Opinion
NO. 01-15-00387-CV
01-05-2016
IFEOLUMPIO O. SOFOLA M.D., Appellant v. AETNA HEALTH, INC. AND AETNA LIFE INSURANCE COMPANY, Appellees
On Appeal from the 152nd District Court Harris County, Texas
Trial Court Case No. 2013-76814
MEMORANDUM OPINION
This is an interlocutory appeal of an order denying arbitration. Dr. Ifeolumipo Sofola moved to compel arbitration of claims filed against him by two Aetna entities for breach of contract and fraud. The trial court found that Dr. Sofola waived his right to arbitration. Dr. Sofola appeals the trial court's order, arguing that he neither expressly nor impliedly waived his right to arbitrate.
See TEX. CIV. PRAC. & REM. CODE ANN. § 51.016 (West 2013) (permitting interlocutory appeal of order denying arbitration).
We reverse.
Background
A. The contractual relationship
Aetna Health, Inc. and Dr. Sofola entered into a Specialist Physician Agreement in March 2009 for Dr. Sofola to become a participating provider of health care services to Aetna's members. The agreement details the parties' various obligations to each other. It contains an arbitration provision that "[a]ny controversy or claim arising out of or relating to this Agreement including breach, termination, or validity of this Agreement, except for temporary, preliminary, or permanent injunctive relief or any other form of equitable relief, shall be settled by binding arbitration."
Another provision of the agreement requires the parties to limit the scope of the arbitration proceeding to claims between themselves and no other parties. It states that "[a]ny arbitration or other proceeding related to a dispute arising under this Agreement shall be conducted solely between them. Neither Party shall request, nor consent to any request, that their dispute be joined or consolidated for any purpose . . . with any other proceeding between such Party and any third party."
The agreement also has a specific provision regarding the type of damages that may be sought. Section 9.4 states that "either Party's liability, if any, for damages to the other Party for any cause whatsoever arising out of or related to this Agreement, and regardless of the form of the action, shall be limited to the damaged Party's actual damages." This provision applies regardless of the theory asserted: "Neither Party shall be liable for any indirect, incidental, punitive, exemplary, special or consequential damages of any kind whatsoever sustained as a result of a breach of this Agreement or any action, inaction, alleged tortious conduct, or delay by the other Party."
B. Aetna sues Dr. Sofola
A couple of years into the contractual relationship, Aetna claimed that Dr. Sofola and other physicians were breaching their agreements and collecting more than their agreed amount of professional fees through a scheme to draw Aetna members to an out-of-network facility in which they held an ownership interest. According to Aetna, the physicians told their Aetna patients that the out-of-network facility would treat them as in-network patients. This led the patients to agree to receive services at the out-of-network facility. In return, the facility greatly reduced or eliminated the members' copays, removing any financial incentive the patients had to stay in-network.
According to Aetna, the physicians established shell practice entities and entered into secret agreements to receive kickbacks from the out-of-network facility for the referrals. Because Aetna was paying higher facility fees at the out-of-network facility, the arrangement damaged Aetna. Aetna asserts that, to the extent some of the higher facility fees were being funneled to the referring physicians, the conduct violated the provider agreements.
In 2011, Aetna sued Dr. Sofola. The suit was later dismissed. Aetna refiled its suit in late 2013. That petition asserted only equitable claims. Dr. Sofola filed a single responsive pleading in January 2014. The pleading included an answer, plea to the jurisdiction, and special exceptions. He argued that the provider agreement contained a mandatory arbitration provision and that Aetna was impermissibly attempting to plead around that arbitration agreement. He contended that the suit should be dismissed because Aetna did not have standing to assert its "equitable" claims. Dr. Sofola again argued that Aetna was improperly attempting to plead around the arbitration provision in a reply filed in March 2014.
