The Corpus Christi Court of Appeals has reversed a trial court order denying a homebuilder’s plea of abatement and motion to compel arbitration, despite a significant delay in the defense prosecution of the case.
McMillin Texas Homes, LLC d/b/a Texas Homes v. Christopher Oliver and Germaine Oliver (No. 13-23-00286-CV; February 8, 2024) stemmed from a fairly typical fact pattern involving an alleged construction defect that allowed water entry into the Oliver’s home. The Olivers sued the homebuilder, alleging negligence, breach of the purchase agreement, breach of warranty, and DTPA violations. As is usually the case, the purchase agreement contained a broad arbitration provision, which in its answer the homebuilder cited in support of its plea to the abatement and motion to compel arbitration. A little over five months later, Plaintiffs requested a trial setting, and the record reflected a trial setting in early April 2023. At about the same time of Plaintiff’s request, the homebuilder noticed a hearing on its plea of abatement and motion to compel for the first week of March 2023, a month out from the trial setting. At the hearing, Plaintiff argued that the homebuilder waived arbitration by sitting on it until virtually the eve of trial. In response to the trial court’s question about why it took so long, defense counsel responded that the builder had 25 similar cases and that there was no particular reason for the delay. The trial court denied the plea and motion to compel without prejudice but, at the builder’s request, reset the trial date. The builder appealed.
The court of appeals reversed. The only issue before the court was whether the builder’s delay in requesting a hearing on its plea and motion to compel constituted a waiver. As we have seen in similar cases, in order to establish waiver, a party must show that the party seeking to compel arbitration has “substantially invoked the judicial process to the other party’s detriment or prejudice” (citations omitted). Because the law favors arbitration, this is a particularly high burden that a court must determine based on the totality of circumstances, the “key factors” being “whether the movant delayed in moving to enforce the clause, the amount of discovery conducted by the movant, and whether the movant sought disposition on the merits” (citations omitted).
The court determined that while the movant moved to compel arbitration in its answer, it delayed seeking a hearing on the motion for over five months “for no specific reason.” But, as the court noted, delay—even a substantial one—standing alone is not enough to overcome the presumption in favor of arbitration. Moving to the other factors, the court ruled that the builder did not “engage in any matters related to the merits of the case, and it did not move for summary judgment or otherwise seek disposition of the merits from the trial court.” Likewise, the builder, though it responded to discovery requests, didn’t make any of its own. Finally, the court determined that although the builder sought to bring two subcontractors into the case, it accompanied that motion with a motion to compel arbitration with them as well. Adding the factors together, the court held that Plaintiffs failed to meet their burden of establishing waiver.
Judging from the relatively high numbers of appellate decisions dealing with arbitration provisions in home purchase contracts, we have yet to see a plaintiff succeed in getting out of one. From what we can tell, SCOTX has settled the law well enough in this area that we would expect these cases to trail off pretty dramatically in the future.
