determination to determine the reasonableness of the fees requested. The application for attorney's fees will therefore be handled pursuant to Fed.R.Civ.P. 54(d)(2). Accordingly, AFD must submit its application within 14 days of the entry date of this opinion and order, along with any affidavit or other documentation it wishes the court to consider. Any response or reply must be filed in accordance with the Local Rules.
IV. Conclusion
For the reasons herein stated, no genuine issues of fact exist regarding James Hinton's joint and several liability for the food and other supplies provided by AmeriServe, and Plaintiff AFD Fund is entitled to judgment as a matter of law. Accordingly, the court grants Plaintiff AFD Fund's Motion for Summary Judgment. Moreover, the court denies Defendant James Hinton's Motion to Stay Litigation Pending Arbitration. The court will issue judgment in favor of Plaintiff AFD Fund in the amount of $359,121.07, plus interest, by separate document pursuant to Fed.R.Civ.P. 58. The application for attorney's fees will be handled pursuant to Fed.R.Civ.P. 54(d)(2).
It is so ordered.