Opinion
14-23-00896-CV
12-19-2024
JUAN CARLOS CAMACHO-JIMENEZ, Appellant v. AIM DIRECTIONAL SERVICES, LLC, Appellee
On Appeal from the 152nd District Court Harris County, Texas Trial Court Cause No. 2021-65360.
Panel consists of Spain, Poissant, and Wilson, Justices.
OPINION
Charles A. Spain, Justice.
What is required for a party to waive its right to arbitration? In two issues on appeal, appellant Juan Carlos Camacho-Jimenez argues the trial court erred by (1) granting appellee AIM Directional Services, LLC's motion to compel arbitration and (2) denying his motion to vacate the arbitrator's award. We sustain Camacho's first issue, reverse the trial court's order granting the motion to compel and remand the case to the trial court for further proceedings.
Below, both parties and the court referred to appellant as either "Juan Carlos Camacho-Jimenez" or simply "Camacho." For brevity, we shall simply refer to him as "Camacho."
I. Background
In 2019, Camacho was employed by AIM as a "measurement-while-drilling engineer." He was also a member of the Texas Army National Guard and was ordered to report for active duty at the Texas-Mexico border. In December 2019, shortly before being released from active duty, he was terminated by AIM. In January 2020, Camacho's counsel sent AIM a letter, informing the company that he intended to pursue a military-service discrimination claim and also requesting that AIM provide a copy of any arbitration agreement that existed between the parties. Camacho's counsel further stated: "If you do not send [an arbitration agreement] to me, I will assume either (1) that one does not exist or (2) that AIM does [not] intend on asserting any rights it may have under the arbitration agreement[.]"
In February 2020, Camacho initiated a complaint with the Texas Workforce Commission (TWC). AIM participated in the administrative process and twice attended mediation with Camacho. In October 2021, when Camacho determined that the case could not be resolved by agreement, he filed suit against AIM alleging military-employment discrimination. AIM filed an answer to the suit and a plea to the jurisdiction in November 2021. In June 2022, AIM filed a motion to compel arbitration, which the trial court granted, rejecting Camacho's argument that AIM had waived its arbitration rights.
In arbitration, AIM argued that the arbitration agreement required Camacho to file a demand for arbitration by March 8, 2022, which he failed to do. The arbitrator agreed and dismissed Camacho's claims as untimely. Camacho moved to vacate the arbitrator's award, and AIM moved to affirm. The trial court granted AIM's motion to affirm and denied Camacho's motion to vacate. This appeal followed. See Perry Homes v. Cull, 258 S.W.3d 580, 585-87, 601 (Tex. 2008) (concluding that party appealing judgment rendered on arbitration award may also challenge any interlocutory order that merged into trial court's final judgment, such as order granting opposing party's motion to compel arbitration); see also Tex. Civ. Prac. &Rem. Code Ann. § 51.016 ("In a matter subject to the Federal Arbitration Act . . . a person may take an appeal or writ of error to the court of appeals from the judgment or interlocutory order of a district court, county court at law, or county court under the same circumstances that an appeal from a federal district court's order or decision would be permitted by 9 U.S.C. Section 16.").
II. Analysis
In his first issue, Camacho argues that AIM waived its arbitration rights through inaction.
A. Standard of review and applicable law
A trial court's decision to grant or deny a motion to compel arbitration is reviewed on appeal for abuse of discretion. See Henry v. Cash Biz, LP, 551 S.W.3d 111, 115 (Tex. 2018). But whether a party has waived its arbitration rights is a question of law we review de novo. See id.
When analyzing whether a party has waived their arbitration right under the Federal Arbitration Act (FAA), the Supreme Court of the United States has reduced the waiver inquiry to a single question: Did the party knowingly relinquish the right to arbitrate by acting inconsistently with that right? See Morgan v. Sundance, Inc., 596 U.S. 411, 419 (2022). Thus, Camacho, as the party asserting implied waiver as a defense to arbitration, had the burden to prove that AIM "'substantially invoked the judicial process,' which is conduct inconsistent with a claimed right to compel arbitration[.]" G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502, 511-12 (Tex. 2015) (quoting Perry Homes, 258 S.W.3d at 593). "Due to the strong presumption against waiver of arbitration, this hurdle is a high one." Perry Homes, 258 S.W.3d at 590.
Both parties agree that the Federal Arbitration Act applies here.