The trial court partially granted Dr. Sofola's plea and dismissed all claims except Aetna's equitable accounting claim. At that point—in March 2014—the equitable accounting claim was the only claim pending against Dr. Sofola, and he had no express contractual right to arbitrate that claim.
In late October 2014, Dr. Sofola filed a motion for summary judgment on the one remaining claim. He argued that an equitable accounting was not available to Aetna because Aetna had an adequate remedy at law through arbitration:
Aetna has an adequate remedy at law, but it is one that Aetna does not like. Aetna may assert a breach of contract claim to recover any damages it claims to have suffered as a result of alleged breaches of its contracts with . . . Dr. Sofola. But Aetna does not want to pursue its breach of contract claims because they are subject to mandatory confidential arbitration. . . . The fact that Aetna does not like its remedy at law cannot and does not erase the fact that one exists, and Aetna cannot demand an equitable accounting just because it does not like the forum for its adequate remedy at law.
Two weeks later, in November 2014, Aetna amended its petition for the first time. The amended petition asserted claims against multiple defendants, not just Dr. Sofola. It asserted various contractual, injunctive, and tort causes of action, in addition to the equitable accounting claim. It sought exemplary damages, not just equitable relief. The first amended petition also informed the trial court that "[i]t is possible that the Doctors and Aetna may agree that some of their dispute will be conducted in a private arbitration."
C. Dr. Sofola moves to compel arbitration
In January 2015—two months after Aetna amended its petition to assert non-equitable claims—Dr. Sofola and his co-defendants filed a motion seeking "dismissal for mandatory arbitration." Dr. Sofola argued that "Aetna's claims are subject to arbitration provisions" but it was pursuing litigation "to intimidate physicians around the nation and prevent them from referring patients to out of network providers." He requested that the trial court dismiss Aetna's claims pursuant to the "undisputed," mandatory arbitration provision. In support, he quoted Aetna's statements made at an earlier hearing, which he viewed as admitting that Aetna's non-equitable claims were subject to mandatory arbitration:
Well, we are allowed to plead around the arbitration provision. The arbitration provision gives us an equitable carve out and that's exactly what we are doing. We are trying to plead within that equitable claim.Dr. Sofola's arbitration motion was scheduled for hearing on January 23, 2015. Several events occurred before that hearing date.
D. Surrounding events that occurred before hearing on motion
Dr. Sofola filed his motion to dismiss on January 6. Before Aetna responded, it twice sought to amend the docket control dates. The first motion was filed January 9 and sought to extend expert designation deadlines because Aetna had not received notice of the deadlines. Dr. Sofola agreed to the relief Aetna sought: new expert deadlines. The second motion was filed just three days later. It sought to extend other case deadlines for the same reason. Again, Dr. Sofola did not oppose the relief sought.
Aetna filed its response to Dr. Sofola's motion to dismiss on January 21, stating that "Aetna has voluntarily agreed to arbitrate its claims against . . . Sofola, [and] arbitration of those claims should be ordered."
The motion was set to be heard on February 20. Three days before the hearing date, on February 17, Dr. Sofola filed a pleading withdrawing the motion. According to that pleading, the withdrawal was "without prejudice" and Dr. Sofola "reserve[d] the right to re-file a Motion to Dismiss in the future, if necessary."
On February 19, Aetna filed another agreed motion to extend deadlines. Aetna's counsel confirmed at oral argument that Aetna prepared the motion and signed it for Dr. Sofola by permission. The pleading noted that the case was one month out from trial, reiterated that Aetna had not received notice of some deadlines in the past, and requested that the trial date be extended
The pleading recounted that Dr. Sofola had moved to compel arbitration, Aetna had "agree[d] to arbitrate its claims," and the motion had been reset "while the Parties attempted to agree on submitting the claims to arbitration."
In addition, the pleading referenced that, three days earlier, on February 16, Dr. Sofola and his co-defendants had "notified Aetna that [they] intended to withdraw their motion and would no longer request that the court compel arbitration."
