Bates v. Laminack

• Decision Date: 03 September 2013
• Docket Number: Civil Action No. 2:12–CV–387.
• Citation: 969 F.Supp.2d 772
• Parties: Frank BATES, et al., Plaintiffs, v. Richard N. LAMINACK, et al., Defendants.
• Court: U.S. District Court — Southern District of Texas

969 F.Supp.2d 772

Frank BATES, et al., Plaintiffs,

v.Richard N. LAMINACK, et al., Defendants.

Civil Action No. 2:12–CV–387.

United States District Court,

S.D. Texas,

Corpus Christi Division.

Sept. 3, 2013.

Lance C. Kassab, Attorney at Law, Houston, TX, David Diaz, Attorney at Law, Corpus Christi, TX, David Eric Kassab, The Kassab Law Firm, Houston, TX, for Plaintiffs.

Darrell Lee Barger, Hartline Dacus et al., Corpus Christi, TX, Kenneth R. Breitbeil, McFall Breitbeil et al., Dale Jefferson, Raul Herman Suazo, Martin Disiere et al., Jimmy Lee Peacock, The Law Office of Jim L. Peacock, Houston, TX, for Defendants.

ORDER ON MOTIONS TO COMPEL ARBITRATION

NELVA GONZALES RAMOS, District Judge.

Before the Court are two motions to compel arbitration (D.E. 60, 62) filed by the O'Quinn Defendants ¹ and Defendant T. Gerald Treece, ² jointly referred to as “Movants.” Defendants Richard N. Laminack, Buffy Martines, and Thomas W. Pirtle filed a consent to arbitration (D.E. 63), claiming that the arbitration agreement in the Power of Attorney and Contingent Fee Contracts on which Movants rely apply equally to the claims made against them because they are sued as employees of O'Quinn. The remaining Defendant, Abel Manji, also sued as an employee of O'Quinn, announced in open court on August 16, 2013 that, consistent with his Original Answer to Plaintiffs' First Amended Complaint, he also consents to the referral of this matter to arbitration. See D.E. 68, p. 5, 25.

Plaintiffs filed a single response (D.E. 73) to both motions, including a footnote reference to the separate consent to arbitration, purporting to apply the arguments to the consenting Defendants as well. Movants then filed a joint reply (D.E. 75), along with objections (D.E. 74) to Plaintiffs' evidence. For the reasons set out below, the Motions (D.E. 60, 62) are GRANTED.

WAIVER

Plaintiffs contend that arbitration has been waived by Defendants' invocation of the Court's jurisdiction to adjudicate previous motions that were filed without being made subject to any request to compel arbitration. In particular, the record reflects the following relevant activity taking place over the first five months of this case prior to the subject motions to compel arbitration:

• January 18, 2013. Defendants Richard N. Laminack, Buffy Martines, and Thomas W. Pirtle filed their respective Original Answers to Plaintiffs' Original Complaint (D.E. 12, 13, 14) admitting jurisdiction and venue and making no claims regarding arbitration.

• February 8, 2013. The O'Quinn Defendants filed their Fed.R.Civ.P. 12 motions in a single instrument (D.E. 20):

• 12(b)(1) motion to dismiss for lack of jurisdiction based on a failure of diversity, failure to join indispensable parties, and failure to meet the amount in controversy;

• 12(b)(7) motion to dismiss for failure to join indispensable parties;

• 12(b)(1) motion for abstention based on separate “mirror-image” action pending in Houston, Texas;

• 12(e) motion to dismiss the fraud claims for failure to meet the heightened pleading requirements of Fed.R.Civ.P. 9(b);

• 12(e) motion to require a more definite statement regarding fraud, vicarious liability, individual defendant liability, and damages allegations, among others;

• 12(f) motion to strike immaterial and scandalous allegations; and

• Motion to abate under Tex. Bus. & Comm.Code § 17.505(a) for 60 days after an appropriate Texas Deceptive Trade Practices Act (DTPA) demand.

There is no mention of arbitration in that series of motions.

• February 15, 2013. Defendant Treece joined in the O'Quinn Defendants' Rule 12 motions (D.E. 21), offering additional grounds for abstention based upon the action pending in Houston, Texas and additional briefing on the complaint regarding fraud pleadings and saying nothing about arbitration.

• February 26, 2013. Defendants Laminack, Martines, and Pirtle joined in the O'Quinn Defendants' Rule 12 motions (D.E. 30).

• March 13, 2013. Movants filed a Reply in support of the Rule 12 motions (D.E. 37).

• March 21, 2013. Defendant Manji filed his Fed.R.Civ.P. 12 motions in a single instrument (D.E. 38):

• 12(b)(1) motion to dismiss for lack of jurisdiction based on a failure of diversity, failure to join indispensable parties, and failure to meet the amount in controversy;

• 12(b)(7) motion to dismiss for failure to join indispensable parties;

• 12(b)(1) motion for abstention based on separate “mirror-image” action pending in Houston, Texas;

• 12(e) motion to dismiss the fraud claims for failure to meet the heightened pleading requirements of Fed.R.Civ.P. 9(b);

• (e) motion to require a more definite statement regarding fraud and other allegations;

• 12(f) motion to strike immaterial and scandalous allegations; and

• Motion to abate under Tex. Bus. & Comm.Code § 17.505(a) for 60 days after an appropriate DTPA demand.