Whether a party has substantially invoked the judicial process depends on the totality of the circumstances. Id. at 591. Courts consider a wide variety of factors, including:
• how long the party moving to compel arbitration waited to do so;
• the reasons for the movant's delay;
• whether and when the movant knew of the arbitration agreement during the period of delay;
• how much discovery the movant conducted before moving to compel arbitration, and whether that discovery related to the merits;
• whether the movant requested the court to dispose of claims on the merits;
• whether the movant asserted affirmative claims for relief in court;
• the extent of the movant's engagement in pretrial matters related to the merits (as opposed to matters related to arbitrability or jurisdiction);
• the amount of time and expense the parties have committed to the litigation;
• whether the discovery conducted would be unavailable or useful in arbitration;
• whether activity in court would be duplicated in arbitration; [and]
• when the case was to be tried.G.T. Leach Builders, 458 S.W.3d at 512. All of these factors are rarely presented in a single case; accordingly, waiver must be decided on a case-by-case basis. Perry Homes, 258 S.W.3d at 590-91. But "[f]ederal courts have found waiver based on a few, or even a single [factor]." Id. at 591; see, e.g., Restoration Preserv. Masonry, Inc. v. Grove Eur. Ltd., 325 F.3d 54, 62 (1st Cir. 2003) (finding three-year delay alone was sufficient to establish waiver); Cabinetree of Wis., Inc. v. Kraftmaid Cabinetry, Inc., 50 F.3d 388, 391 (7th Cir. 1995) (finding removal to federal court alone was sufficient to establish waiver).
B. Application
We first address AIM's contention that in order to demonstrate waiver, Camacho needed not only to show that AIM had acted inconsistently with the right to arbitrate, but he also needed to demonstrate that he suffered prejudice as a result. Historically courts concluded prejudice was required to prove waiver. See Perry Homes, 258 S.W.3d at 595. However, as noted above, the Supreme Court has recently eliminated the prejudice element, observing that "Section 6 [of the FAA] instructs that prejudice is not a condition of finding that a party . . . waived its right to stay litigation or compel arbitration under the FAA." Morgan, 596 U.S. at 419. Therefore, we turn to the waiver factors to determine if AIM acted inconsistently with its right to arbitrate.
The most relevant factors in this case are the length of time AIM waited to move to compel arbitration, the reasons for AIM's delay, and whether and when AIM knew of the arbitration agreement during the period of delay. See G.T. Leach Builders, 458 S.W.3d at 512. Although there was only an 8-month delay between Camacho filing suit in October 2021 and AIM filing its motion to compel arbitration in June 2022, there was a delay of approximately 2 years and 4 months counting from the day Camacho sent a letter to AIM in February 2020, informing the company that he intended to file a TWC complaint. This letter specifically requested AIM provide any arbitration agreement that existed between the parties, stating, "If you do not send it to me, I will assume either (1) that one does not exist or (2) that AIM does [not] intend on asserting any rights it may have under the arbitration agreement[.]" AIM never responded to this request. And it is worth noting that the record reflects that AIM forwarded the arbitration agreement to Camacho for the first time on April 22, 2022, more than a month after the date by which AIM alleges Camacho was required to file his demand for arbitration.
As the employer who made Camacho sign the arbitration agreement, it cannot be denied that AIM was, or should have been, aware of the arbitration agreement throughout the entire two-year period at issue. And yet, AIM never offered a single reason for the delay or for failing to respond to Camacho's request for the arbitration agreement. In other words, despite Camacho inquiring into AIM's potential desires to pursue arbitration, AIM remained quiet and let the matter rest while the parties proceeded through almost 2 years of mediation as part of the TWC complaint. AIM then waited for Camacho to file suit, but still did not raise the affirmative defense of arbitration at that time. Instead, AIM waited another 7 months after its initial answer to file its motion to compel arbitration for the first time. And even though Camacho was not required to demonstrate prejudice, it is worth noting that this was not a harmless delay. Once the trial court compelled the parties to arbitrate their claims, AIM argued to the arbitrator that the arbitration agreement-the one Camacho did not know existed and that AIM did not supply to Camacho upon request-required Camacho to file a demand for arbitration within "the applicable limitations period." The trial court ultimately dismissed Camacho's claims as untimely. In totality, it is inconsistent with the right to arbitrate to proceed through years of mediation, fail to respond to a request for any applicable arbitration agreement for several years, delay raising arbitration for more than half a year after suit is finally filed, yet move to dismiss the arbitration claims for lack of timely compliance with the arbitration agreement it failed to provide, or even mention.
Applying the waiver factors to AIM and considering the length of the delay, AIM's knowledge of the arbitration agreement, AIM's refusal to respond to Camacho's request for any existing arbitration agreement, and AIM's lack of any explanation for the delay, we conclude AIM's conduct was inconsistent with the right to arbitrate. Accordingly, the trial court erred in granting AIM's motion to compel arbitration.
We sustain Camacho's first issue. Accordingly, we do not reach Camacho's second issue. See Tex.R.App.P. 47.1.
III. Conclusion
We reverse the trial court's order granting the motion to compel and remand the case to the trial court for further proceedings.