Finally, the motion confirmed that the parties were not requesting new dates to cause delay.
To summarize the events thus far:
January 6 | Dr. Sofola moved to dismiss suit because of themandatory arbitration provision |
January 21 | Aetna stated that it has agreed to arbitrate "all of itsclaims against . . . Sofola" but contended that claimsagainst other defendants should continue |
February 17 | Dr. Sofola withdrew "without prejudice" his motionseeking to dismiss the suit for mandatory arbitration |
February 19 | In the context of requesting new docket control dates,Aetna acknowledged that it had agreed to arbitrate andthat Dr. Sofola withdrew the motion and would nolonger request that the Court "compel" arbitration |
February 20 | Date motion would have been heard if it had not beenwithdrawn |
One week after the new dates were entered, Dr. Sofola filed a counterclaim "subject to the express arbitration provision and request for arbitration pending before this court." In his counterclaim—his third pleading referencing a request for arbitration—Dr. Sofola stated as follows:
Dr. Sofola's counterclaim is expressly filed subject to the arbitration agreement between the parties. Dr. Sofola insists that all matters pending in this litigation, including this counterclaim, are to be arbitrated. . . . [Dr. Sofola] insists that the case is being wrongly prosecuted in court and asks that the suit be dismissed and referred to arbitration in its entirety."
Three days later, Dr. Sofola filed a motion for contractual severance of claims and arbitration. Within the next ten days, Dr. Sofola filed three more pleadings either supplementing evidentiary support for the relief sought or making corrections to the pending motion for arbitration. After these filings, Dr. Sofola had pleaded a right to arbitration in at least seven pleadings.
E. Aetna responds to the motion by arguing waiver
On March 26—the same day that Dr. Sofola filed his last amendment to the arbitration motion—Aetna filed its response. Despite its earlier agreements to arbitrate, Aetna now challenged arbitration, contending that Dr. Sofola had waived his right to arbitration. Specifically, Aetna contended that Dr. Sofola's February 17 notice of withdrawal of his motion to dismiss acted as a judicial admission and estopped him from later seeking arbitration. The trial court held a non-evidentiary hearing.
In April 2015, which was five months after Aetna first added a claim for legal relief (instead of just equitable relief), the trial court denied Dr. Sofola's motion to compel arbitration. The order did not state the basis for the denial, though the only basis Aetna had raised was waiver. Dr. Sofola timely appealed.
Waiver
We must determine whether Dr. Sofola's actions withdrawing his pending arbitration motion, after he submitted multiple pleadings asserting a contractual right to arbitration and Aetna filed pleadings indicating an agreement to arbitrate, either expressly waived or impliedly waived his right to arbitrate. See G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502, 511-12 (Tex. 2015) (explaining express and implied waivers).
"The elements of waiver include (1) an existing right, benefit, or advantage held by a party; (2) the party's actual knowledge of its existence; and (3) the party's actual intent to relinquish the right or intentional conduct inconsistent with the right." Ulico Cas. Co. v. Allied Pilots Ass'n, 262 S.W.3d 773, 778 (Tex. 2008). Waiver must be intentional. In re Bank One, N.A., 216 S.W.3d 825, 827 (Tex. 2007). Waiver may be express or implied. Perry Homes v. Cull, 258 S.W.3d 580, 593 (Tex. 2008). If implied from a party's conduct, that conduct must be "unequivocal." Id.; see Williams Indus., Inc. v. Earth Dev. Sys. Corp., 110 S.W.3d 131, 135 (Tex. App.—Houston [1st Dist.] 2003, no pet.); Haddock v. Quinn, 287 S.W.3d 158, 177 (Tex. App.—Fort Worth 2009, pet. denied). "Whether waiver occurs depends on the individual facts and circumstances of each case." Williams Indus., 110 S.W.3d at 135.
