Houston Lighting & Power Co. v. City of San Antonio

• Decision Date: 23 March 1995
• Docket Number: 01-94-01135-CV,Nos. 01-94-01092-C,s. 01-94-01092-C
• Citation: 896 S.W.2d 366
• Parties: HOUSTON LIGHTING & POWER COMPANY, Appellant v. CITY OF SAN ANTONIO, Appellee. HOUSTON LIGHTING & POWER COMPANY, Relator v. The Honorable Harriet O'NEILL, Respondent. (1st Dist.)
• Court: Texas Court of Appeals

Page 366

896 S.W.2d 366

HOUSTON LIGHTING & POWER COMPANY, Appellant v. CITY OF SAN ANTONIO, Appellee.

HOUSTON LIGHTING & POWER COMPANY, Relator v. The Honorable Harriet O'NEILL, Respondent.

Nos. 01-94-01092-CV, 01-94-01135-CV.

Court of Appeals of Texas,

Houston (1st Dist.).

March 23, 1995.

Rehearing Overruled April 13, 1995.

David J. Beck, J. Gregory Copeland, Houston, and Robert J. Hearon, Jr. and Roy Q. Minton, Austin, for appellant.

Jon C. Wood, Howard P. Newton, Charles J. Fitzpatrick, Merritt M. Clements, San Antonio, Thomas J. Heiden, Grand Rapids, MI, Lori Meghan Gallagher, Houston, Mike A. Hatchell, Tyler, and Peter W. Waldmeir, Detroit, MI, for appellee.

Before OLIVER-PARROTT, C.J., and ANDELL and HEDGES, JJ.

OPINION

ANDELL, Justice.

In an interlocutory appeal and a mandamus action, Houston Lighting and Power attacks the trial court's denial of its motion to compel arbitration. In the mandamus proceeding, it also challenges the court's denial of its motion to strike an intervention. We affirm the trial court in the interlocutory appeal and overrule the motion for leave to file in the mandamus action.

Facts and Procedural History

In 1973, Houston Lighting and Power (HL & P), Central Power and Light Company (CP & L), and the City of San Antonio signed a document styled "Participation Agreement," in which they agreed to license, construct, operate, and maintain a jointly-owned, nuclear-powered electric generation plant known as the South Texas Project. Later in 1973, the City of Austin joined the Participation Agreement. Thus, there are four "participants": HL & P, CP & L, San Antonio, and Austin. ¹

Under the agreement, HL & P is the project manager and operator of the plant (with the exception of certain duties not relevant here). The participants each own a percentage of the project and provide funds for its operation in proportion to their interest. San Antonio and Austin also have the right to obtain electricity generated at the plant for the use of their residents. The Participation Agreement contains an arbitration clause, which states in relevant part as follows:

23.1 If a dispute [other than one regarding a Management Committee decision] between any of the Participants should arise under this Participation Agreement or the Project Agreements, any Participant may call for submission of the dispute to arbitration, which call shall be binding upon all other Participants....

23.2 ... The decision of a majority of the arbitrators so appointed shall be binding on all Participants, and all the Participants hereby consent to the entry of a judgment in any court of competent jurisdiction confirming and implementing the decision of the arbitrators....

During the early 1980s, a dispute over the plant's construction arose between the participants. In 1992, as part of the settlement process, HL & P and CP & L entered into an agreement which stated that, with exceptions not relevant here, HL & P will not call CP & L "to arbitration provided for in the Participation Agreement" of future disputes "with respect to the South Texas Project and the Participation Agreement...."

In 1993, the plant's two generating units stopped operating. The units stayed inoperative for approximately 14 months. As a result, San Antonio and Austin were forced to find alternative sources of electricity.

In 1994, Austin sued HL & P, alleging that HL & P had mishandled the operation and maintenance of the project. Among other relief, Austin asked for a declaratory judgment that would "declare void the arbitration clause in the Participation Agreement."

Later in 1994, San Antonio intervened in the lawsuit as a party-plaintiff. San Antonio made the same factual allegations, asserted most of the same causes of action, and sought most of the same relief as Austin. San Antonio sought a declaratory judgment that (1) "provisions of the Participation Agreement purporting to limit HL & P's liability are unenforceable," and (2) HL & P may not utilize the Participation Agreement's arbitration provisions.

HL & P called for arbitration with San Antonio, asked the trial court to strike San Antonio's intervention, and moved to compel arbitration with San Antonio. After a hearing on these issues, the trial court denied all the relief HL & P sought.

