Maria Socorro Estrada, Individually and on Behalf of the Estate of Cesar Estrada Rangel, and as Next of Friend to C.E., Jr., Y.E. and N.E., Minors Juliana Meza on Behalf of the Estate of Leo Marin and as Next Friend to E.I.M., a Minor Amanda M. Estrada as Next Friend to J.O.H.P., a Minor And Damian Michael Estrada v. 12291 CBW, LLC D/B/A Temptations Cabaret, Inc. RCI Hospitality Holdings, Inc. And RCI Holdings, Inc.
02-21-00154-CV
| Tex. App. | Sep 30, 2021Background
- In March 2018 two employees were fatally shot at Temptations Cabaret; wrongful-death and survival suits were filed in January 2020.
- In February 2020 RCI Hospitality and RCI Holdings answered and pleaded, among other defenses, that arbitration agreements existed.
- Plaintiffs amended pleadings (adding parties) and served extensive discovery while the arbitration defense was on file; defendants responded to discovery in March–June 2020.
- A December 10, 2020 hearing discussed production of the arbitration agreement; plaintiffs cured a Rule 47(c) pleading defect on December 16, and the arbitration agreements were produced in January 2021.
- Plaintiffs moved to abate and compel arbitration on March 19, 2021 (about 13 months after learning of the arbitration defense); the trial court denied the motion April 29, 2021.
- On interlocutory appeal the court affirmed, holding plaintiffs waived arbitration by substantially invoking the judicial process and causing prejudice to defendants.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a party who lacked possession of the arbitration agreement and did not know the arbitration provider can avoid waiver-by-litigation for conduct before that info was produced | Plaintiffs argued they could not waive because the actual arbitration agreements and provider identity were not produced until Jan 2021 | Defendants argued plaintiffs had notice of the arbitration defense in Feb 2020, litigated and took merits discovery for 13 months, and that this conduct prejudiced defendants | Court held plaintiffs knew of the arbitration defense in Feb 2020, substantially invoked the judicial process for 13 months, and prejudiced defendants; denial of motion to compel was not an abuse of discretion |
Key Cases Cited
- Henry v. Cash Biz, LP, 551 S.W.3d 111 (Tex. 2018) (abuse-of-discretion review of order denying motion to compel arbitration)
- G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502 (Tex. 2015) (two-part test for implied waiver by litigation conduct)
- Perry Homes v. Cull, 258 S.W.3d 580 (Tex. 2008) (factors for determining substantial invocation and prejudice)
- Kennedy Hodges, L.L.P. v. Gobellan, 433 S.W.3d 542 (Tex. 2014) (prejudice required to establish waiver)
- In re Labatt Food Serv., L.P., 279 S.W.3d 640 (Tex. 2009) (orig. proceeding) (standards governing arbitration interlocutory review)
- In re Citigroup Global Markets, Inc., 258 S.W.3d 623 (Tex. 2008) (discussing unfairness from switching between litigation and arbitration)