A. Standard of review
When the relevant facts are undisputed, whether a party has waived its right to arbitrate is a question of law that we review de novo. Id. at 511; see Kennedy Hodges, L.L.P. v. Gobellan, 433 S.W.3d 542, 545 (Tex. 2014) (per curiam); Williams Indus., 110 S.W.3d at 136 (discussing use of other standards by some courts). "[W]e do not defer to the trial court on questions of law." Perry Homes, 258 S.W.3d at 598.
"There is a strong presumption against waiver of arbitration." Perry Homes, 258 S.W.3d at 584; see Garcia v. Huerta, 340 S.W.3d 864, 869 (Tex. App.—San Antonio 2011, pet. denied) ("Once a valid agreement to arbitrate has been established, a presumption attaches favoring arbitration and the burden shifts to the party resisting arbitration to establish a defense to enforcing arbitration."); see also Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S. Ct. 927, 941 (1983) (discussing United States Arbitration Act and stating 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."); Richmont Holdings, Inc. v. Superior Recharge Sys., L.L.C., 455 S.W.3d 573, 574 (Tex. 2014) (per curiam) (listing numerous cases in which the Texas Supreme Court has found no waiver). "[C]ourts should resolve any doubts as to the agreement's scope, waiver, and other issues unrelated to its validity in favor or arbitration." Ellis v. Schlimmer, 337 S.W.3d 860, 862 (Tex. 2011).
B. Express waiver
Express waiver occurs when a party clearly repudiates or relinquishes its right of arbitration. G.T. Leach, 458 S.W.3d at 511 (stating that express waiver occurs through "clear repudiation of the right" to arbitrate). In the context of an arbitration provision, express waiver occurs "when a party affirmatively indicates that it wishes to resolve the case in the judicial forum, rather than through arbitration." Okorafor v. Uncle Sam & Assocs., Inc., 295 S.W.3d 27, 39 (Tex. App.—Houston [1st Dist.] 2009, pet. denied). "Clear" means "free from doubt" and "sure." Black's Law Dictionary 287 (9th ed. 2009) (defining clear); see id. at 1667 (defining "unequivocal" as unambiguous, clear; free from uncertainty); cf. Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323, 331, 336, 337 n.8 (Tex. 2011) (requiring disclaimer of reliance clause to also be "clear and unequivocal"). The waiver must not only be clear, it must be specific. Moayedi v. Interstate 35/Chisam Rd., L.P., 438 S.W.3d 1, 6 (Tex. 2014); see Shumway v. Horizon Credit Corp., 801 S.W.2d 890, 893 (Tex. 1991) ("a waiver provision must state specifically and separately the rights surrendered.").
Acts that are merely "inconsistent with an intent to exercise the right to arbitrate" are not sufficient to demonstrate an express waiver of the right to arbitrate. G.T. Leach, 458 S.W.3d at 511. For example, requesting a new trial date might be inconsistent with exercising a right to arbitration, but that inconsistency does not qualify as an express waiver. Id.; see In re Fleetwood Homes of Tex., L.P., 257 S.W.3d 692, 694 (Tex. 2008) ("Nothing in this communication expressly waives arbitration or revokes the arbitration demand Fleetwood included in every answer it filed.").
Aetna makes two arguments for concluding that Dr. Sofola expressly waived his contractual right to arbitrate. First, it argues that the February 19 agreed motion to extend case deadlines contains an express waiver. Second, it argues that, by placing reservation-of-rights language in his February 17 notice, Dr. Sofola limited his ability to reassert a right to arbitrate to situations in which it became "necessary," which he has not shown to exist.
