Kennedy Hodges, L. L.P. v. Gobellan, 13–12–00473–CV.
| Decision Date | 14 March 2013 |
| Docket Number | No. 13–12–00473–CV.,13–12–00473–CV. |
| Parties | KENNEDY HODGES, L.L.P., Appellant, v. Ventura GOBELLAN, Jr. and Paula Gobellan, Appellees. |
| Court | Texas Court of Appeals |
OPINION TEXT STARTS HERE
Kevin Risley, Zandra Foley, Kelly E. Cook, for Appellant.
John W. Griffin Jr., Robert P. Houston, Robert E. McKnight, for Appellees.
Before Chief Justice VALDEZ and Justices GARZA and LONGORIA.
By one issue, appellant, Kennedy Hodges, LLP, appeals the trial court's order denying its motion to compel arbitration. We affirm.
In 2004, appellees, Ventura Gobellan, Jr. and Paula Gobellan, signed a contingency fee agreement with appellant concerning appellant's representation of appellees in a personal injury suit. The suit was filed in 2005 in Jackson County, Texas (the “Jackson County suit”). In 2006, appellees terminated their representation by appellant. Thereafter, appellees were represented by Canonero Brown, an attorney who previously worked for appellant.
Subsequently, in 2006, appellant filed suit in Harris County, Texas against Brown and his new employer (the “Harris County suit”). Appellees were not named as defendants, but the suit involved appellees' contingency fee contract with appellant. In relevant part, appellant alleged in its petition:
[Appellant seeks] a declaratory judgment regarding [appellant's] existing rights and/or the status of [appellant's] interests in cases in which current or former ... clients [of appellant] are now being represented (or in the future will be represented) by one or more defendants. [Appellant] is entitled to recover its full contractual fee interest in these cases. Alternatively, [appellant] is entitled to recover in quantum meruit for the reasonable value of services rendered before termination of the contractual relationship with each client.
In 2007, appellant intervened in appellees' personal injury suit in Jackson County. Appellant asserted causes of action against appellees for breach of contract and declaratory judgment, alleging that it “is entitled to forty percent (40%) of any and all settlements and/or compensation paid to and/or received by [appellees] with regards to the accident made the basis of their lawsuit.” Appellant requested a judgment declaring that it is entitled to 40% of any recovery by appellees, its “full contractual fee interest.”
On December 4, 2007, after what appellees describe as “eighteen months of intense litigation, including full discovery,” appellant, Brown, and Brown's employer entered into a settlement agreement in the Harris County suit. The parties agreed “to settle all claims and controversies between them, whether or not asserted in this case, except as explicitly stated [in the agreement].” The settlement agreement specifically addressed appellant's claim for its full contractual fee interest under its contingency fee contract with appellees. Under the terms of the agreement, appellant agreed to accept less than its full contractual fee interest. Specifically, the agreement provided in relevant part as follows:
[Appellees'] claims shall be split as follows: 65% of the legal fees shall be paid to [appellant] and 35% of the legal fees shall be paid to [Brown]. Notwithstanding this fee split, 100% of the fees on the $7500 settlement achieved before [Brown] left [appellant's employment] shall be paid to [appellant] only. Further, [Brown] shall request that the clients involved herein authorize [appellant] to endorse the settlement check, or its replacement if “stale,” for $7,500.00 or shall use his Power of Attorney to endorse the check for the benefit of [appellant].
The agreement also provided that Brown would pay appellant the fees owed by appellees:
Other terms of this settlement are that since the payment of these settlements will be made to parties other than [appellant], the funds shall be placed first into an IOLTA account and shall be paid directly to [appellant] within 15 days of the date of the deposit.
Pursuant to the agreement, appellant and Brown filed a joint motion for dismissal with prejudice in the Harris County suit. On February 29, 2008, the trial court in the Harris County suit entered an agreed order of dismissal with prejudice, dismissing all claims and causes of action that were asserted or that could have been asserted by the parties in that suit.
In 2010, Brown, representing appellees, settled appellees' personal injury claims in the Jackson County suit for $470,000. Based on the settlement agreement between Brown and appellant, Brown paid appellant attorney's fees in the amount of $61,600 on behalf of appellees. Subsequently, in June 2011, appellant filed a lawsuit against appellees in Harris County, seeking an additional $189,000 from their recovery. Appellant alleged that appellees terminated representation without good cause and thereafter “refus[ed] to pay [appellant] the full fee and reimbursement for all expenses, as provided for in the Fee Agreement for termination without cause.” The lawsuit contained a demand for arbitration; however, appellant subsequently amended the lawsuit to add Brown and the payor of the $470,000 settlement as defendants and to delete its demand for arbitration.
