G.T. Leach Builders, LLC v. Sapphire V.P., Lp
458 S.W.3d 502
| Tex. | 2015Background
- Sapphire V.P., L.P. developed a condominium project damaged by Hurricane Dolly; it sued insurance brokers for allegedly letting builder’s-risk coverage lapse and later amended to add general contractor G.T. Leach, two subcontractors (Power Design, Atlas Comfort), and engineers as defendants based on alleged construction defects.
- The general contract between Sapphire and G.T. Leach contained a broad arbitration clause covering “Any Claim arising out of or related to the Contract” and a joinder provision permitting inclusion of other parties; G.T. Leach moved to compel arbitration.
- Other defendants (Insurance Brokers, Engineers, Subcontractors) also sought to compel arbitration: they relied on the general contract (though they did not sign it) and the Subcontractors also relied on arbitration clauses in their subcontracts with G.T. Leach (Sapphire did not sign the subcontracts).
- Trial court denied all motions to compel without explanation; the court of appeals affirmed. The Supreme Court of Texas granted review.
- The Supreme Court considered (1) whether G.T. Leach waived arbitration, (2) whether a contractual deadline barred G.T. Leach’s arbitration demand and who should decide that, and (3) whether the Other Defendants can force Sapphire to arbitrate under the general contract or subcontracts (including equitable‑estoppel theories).
Issues
| Issue | Plaintiff's Argument (Sapphire) | Defendant's Argument (e.g., G.T. Leach / Other Defs.) | Held |
|---|---|---|---|
| Whether G.T. Leach waived its right to arbitrate by participating in litigation | G.T. Leach substantially invoked judicial process (counterclaims, discovery, motions, agreed trial continuance) and thereby waived arbitration | Participation was defensive, warranted by litigation posture and rules; delay was not prejudicial | No waiver: conduct was defensive/required; totality of circumstances do not meet high waiver burden |
| Whether a contractual deadline bars G.T. Leach’s demand for arbitration and who decides that | The contractual time‑limit makes arbitration untimely because statute of limitations for some claims expired before demand; court should enforce barrier | The effect/interpretation of the contractual deadline is a procedural gateway issue for arbitrators to decide | Arbitrators, not courts, must decide the contractual‑deadline issue (procedural arbitrability); court of appeals erred in deciding it |
| Whether non‑signatory Other Defendants can compel arbitration under the general contract | Sapphire’s claims arise out of/relate to the general contract and the joinder clause permits inclusion; estoppel binds Sapphire to arbitration | Other Defendants are not parties/signatories and general contract does not grant them a right to compel arbitration; joinder language is permissive; no direct‑benefit estoppel shown | Sapphire did not agree to arbitrate with Other Defendants via the general contract; equitable estoppel does not apply to compel arbitration under that contract |
| Whether subcontracts require Sapphire to arbitrate claims against Subcontractors | Subcontracts contain arbitration clause (11.1) and consolidation language (11.3) so Subcontractors can compel arbitration | Subcontracts expressly disclaim mandatory arbitration (12.13) overriding other provisions, so no enforceable arbitration obligation exists as to Sapphire | Section 12.13 overrides and negates mandatory arbitration in subcontracts; Subcontractors cannot compel arbitration under those subcontract provisions |
Key Cases Cited
- Perry Homes v. Cull, 258 S.W.3d 580 (Tex. 2008) (waiver-by-litigation conduct test; courts decide substantive arbitrability/waiver by litigation conduct)
- FirstMerit Bank, N.A. v. In re FirstMerit Bank, 52 S.W.3d 749 (Tex. 2001) (party seeking arbitration must show agreement to arbitrate and refusal to arbitrate)
- J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex. 2003) (scope/enforceability questions for arbitrability analysis)
- In re Kellogg Brown & Root, Inc., 166 S.W.3d 732 (Tex. 2005) (non‑signatory enforcement principles; list of doctrines permitting nonparties to be bound)
- In re Rubiola, 334 S.W.3d 220 (Tex. 2011) (non‑signatory may be a party if contract expressly grants that right)
- Poly‑Am., L.P. v. [In re Poly‑Am.], 262 S.W.3d 337 (Tex. 2008) (Texas presumption in favor of arbitration; resolve doubts in favor of arbitration on scope/waiver issues not affecting enforceability)
- Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002) (distinguishing substantive vs. procedural arbitrability; procedural preconditions for arbitration are for arbitrators)
- BG Group v. Republic of Argentina, 134 S. Ct. 1198 (U.S. 2014) (courts decide substantive arbitrability; arbitrators decide procedural preconditions including time limits)