There is no mention of arbitration in that series of motions.

• April 17, 2013. Defendants Laminack, Martines, and Pirtle filed their respective First Amended Original Answers to Plaintiffs' First Amended Original Complaint (D.E. 47, 48, 49), still admitting jurisdiction and venue and making no mention of arbitration even after Defendant Lowenberg (no longer a defendant) filed a Motion to Compel Arbitration and Stay this Litigation (D.E. 46). Those Defendants later withdrew their Answers reciting only that they had been mistakenly filed during the DTPA stay and would be re-filed after the stay was lifted. D.E. 50, 51.

• May 3, 2013. The O'Quinn Defendants filed their Motion to Lift the Abatement (D.E. 58) reciting that the purpose of the stay—to permit a DTPA demand and response—had been accomplished. D.E. 58. In this Motion, the O'Quinn Defendants indicated, for the first time, their intent to pursue arbitration. D.E. 58, p. 2.

On May 9, 2013, the O'Quinn Defendants filed the first motion to compel arbitration that is at issue here, followed by the Treece motion on May 20, 2013.

There is no dispute regarding the test to be applied to determine waiver. “Waiver will be found when the party seeking arbitration [1] substantially invokes the judicial process [2] to the detriment or prejudice of the other party.” Walker v. J.C. Bradford & Co., 938 F.2d 575, 577 (5th Cir.1991) (internal quotation marks and citation omitted). “There is a strong presumption against finding a waiver of arbitration, and the party claiming that the right to arbitrate has been waived bears a heavy burden.” Republic Ins. Co. v. PAICO Receivables, LLC, 383 F.3d 341, 344 (5th Cir.2004).

By the same token, “arbitration may not be used as a strategy to manipulate the legal process.” Mirant Corp. v. MC Asset Recovery LLC, 613 F.3d 584, 590 n. 4 (5th Cir.2010) (citing Khan v. Parsons Global Servs., Ltd., 521 F.3d 421, 427 (D.C.Cir.2008)). More particularly, a party is not permitted to keep its right to demand arbitration in reserve indefinitely while it pursues a decision on the merits before the district court. Mirant, at 591. “The question of what constitutes a waiver of the right of arbitration depends on the facts of each case.” Tenneco Resins, Inc. v. Davy Int'l, AG, 770 F.2d 416, 420 (5th Cir.1985) (citing Burton–Dixie Corp. v. Timothy McCarthy Construction Co., Inc., 436 F.2d 405, 406 (5th Cir.1971)).

To invoke the judicial process, a “party must, at the very least, engage in some overt act in court that evinces a desire to resolve the arbitrable dispute through litigation rather than arbitration.” Mirant, supra at 589 (citing Subway Equip. Leasing Corp. v. Forte, 169 F.3d 324, 329 (5th Cir.1999)). The preliminary motions set out above were formulated to (1) test the Court's jurisdiction and its willingness to exercise same, (2) test Plaintiffs' pleadings for sufficiency of allegations under the Federal Rules of Civil Procedure, seeking clarification, and (3) obtain relief from the exercise of judicial jurisdiction pending consideration of a DTPA demand.

Plaintiffs rely on Mirant and Electrostim Medical Services, Inc. v. Health Care Service Corp., 2012 WL 5373462, *6–7, 2012 U.S. Dist. LEXIS 155107, *17 (S.D.Tex. Oct. 30, 2012) (Rosenthal, J.) to show that these actions constitute waiver of arbitration. Those cases involved efforts of discovery and motions that pertained to the disposition on the merits of the dispute—not just the definition of the claims and determination of jurisdiction. The Fifth Circuit has held that disputes over jurisdiction do not constitute waiver, even where they take place over an extendedperiod of time. Sedco, Inc. v. Petroleos Mexicanos Mexican Nat'l Oil Co. (Pemex), 767 F.2d 1140, 1150–51 (5th Cir.1985). Movants here did not seek an adjudication of an affirmative defense or counterclaim. Neither did they seek a determination of the merits of any of Plaintiffs' claims as was the case in Mirant, supra at 589. Their motions were filed prior to the deadline for their answers, only a few months into the case.

Even when there is an arbitration agreement, the parties are entitled to a judicial determination that the agreement is enforceable. 9 U.S.C. § 4. See generally, American Family Life Assur. Co. v. Biles, 714 F.3d 887, 893 (5th Cir.2013) (duty to exercise federal jurisdiction to determine enforceability of arbitration agreement weighs against abstention); Saucier v. Aviva Life & Annuity Co., 701 F.3d 458, 463–64 (5th Cir.2012) (same). Such a determination obviously requires that the Court have personal and subject matter jurisdiction over the parties and the enforceability of the contract.

If the Court were to dismiss for lack of subject matter jurisdiction or abstain from exercising jurisdiction in deference to other litigation pending in another tribunal, such a determination is not one that is prejudicial to the claims. E.g.,Nilsen v. City of Moss Point, 674 F.2d 379, 382 (5th Cir.1982). Likewise, the issue of the sufficiency of the pleadings is a matter most commonly determined “without prejudice”—especially where, as here, the...