On January 13, 2012, appellees answered the lawsuit. Appellant then filed a motion to compel arbitration. On March 8, 2012, appellees filed a verified plea in abatement based on the pending status of appellant's intervention in the Jackson County suit. Appellant subsequently nonsuited its claims against appellees in the Harris County suit.
In March 2012, appellees filed their answer to appellant's petition in intervention in the Jackson County suit. In addition, appellees filed a third-party petition against Brown and his employer. No discovery has been conducted in the Jackson County suit with regard to appellant's petition in intervention or appellees' counterclaim.
On May 16, 2012, appellant filed a motion to compel arbitration based on an arbitration provision in the contingency fee agreement. Appellees opposed the motion on the basis that appellant had waived its right to arbitration by delaying any attempts to enforce the arbitration provision and litigating its claim in the Harris County suit against Brown to a final order. Appellees maintained that they had been prejudiced by appellant's attempt to have it both ways by seeking to compel arbitration of the same claim it fully litigated in the Harris County suit. On June 29, 2012, the trial court entered an order denying appellant's motion to compel arbitration. This interlocutory appeal ensued. SeeTex. Civ. Prac. & Rem.Code Ann. § 51.016 (West Supp.2011).
A party waives an arbitration clause by substantially invoking the judicial process to the other party's detriment or prejudice. Perry Homes v. Cull, 258 S.W.3d 580, 589–90 (Tex.2008). Due to the strong presumption against waiver of arbitration, this hurdle is a high one. Id. at 590. The Texas Supreme Court has held that parties did not waive arbitration by: (1) filing suit; (2) moving to dismiss a claim for lack of standing; (3) moving to set aside a default judgment and requesting a new trial; (4) opposing a trial setting and seeking to move the litigation to federal court; (5) moving to strike an intervention and opposing discovery; (6) sending 18 interrogatories and 19 requests for production; (7) requesting an initial round of discovery, noticing (but not taking) a single deposition, and agreeing to a trial resetting; or (8) seeking initial discovery, taking four depositions, and moving for dismissal based on standing. Id. (citations omitted).
We decide questions of waiver by applying a totality-of-the-circumstances test on a case-by-case basis. Id. In doing so, we consider a wide variety of factors including: (1) whether the movant was plaintiff (who chose to file in court) or defendant (who merely responded); (2) how long the movant delayed before seeking arbitration; (3) whether the movant knew of the arbitration clause all along; (4) how much pretrial activity related to the merits rather than arbitrability or jurisdiction; (5) how much time and expense has been incurred in litigation; (6) whether the movant sought or opposed arbitration earlier in the case; (7) whether the movant filed affirmative claims or dispositive motions; (8) what discovery would be unavailable in arbitration; (9) whether activity in court would be duplicated in arbitration; and (10) when the case was to be tried. Id. at 591. Of course, all these factors are rarely presented in a single case. Courts have found waiver based on a few, or even a single one. Id.
Even substantially invoking the judicial process does not waive a party's arbitration rights unless the opposing party proves that it suffered prejudice as a result. Id. at 593. “Prejudice” has many meanings, but in the context of waiver of arbitration, it relates to inherent unfairness—that is, a party's attempt to have it both ways by switching between litigation and arbitration to its own advantage. Id. at 597. For purposes of a waiver of an arbitration agreement, prejudice refers to the inherent unfairness in terms of delay, expense, or damage to a party's legal positionthat occurs when the party's opponent forces it to litigate an issue and later seeks to arbitrate that same issue. Id. Thus, “a party should not be allowed purposefully and unjustifiably to manipulate the exercise of its arbitral rights simply to gain an unfair tactical advantage over the opposing party.” Id.
Review of the denial of a motion to compel arbitration is conducted under an abuse of discretion standard. Okorafor v. Uncle Sam & Assocs., Inc., 295 S.W.3d 27, 38 (Tex.App.-Houston [1st Dist.] 2009, pet. denied). We resolve the question of waiver as a question of law by applying a totality-of-the-circumstances test to the particular circumstances of the case. Id....
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Kennedy Hodges, L. L.P. v. Gobellan
...Hodges substantially invoked the litigation process as to the Gobellan fee based on the discovery it conducted in the Brown Suit. 433 S.W.3d 579, 585. The court also found the Gobellans established prejudice because Kennedy Hodges attempted to “have it both ways” by switching between litiga......