1. The February 19 pleading does not contain an express waiver
The February 19 agreed motion requested new docket control dates. Requesting a trial date or seeking new docket control dates does not constitute an express waiver of arbitration rights. G.T. Leach, 458 S.W.3d at 511 (holding that, while such actions could be relevant to an implied waiver argument, "they do not constitute an express waiver"). Nonetheless, Aetna argues that Paragraph Three of the motion does qualify as an express waiver. It states as follows:
In the interim, [Dr. Sofola] filed a Motion to Dismiss for Mandatory Arbitration and for Stay. Aetna filed a response, agreeing to arbitrate its claims against doctors. The motion was set for oral hearing on January 23, 2015 and then reset for February 20, 2015, while the Parties attempted to agree on submitting the claims to arbitration. On February 16, 2015, [Dr. Sofola] notified Aetna that [Dr. Sofola] intended to withdraw [his] motion and would no longer request that the Court compel arbitration.
There are at least three problems with Aetna's argument that Paragraph Three is an express waiver—meaning a clear, unequivocal relinquishment of a right to arbitrate. First, while the agreed motion states that Dr. Sofola "intended to withdraw" his motion and would no longer request the court to "compel" arbitration, that statement of intent follows the representation that Aetna had agreed to arbitrate. Such an agreement presumably would render any further need to compel arbitration unnecessary. Aetna's proposed interpretation of the clause—that Dr. Sofola changed his mind and decided against arbitration—nevertheless remains plausible. However, because the statement admits of two different but reasonable interpretations, we cannot conclude that Paragraph Three is an express, clear, and unequivocal repudiation of the right to arbitration or an affirmative statement that Dr. Sofola wished to resolve the case in the judicial forum, rather than through arbitration. G.T. Leach, 458 S.W.3d at 511 (express waiver occurs "through a clear repudiation of the right" to arbitrate); Ellis, 337 S.W.3d at 862 (stating that "any doubts" as to waiver of arbitration right should be resolved "in favor or arbitration").
Aetna has argued that statements made by Dr. Sofola or his counsel at the time of these events should be considered. But those statements are not in the record and find no support in the arguments contemporaneously made to the trial court.
Second, neither Paragraph Three nor the remainder of the agreed motion provided a full history of the pleadings relevant to the arbitration issue. Instead, the motion simply explained that there had been "glitches" with the new electronic filing system that caused Aetna to miss deadlines, Dr. Sofola had agreed to extend deadlines as a result, and then again, on February 19, Dr. Sofola agreed to extend deadlines once more. But we should consider the fuller context and the state of the pleadings at that time to determine whether an express waiver occurred. Cf. Garza v. Villarreal, 345 S.W.3d 473, 479 (Tex. App.—San Antonio 2011, pet. denied) (court interpreting Rule 11 agreement may consider surrounding circumstances, including state of pleadings, to determine to what parties had agreed).
These are the types of agreements that attorneys are encouraged to reach without the necessity of court intervention. See Texas Lawyer's Creed—A Mandate for Professionalism, III § 6, 15.
The deadlines set by the trial court in response to the February 19 agreed motion could have been adopted in a subsequent arbitration order. Indeed, Aetna could have been concerned that an arbitrator would retain the dates unaware that "glitches" caused missed deadlines. Thus, it was in Aetna's interest to move the deadlines even if there was a continuing agreement to arbitrate.
The circumstances that were not included with the "glitches" discussion or fully explained in Paragraph Three were (1) that Aetna had twice agreed to arbitrate against Dr. Sofola but did not agree to arbitrate against the other defendants, (2) the complexity surrounding how the parties would divide the litigation between arbitrable claims and parties and those that would remain in litigation, and (3) that Dr. Sofola was no longer asking the court to "compel" arbitration but all the while reserved his right to demand arbitration if court intervention became "necessary."
The court order that resulted from Dr. Sofola's arbitration motion could have addressed more than simply whether the contract claims against Dr. Sofola should be arbitrated. It could have addressed the unarbitrable claims for equitable relief and the claims against third parties, as well as the issue of the recovery of certain types of damages. Thus, an agreement to arbitrate, in this case, was not as simple as two parties agreeing that all claims between them should be arbitrated.
