John C. Dempsey A/K/A Jack Dempsey and 401 Gold Consultants v. U.S. Money Reserve, Inc. D/B/A United States Rare Coin & Bullion Reserve
13-15-00469-CV
| Tex. App. | Dec 28, 2015Background
- USMR sued John C. Dempsey alleging breach of a 2007 Confidential Services, Trade Secrets, and Employment Agreement containing a non‑compete, liquidated damages, and a limited arbitration clause.
- The 2007 agreement expressly excluded from arbitration any dispute regarding breach of the agreement and the employer’s right to injunctive relief or liquidated damages; arbitration covered only certain employment/statutory claims.
- USMR pursued judicial relief for years (temporary injunction, amended petitions, discovery, depositions) and later sought arbitration on the breach/liquidated‑damages claim.
- Dempsey moved to stay arbitration, moved for a jury trial setting, and filed a no‑evidence motion for summary judgment; the trial court denied the stay, arbitration proceeded without Dempsey, and an award for $1,650,000 in favor of USMR was entered and later confirmed by the trial court.
- Dempsey appealed, arguing (1) the claims were outside the arbitration clause, (2) USMR waived arbitration by substantially invoking the judicial process, and (3) the trial court erred by denying relief and confirming the award.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the trial court erred in denying Dempsey’s motion to stay arbitration | USMR argued arbitration was proper under the 2007 agreement | Dempsey argued the arbitration clause excluded breach/liquidated‑damages claims | The court below denied the stay; appellant contends this was error because the breach claim was excluded from arbitration |
| Whether the subject claims fall within the scope of the arbitration provision | USMR treated breach/liquidated damages as arbitrable and proceeded to arbitration | Dempsey pointed to the agreement’s express carve‑out excluding breaches and liquidated damages from arbitration | Appellant argues arbitration was improper because the agreement expressly reserved breach claims for litigation |
| Whether USMR waived arbitration by substantially invoking the judicial process | USMR pursued prolonged court proceedings before seeking arbitration | Dempsey argued extensive discovery, injunctions, amended pleadings, and delay show waiver and prejudice | Appellant contends waiver occurred and the trial court erred in allowing arbitration and confirming the award |
| Whether the trial court erred by refusing to set trial, consider no‑evidence SJ, and by confirming the arbitration award | USMR sought confirmation of the arbitration award and final judgment | Dempsey maintained the court should have set trial, considered his no‑evidence SJ (challenging enforceability of the non‑compete), and denied confirmation | Appellant requests reversal: arbitration award not confirmable because outside clause and waived by USMR (trial court had confirmed award) |
Key Cases Cited
- Forest Oil Corp. v. McAllen, 268 S.W.3d 51 (Tex. 2008) (FAA/TGAA principles and arbitration contract law)
- In re Dillard Dep’t Stores, Inc., 198 S.W.3d 778 (Tex. 2006) (arbitrability and enforceability of arbitration provisions are questions of law)
- In re FirstMerit Bank, N.A., 52 S.W.3d 749 (Tex. 2001) (once claims are arbitrable and defenses fail, trial court must compel arbitration and stay proceedings)
- J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex. 2003) (burden shifts to party opposing arbitration to prove affirmative defenses)
- Nationwide of Fort Worth, Inc. v. Wigington, 945 S.W.2d 883 (Tex. App.—Waco 1997) (framework for deciding whether claims fall within arbitration agreement)
- Perry Homes v. Cull, 258 S.W.3d 580 (Tex. 2008) (waiver of arbitration by substantially invoking judicial process)
- Richmont Holdings, Inc. v. Superior Recharge Sys., L.L.C., 455 S.W.3d 573 (Tex. 2014) (totality‑of‑circumstances test for waiver and prejudice in arbitration waiver claims)