Handing down a second defeat in the same case, the Houston [1st] Court of Appeals has held that the Buzbee Law Firm cannot invoke arbitration after having aggressively pursued litigation on the merits and failed.
Anthony G. Buzbee and Anthony G. Buzbee, LP d/b/a The Buzbee Law Firm vs. Terry & Thweatt, P.C. (No. 01-23-00123-CV; issued November 7, 2023) arose from a dispute between the two firms over attorney’s fees in the settlement of a wrongful death lawsuit. The parents of the deceased approached Terry & Thweatt (T&T) regarding representation in the matter, and one parent ended signing a representation agreement. The following day, that parent notified T&T that she was terminating the agreement without stating a cause. T&T informed her that she should notify her new counsel that T&T would not relinquish its fee interest in her case because she terminated without cause, as permitted by Texas law. She then signed an agreement with Buzbee, who settled the case and offered to pay T&T substantially less than the 40% to which it was legally entitled. T&T rejected the offer and informed Buzbee of its intention to recover its fee interest and seek damages for tortious interference with contract.
Buzbee then initiated an arbitration proceeding against T&T under the representation agreement, in which he asserted the agreement with T&T was unconscionable, and sued T&T on behalf of the husband, who had never signed a representation agreement with T&T in the first place. The arbitrator ended up awarding $5,000 to T&T. T&T subsequently sued Buzbee for tortious interference with its representation agreement with the parent seeking actual and exemplary damages. The suit alleged that Buzbee convinced the parent to terminate the agreement without cause and hire Buzbee based on Buzbee’s assurance that he would pay any attorney’s fees owed to T&T as a result of the termination. Buzbee moved to dismiss the lawsuit under the TCPA. The trial court denied the motion. Buzbee appealed, but the Houston [1st] Court of Appeals affirmed and SCOTX denied review. Back in the trial court, Buzbee filed a motion to compel arbitration. After a hearing, the trial court denied the motion. Buzbee again appealed.
The Houston [1st] Court of Appeals affirmed. Buzbee argued that the trial court erred because equitable estopppel requires T&T to arbitrate the dispute because its tortious interference claim arose from a contract with an arbitration provision. Buzbee further argued that he did not waive arbitration by substantially invoking the litigation process. Setting aside the equitable estoppel issue, the court determined that Buzbee substantially invoked the litigation process because he “[took] specific and deliberate actions that are inconsistent with the right to arbitrate, or if it actively tries but fails to achieve a satisfactory result in litigation before turning to arbitration” (citations omitted). In order to waive arbitration, “the movant must, at the very least, [have] engage[d] in some overt act in court that evince[d] a desire to resolve the [same] arbitrable dispute through litigation rather than arbitration” (citations omitted).
Applying the multi-factor test, the court found that “[t]he totality of circumstances presented by this case demonstrates an attempt by Buzbee to ‘have it both ways’” (citation omitted). He sought a determination on the merits by filing a TCPA motion (which went all the way to SCOTX at the expense of a two-year delay) and failed “to seek arbitration until after proceeding in litigation to an adverse result [which] is the clearest form of inconsistent litigation conduct and  inevitably found to constitute substantial invocation of the litigation process resulting in waiver” (citations omitted). The court then turned to whether Buzbee’s conduct prejudiced T&T. “Prejudice,” stated the court, “refers to the inherent unfairness caused by ‘a party’s attempt to have it both ways by switching between litigation and arbitration to its own advantage’” (citations omitted). This may “be demonstrated ‘in terms of delay, expense, or damage to a party’s legal position that occurs when the party’s opponent forces it to litigate an issue and later seeks to arbitrate the same issue’” (citations omitted). Here Buzbee not only delayed arbitration for years, he forced T&T to respond to the TCPA motion, which provided Buzbee with additional information concerning the basis of T&T’s claims. When he lost the TCPA motion, Buzbee “sought a second bite at the apple through arbitration.” T&T thus established prejudice.