At the hearing on the waiver issue, none of the parties emphasized Aetna's express agreement to arbitration in two prior pleadings or the context of the earlier withdrawal of the arbitration motion. But these two pleadings and this context support our conclusion that Dr. Sofola did not intentionally or clearly repudiate his right to arbitration, expressly or unequivocally relinquish that right, or affirmatively state that he wished to resolve the case in the judicial forum. See G.T. Leach, 458 S.W.3d at 511; Okorafor, 295 S.W.3d at 39.
Third, Aetna confirmed at oral argument that it drafted the February 19 document that it now argues is an express waiver by its party-opponent. Given Aetna's role as drafter, an effective waiver would need to be much more straightforward than what we are presented with here. To accept Aetna's reading of the pleadings, we would have to resolve doubt against arbitration and imply a motivation on Dr. Sofola that the surrounding circumstances do not support. Because of the clarity requirement for an express waiver, this we cannot do. See G.T. Leach, 458 S.W.3d at 511; Ellis, 337 S.W.3d at 862.
Aetna relies on Gilmore v. Shearson/American Express Inc., 811 F.2d 108, 113 (2d Cir. 1987), overruled on other grounds by Gulfstream Aerospace Corp. v. Mayacamas Corp., 485 U.S. 271 (1988), to argue that the act of withdrawing a motion for arbitration waives the right to arbitrate and becomes binding on the pleader such that he cannot later take an inconsistent position in the litigation. But Gilmore is distinguishable because the party that previously withdrew its arbitration motion, in that case, agreed that the withdrawal was an express waiver and "conceded" that the effect of the withdrawal was that it could no longer pursue arbitration without a significant, intervening event. Id. at 112. Dr. Sofola makes no such concession here. He has steadfastly maintained that he was not waiving his contractual right to arbitrate.
2. The February 17 "if necessary" language does not prohibit dismissal
Because Dr. Sofola's withdrawal motion stated that it was without prejudice and that he reserved the right to reassert his motion "if necessary," Aetna's second argument hinges on the extent that limitation placed on Dr. Sofola's ability to pursue post-withdrawal arbitration. Aetna argues that this phrase limited Dr. Sofola's opportunity to re-urge his right to arbitration to situations in which arbitration became "absolutely essential," which Dr. Sofola has not shown to exist.
But there is another, more plausible reading of this language: Dr. Sofola was removing the issue from the court's consideration given that the parties had reached an agreement to arbitrate, but he would re-urge his motion if the parties could not agree on the form of the dismissal order. Consistent with this interpretation, the parties filed a pleading, just two days later, stating that "Aetna [has] filed a response, agreeing to arbitrate its claims . . . ." Thus, we conclude that Dr. Sofola did not waive his right to arbitration through this February 17 pleading either.
See footnote 5, supra. --------
Throughout this case, Dr. Sofola consistently maintained that Aetna was making breach-of-contract claims, that Aetna was attempting to recast them as equitable claims to avoid arbitration, and that he had a contractual right to compel arbitration. Dr. Sofola only removed his arbitration motion from consideration after Aetna agreed in a pleading to arbitrate its claims against Dr. Sofola and the parties informed the court that they were using the time during which the issue was being passed to "agree" on the terms of the submission to arbitration. We conclude that Dr. Sofola did not expressly waive his right to arbitration during the course of these events. Having rejected Aetna's express-waiver argument, we turn to its contention that Dr. Sofola impliedly waived that right.
C. Implied waiver
"A party asserting implied waiver as a defense to arbitration has the burden to prove that (1) the other party has 'substantially invoked the judicial process,' which is conduct inconsistent with a claimed right to compel arbitration, and (2) the inconsistent conduct has caused it to suffer detriment or prejudice." G.T. Leach, 458 S.W.3d at 511-12; Perry Homes, 258 S.W.3d at 593-94. Prejudice is "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." Perry Homes, 258 S.W.3d at 597; Kennedy Hodges, 433 S.W.3d at 545.
