DRAFT 2 Brief on the merits - Supreme Court of Texas

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Glass v. Kidder Peabody & Co., Inc. is also distinguishable. In Kidder Peabody the parties had already filed a demand for arbitration, selected a panel of arbitrators, and set the date and location for the arbitration before Kidder asked the court to dismiss—a mere two weeks before the arbitration was set to begin and in response to an adverse ruling from the arbitrator. 114 F.3d 446, 448 (4 th Cir. 1997). Thus, in Kidder Peabody, arbitration had commenced and an arbitration panel was selected to which the parties could present their complaints. That is not the case before this Court, where Heritage never filed an arbitration demand. There was no arbitrator appointed who could decide this issue. This case was left hanging in purgatory—not in court and not in arbitration. The only way Beck could achieve final resolution was to return to court. Moreover, Heritage’s reasoning contravenes the express wording of the statute. The trial court is obligated to stay the lawsuit pending arbitration “providing the applicant for the stay is not in default in proceeding with such arbitration.” 9 U.S.C. § 3. Thus, the trial court is not obligated to stay the lawsuit when, as here, there has been a default in proceeding with arbitration. See Garcia, 2010 U.S. Dist. LEXIS 92869 at *3-4 (holding that when a defendant is in default “the FAA no longer compels us to dismiss or stay this case for arbitration.”) Applying Heritage’s reasoning, it could delay indefinitely in pursuing arbitration and the court could never lift the stay or dismiss the lawsuit regardless of the passage of time. This is nonsensical. The only way this issue could be decided was by the court. 3. A Four-Year Delay in Initiating Arbitration is Prejudicial Per Se Heritage’s four-year delay in filing a demand for arbitration with the AAA is 8
excessive, unreasonable, and prejudicial to Beck and Brandt. Therefore Heritage waived its right to arbitration. An unreasonable delay in moving to compel arbitration is prejudicial per se. Spain v. Houston Oilers, Inc., 593 S.W.2d 746, 748 (Tex. Civ. App.— Houston [14 th Dist.] 1979, no writ). If a delay is excessive, a party waives its right to arbitration. Id. at 747. The Spain court found that a three-year, eight-month lapse between the date the defendant received notice of the plaintiff’s claim and the date the defendant moved to compel arbitration was “an unreasonable delay and prejudicial per se.” Id. Although Spain specifically addresses a prejudicial lapse between the time the defendant received notice of the suit and the time the defendant moved to compel arbitration, the effect is the same as delaying arbitration for an excessive period of time after the trial court has ordered arbitration—the excessive delay prejudices the other parties. Further, delays in initiating arbitration after the court orders arbitration have also been found to waive a party’s right to arbitration. See Mamlin v. Susan Thoman, Inc., 490 S.W.2d 634 (Tex. Civ. App.—Dallas 1973, no writ). Heritage’s delay was even greater than the three years and eight months held to be “prejudicial per se” by the Spain court. Heritage waited more than four years after the trial court compelled arbitration, almost five-years after Heritage initially filed suit, and eight years after it had notice of the claim to file a demand for arbitration with the AAA. And once the trial court compelled the parties to arbitration, it was Heritage’s duty, as the party seeking affirmative relief, to initiate the arbitration proceedings. In re Bruce Terminix Co., 988 S.W.2d 702, 705-706 (Tex. 1998). Instead, Heritage slept on its rights for four years, allowing evidence to grow stale, before unilaterally deciding that it was 9
Page 1 and 2: No.11-0100 IN THE SUPREME COURT OF
Page 3 and 4: !"#$#! TABLE OF AUTHORITIES 3V, Inc
Page 5 and 6: TO THE HONORABLE SUPREME COURT OF T
Page 7 and 8: claims, and (ii) Heritage’s claim
Page 9 and 10: U.S.C. § 3, the court was not requ
Page 11: 1019, 1020 (5 th Cir. 1977). See al
Page 15 and 16: y which it was required to initiate
Page 17 and 18: award within 356 days. AMERICAN ARB
Page 19 and 20: forcing them to endure risk for an
Page 21 and 22: PRAYER Real Party in Interest Brand
Page 23 and 24: CERTIFICATE OF SERVICE The undersig

DRAFT 2 Brief on the merits - Supreme Court of Texas

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