HL & P contends that both the Texas General Arbitration Act, TEX.REV.CIV.STAT.ANN. art. 224 et seq. (Vernon 1973 and Supp.1995), and the Federal Arbitration Act, 9 U.S.C. § 1 et seq. (1988), provide authority for arbitration in this case. To attack the trial court's denial of its motion to compel arbitration under the Texas act, HL & P brings an appeal. See Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 272 (Tex.1992) (holding that a litigant "who allege[s] entitlement to arbitration ... under the Texas Act" must pursue an interlocutory appeal of the trial court's denial of its application to compel arbitration). Article 238-2(A)(1), which states that an appeal may be taken from an "order denying an application to compel arbitration made under Section A of Article 225," authorizes such an appeal. TEX.REV.CIV.STAT.ANN. art. 238-2(A)(1) (Vernon 1973). ²

The appeal from the trial court's denial of the motion to compel arbitration is an appeal from an interlocutory order. Central Nat'l Ins. Co. v. Glover, 856 S.W.2d 490, 491 (Tex.App.--Houston [1st Dist.] 1993, no writ) (per curiam); USX Corp. v. West, 759 S.W.2d 764, 765 (Tex.App.--Houston [1st Dist.] 1988, orig. proceeding); NCR Corp. v. Mr. Penguin Tuxedo Rental & Sales, Inc., 663 S.W.2d 107 (Tex.App.--Eastland 1983, writ ref'd n.r.e.). Thus, the appeal is accelerated. TEX.R.APP.P. 42(a)(1).

To challenge the trial court's denial of its motion to compel arbitration under the federal act, HL & P brings a mandamus proceeding. See Jack B. Anglin Co., 842 S.W.2d at 272 (holding that a litigant "who allege[s] entitlement to arbitration under the Federal Act" must pursue a writ of mandamus in order to attack the trial court's denial of its application to compel arbitration). Its mandamus action also attacks the trial court's denial of its motion to strike San Antonio's intervention.

In a single order, we granted HL & P's motion for leave to file petition for writ of mandamus and ordered that we would hear and consider the interlocutory appeal and the mandamus action together.

Is HL & P Entitled to Arbitration?

Article 224 states that a contract provision mandating that the parties to the contract shall submit a controversy between them to arbitration is "valid, enforceable, and irrevocable," unless grounds exist for the contract's revocation. TEX.REV.CIV.STAT.ANN. art. 224 (Vernon Supp.1995). ³ The federal act states in relevant part that A written provision in ... a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or equity for the revocation of any contract.

9 U.S.C. § 2 (1988).

In its sole point of error on appeal, HL & P argues that the trial court erred in denying its motion to compel arbitration under the Texas act. In its mandamus proceeding, HL & P contends that the trial court erred in denying its motion to compel arbitration under the federal act. San Antonio asserts that HL & P waived its right to arbitration under both acts. For reasons to follow, we agree with San Antonio.

The initial issue presented by a motion to compel arbitration is whether there is an agreement to arbitrate. See Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 403, 87 S.Ct. 1801, 1806, 18 L.Ed.2d 1270 (1967); Capital Income Properties v. Blackmon, 843 S.W.2d 22, 23 (Tex.1992). There is no doubt that there is an agreement to arbitrate here; however, a party can waive a contractual right to arbitrate. Central Nat'l Ins. Co. v. Lerner, 856 S.W.2d 492, 494 (Tex.App.--Houston [1st Dist.] 1993, orig. proceeding) (per curiam); Transwestern Pipeline Co. v. Horizon Oil & Gas Co., 809 S.W.2d 589, 592 (Tex.App.--Dallas 1991, writ dism'd w.o.j.); Price v. Drexel Burnham Lambert, Inc., 791 F.2d 1156, 1158 (5th Cir.1986). The waiver can be express or by implication. Transwestern Pipeline, 809 S.W.2d at 592; Star Hill Co. v. Johnson Controls, Inc., 673 S.W.2d 282, 283 (Tex.App.--Beaumont 1984, no writ); Compuserve, Inc. v. Vigny Int'l Fin. Ltd., 760 F.Supp. 1273, 1279 n. 2 (S.D. Ohio 1990).

For a party to waive the right to arbitration, that party must take action inconsistent with its right to arbitration, and the party claiming waiver must be prejudiced. Psarianos v. Standard Marine, Ltd., 728 F.Supp. 438, 449 (E.D.Tex.1989); see D. Wilson Constr. Co. v. McAllen Indep. Sch. Dist., 848 S.W.2d 226, 230 (Tex.App.--Corpus Christi 1992, writ dism'd w.o.j.). Some cases hold that a party must demonstrate prejudice to show waiver of the right to arbitration; other cases hold that proof of prejudice is not required. Compare E.C. Ernst, Inc. v. Manhattan Constr. Co., 559 F.2d 268, 269 (5th Cir.1977) ("[P]rejudice ... is the essence of waiver."), with National Found. for Cancer Research v. A.G. Edwards & Sons, Inc., 821 F.2d 772, 777 (D.C.Cir.1987) ("[W]aiver may be found absent a showing of prejudice."). We favor the prejudice requirement, which the Fifth Circuit restated in Valero Refining, Inc. v. M/T Lauberhorn, 813 F.2d 60, 66 (5th Cir.1987).

Whether a party has waived its right to compel arbitration is a question of law. Lerner, 856 S.W.2d at 494; Transwestern Pipeline, 809 S.W.2d at 592; Price, 791 F.2d at 1159. There is a presumption against the waiver of a contractual right to arbitration. Lerner, 856 S.W.2d at 494; Walker v. J.C. Bradford & Co., 938 F.2d 575, 577 (5th Cir.1991)....