With regard to both prongs of the implied-waiver defense, "this hurdle is a high one" because "the law favors and encourages arbitration." G.T. Leach, 458 S.W.3d at 512 (quoting Perry Homes, 258 S.W.3d at 589-90); see Richmont Holdings, Inc. v. Superior Recharge Sys., L.L.C., 455 S.W.3d 573, 575 (Tex. 2014) (per curiam). The party asserting implied waiver bears a "heavy burden of proof," and the court must resolve all doubts in favor of arbitration. In re Bruce Terminix Co., 988 S.W.2d 702, 705 (Tex. 1998); USX Corp. v. West, 759 S.W.2d 764, 767 (Tex. App.—Houston [1st Dist.] 1988, no writ).
Implied waiver is decided on a case-by-case basis by assessing the "totality of the circumstances." Kennedy Hodges, 433 S.W.3d at 545. We consider such factors as (1) how long the party moving to compel arbitration waited to do so; (2) the reasons for the movant's delay; (3) whether and when the movant knew of the arbitration agreement during the period of delay; (4) how much discovery the movant conducted before moving to compel arbitration and whether that discovery related to the merits; (5) whether the movant requested the court to dispose of claims on the merits; (6) whether the movant asserted affirmative claims for relief in court; (7) the extent of the movant's engagement in pretrial matters related to the merits (as opposed to matters related to arbitrability or jurisdiction); (8) the amount of time and expense the parties have committed to the litigation; (9) whether the discovery conducted would be unavailable or useful in arbitration; (10) whether activity in court would be duplicated in arbitration; and (11) when the case was to be tried. G.T. Leach, 458 S.W.3d at 512; Perry Homes, 258 S.W.3d at 590-91; Kennedy Hodges, 433 S.W.3d at 545.
1. Substantially invoking judicial process
Aetna argues that Dr. Sofola took actions during the pendency of the litigation that substantially invoked the judicial process. The first act on which Aetna relies is Dr. Sofola's decision to challenge Aetna's equitable claims through a plea to the jurisdiction instead of a motion to compel arbitration. Aetna's original petition asserted equitable claims only. Aetna expressly stated that it was presenting equitable claims in an effort to plead around the contractual arbitration provision. Dr. Sofola argued that the claims were actually breach of contract claims. His plea to the jurisdiction based on arguments consistent with the arbitration provision effectively challenged those claims and resulted in all but one being dismissed. We do not agree that Dr. Sofola substantially invoked the judicial process by asserting a plea to the jurisdiction.
Next, Aetna cites Dr. Sofola's summary-judgment motion and counterclaim. Dr. Sofola moved for summary judgment on the only Aetna claim that survived the plea to the jurisdiction. In that pleading, Dr. Sofola again asserted that Aetna's true claim was a breach-of-contract claim and that Aetna was seeking an equitable accounting only to avoid the confidential arbitration provision that applied. Dr. Sofola's subsequent counterclaim was filed "expressly and unconditionally subject to and insisting upon compliance with the arbitration provision between the parties." The title of the pleading stated that it was "filed subject to the express arbitration provision and request for arbitration pending before this court." We do not view either of these pleadings as substantially invoking the judicial process.
Next, Aetna argues that Dr. Sofola's notice of withdrawal of his arbitration motion acted as a waiver. We have already concluded that the notice, when considered in the context of the parties' other pleadings and in light of the surrounding circumstances, equally could be viewed as passing the hearing because the parties had agreed to arbitrate. Because the record does not support the conclusion that Dr. Sofola withdrew his motion to elect litigation and in light of the strong presumption against waiver of the right to arbitrate, we conclude that the withdrawal does not represent a substantial invocation of the judicial process. See Williams Indus., 110 S.W.3d at 135.
