RSL Funding, LLC v. Pippins
499 S.W.3d 423
| Tex. App. | 2016Background
- RSL Funding, LLC (RSL) purchased annuities from three individuals (Pippins, Morris, O’Brien) who assigned their contracts to RSL; those assignment agreements included FAA arbitration clauses. MetLife (issuer of the annuities) was not a party to those assignments and refused to honor them.
- RSL sued MetLife (and named the Individuals) in Harris County County Court at Law (CCL) for declaratory relief after MetLife refused to redirect annuity payments; the Individuals initially supported RSL and filed affidavits consenting to the declaratory action.
- Disputes later developed between RSL and the Individuals (attempted terminations, counterclaims by Individuals), prompting RSL to initiate arbitration with the Individuals and move to stay the CCL proceedings; the CCL denied the stay and stayed arbitration instead.
- The court of appeals held RSL waived its right to arbitrate by substantially invoking the judicial process and also noted an alternative ground: RSL failed to join its assignees in the arbitration.
- The Texas Supreme Court found RSL did not waive arbitration by its litigation conduct (because actions against MetLife were not relevant to arbitrability with the Individuals and RSL sought arbitration reasonably quickly), but affirmed based on the court-of-appeals alternative ground (failure to challenge nonjoinder of assignees).
Issues
| Issue | Plaintiff's Argument (RSL) | Defendant's Argument (MetLife / Morris) | Held |
|---|---|---|---|
| Whether RSL waived its contractual right to arbitrate with the Individuals by substantially invoking the judicial process | RSL: inclusion of Individuals in CCL suit was procedural/friendly under Declaratory Judgment Act; disputes with MetLife are separate; when disputes with Individuals arose RSL promptly sought arbitration | MetLife/Morris: RSL litigated claims, engaged in discovery and motions, delayed seeking arbitration and thereby prejudiced opponents | Held: No waiver. Conduct against MetLife was not relevant to arbitrability with the Individuals; delay and conduct were not sufficient to show substantial invocation of judicial process |
| Whether actions taken in litigation (discovery, summary-judgment motion, deposit of funds in registry) constitute waiver of arbitration | RSL: actions related to non-arbitrable MetLife dispute or were defensive/procedural; deposit of funds protected entitlement and did not create dispute | MetLife/Morris: those actions forced Individuals into litigation and increased costs; amounted to forum-shopping and prejudice | Held: Not waiver. Most actions related to MetLife, were compelled or defensive, and RSL sought arbitration promptly after disputes with Individuals arose |
| Whether timing of RSL’s arbitration requests was unreasonable (delay) | RSL: sought arbitration within months of Individuals’ termination attempts and within weeks of Individuals’ efforts to withdraw funds | MetLife/Morris: RSL waited too long (participation in litigation before arbitration) | Held: Delay insufficient to show waiver; comparable delays in prior cases did not establish waiver |
| Whether RSL’s failure to join assignees in arbitration barred relief (alternative ground) | RSL: did not adequately challenge this ground on appeal | MetLife: trial court could deny stay for nonjoinder; appeals court’s alternative ground stands | Held: Affirmed on alternative ground — RSL did not challenge nonjoinder of assignees, so court of appeals’ alternative basis was sustained |
Key Cases Cited
- Kennedy Hodges, L.L.P. v. Gobellan, 433 S.W.3d 542 (Tex. 2014) (litigating one claim does not automatically waive arbitration of a related but distinct claim against a different party)
- Perry Homes v. Cull, 258 S.W.3d 580 (Tex. 2008) (party may waive arbitration by substantially invoking the judicial process and prejudicing the opponent)
- G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502 (Tex. 2015) (defensive litigation conduct and compliance with procedural rules do not necessarily waive arbitration)
- In re Bruce Terminix Co., 988 S.W.2d 702 (Tex. 1998) (party asserting waiver bears heavy burden; presumption against waiver under FAA)