The El Paso Court of Appeals has upheld a trial court order denying a contractor’s motion to compel arbitration after the contractor waited nearly two years before seeking arbitration on the eve of trial.
Humberto Rivas, Individually, Steve Rivas, Individually, Atlantis Custom Pools & Spas, Humberto Rivas d/b/a Atlantis Pools & Spas, and Steve Rivas, d/b/a Atlantis Pools & Spas v. Carmen Molina (No. 08-23-00102-CV; February 15, 2024) arose from a dispute between a homeowner and contractor over the construction of a pool. The homeowner sued the contractor for breach of contract, breach of the common law implied warranty of good and workmanlike services, negligence, and DTPA violations. The pool construction contract contained an arbitration provision. Defendants served a general denial but did not move to compel arbitration. After a scheduling conference in September 2021, the trial court set the case for trial in June 2022. Two months prior to trial, the parties agreed to continue the case, citing the need for more discovery and mediation. Homeowner likewise reported that she had hired a new contractor to repair the pool, affecting her damages. In August 2022, the court held a status hearing at which the homeowner stated that the repairs cost $20,000. The parties announced that they were ready for another trial setting, which the court set for April 28, 2023, with a pretrial conference two weeks before that. In January 2023, however, Defendants sent the homeowner a demand to arbitrate and moved to compel arbitration. After a hearing, the trial court denied the motion. Defendants appealed.
In an opinion by Justice Palafox, the court of appeals affirmed. The issue was whether Defendants waived arbitration by substantially invoking the litigation process to the homeowner’s “detriment and prejudice.” Conducting an analysis under the factors established by SCOTX in Perry Homes v. Cull, 258, S.W.3d 623 (Tex. 2008) and subsequent cases for determining waiver, the court noted that SCOTX emphasized one factor above all others: waiting until the “eve of trial” to request arbitration. In this case, after waiting for 22 months since the date the lawsuit filed, Defendants moved to compel just three months before trial. The court determined that this fact weighed heavily in favor of finding waiver. Next, the court found that the parties had engaged in extensive discovery on merits issues such as the contract terms, subsequent repairs of the pool, and the homeowner’s breach-of-contract claims. Given the relative simplicity of the case—a contract dispute involving a $30,000 pool project—the court concluded that this level of activity constituted substantial invocation of the litigation process. Based on the totality of circumstances, therefore, the court found that Defendants really had no excuse for letting the case get that far along before dropping a “King’s X.”
This is an interesting case, and one wonders what SCOTX might say about the analysis. We are not aware (though we could be wrong) of a post-Perry Homes case in which SCOTX has found waiver, but under the circumstances of this case, it appears to us that the court of appeals got it right. Why on earth the contractor waited so long to seek arbitration of a relatively small case, thus requiring the parties to run up legal expenses and discovery costs and making a trial court schedule and continue trial dates and hold hearings, is beyond us. Perhaps a more bright-line waiver rule would be in order to avoid these types of cases.