Finally, both times that Dr. Sofola executed agreed motions to extend deadlines, those documents plainly stated that the requests were being made because Aetna had been disadvantaged by missing deadlines. Dr. Sofola acquiesced to Aetna's request for new deadlines. Doing so does not equate to a deliberate act inconsistent with the right to arbitrate. See id.
2. Evidence of prejudice
To show prejudice through delay, Aetna focuses on the fact that Dr. Sofola first moved to compel arbitration "13 months after suit was filed by Aetna." At the hearing on the motion to compel arbitration, Aetna argued, "if Dr. Sofola wanted to go to arbitration, he should have filed that Motion Day One. He should have been in arbitration from Day One and avoiding all of this unnecessary expense in this case." But during the first 11 months of the lawsuit, Aetna sought only equitable relief—which was not subject to arbitration—specifically noting that it was exercising its right to plead within the "equitable carve out" that the arbitration provision provided. The time period during which Aetna was asserting only equitable claims does not count against Dr. Sofola as a period of delay in seeking arbitration.
Removing those eleven months from our analysis, we see that Aetna first asserted its non-equitable claims in November 2014. Dr. Sofola moved for dismissal, specifically citing the arbitration clause, two months later. This is not a lengthy delay. Regardless, "while the time period may be instructive in interpreting the parties' intentions, it alone is not the standard by which courts determine" whether a waiver has occurred. In re Universal Underwriters, 345 S.W.3d 404, 408 (Tex. 2011). Instead, a court must examine "the circumstances and the parties' conduct, not merely a measure of the amount of time involved" preceding the alleged waiver. Id. Because the parties, through their pleadings, were seemingly agreeing to arbitrate but continuing to negotiate aspects of that agreement, a two month delay does not appear unreasonable.
Finally, Aetna argues that the "time and expense that Aetna has incurred because of Sofola's actions is obvious from the fact of the record." However, the timeline of events does not support that contention. Aetna presents no evidence that Dr. Sofola engaged in any discovery or otherwise affirmatively sought relief in the judicial forum during the period before he sought to compel arbitration. Nor does Aetna present any evidence that it spent much time or money on the merits of its arbitrable claims.
After initiating its lawsuit, Aetna spent much of the next year attempting to plead around the arbitration agreement. When Aetna finally clearly asserted arbitrable claims, Dr. Sofola demanded arbitration within two months and was denied that right within four. In light of the significant amount of time Aetna spent defending its "carve out" pleading approach and Dr. Sofola spent demanding or preserving his contractual right to arbitrate, we do not view the record as supporting Aetna's contention that it endured expense and delay as a result of Dr. Sofola's flip-flop tactics versus its own trial strategy. The record does not support Aetna's statement to the contrary.
In sum, Aetna's petition seeking legal relief subject to the arbitration clause (not just equitable relief) had been on file only four and one-half months when the trial court rejected Dr. Sofola's arbitration motion based on Aetna's waiver defense. During that time, Dr. Sofola filed at least five pleadings asserting a right to arbitration, and Aetna filed at least two pleadings evidencing an agreement to arbitration. We conclude that Aetna has not established the requirements for holding that Dr. Sofola impliedly waived his right to arbitration during these events.
Conclusion
Because Dr. Sofola neither expressly nor impliedly waived his right to arbitration, we conclude that the trial court erred by denying his motion. We reach this conclusion by considering the language in the agreed motion on which Aetna bases its waiver argument—language that was drafted by Aetna—as well as the surrounding circumstances and pleadings, including Aetna's two statements that it was agreeing to arbitrate and that the hearing that was approaching when those statements were made.
Aetna offered no basis for denying Dr. Sofola's motion other than waiver; therefore, having concluded that the waiver argument was without merit, we reverse the trial court's order denying the motion and instruct the trial court to grant the motion as to all non-equitable claims.
Harvey Brown
Justice Panel consists of Justices Jennings, Higley, and Brown.