DRAFT 2 Brief on the merits - Supreme Court of Texas

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not about the invocation of judicial process before moving to compel arbitration—it is about a complete failure to initiate arbitration after a court has ordered the parties to arbitrate. The cases Heritage relies upon are not on point. A party can forfeit its right to arbitrate through either action or inaction. Futurewei Techs. Inc. v. E. Oliver Capital Group, LLC, No. 4:09CV455, 2011 U.S. Dist. LEXIS 39080 at *4 (E.D.T.X. [Sherman Div.] April 11, 2011)(mem. op.). Cases discussing waiver based upon the invocation of judicial processes pertain to forfeiture of the rights to arbitrate caused by action. Conversely, the present matter pertains to forfeiture of the right to arbitrate caused by inaction. Heritage did not forfeit its right to arbitrate because of its actions. It forfeited its right to arbitrate by doing nothing for four years. 1. Heritage’s Inaction Constitutes Default The United States District Court for the Eastern District of Texas (Sherman Division) recently considered a matter similar to the one presented herein. See Futurewei, 2011 U.S. Dist. LEXIS 39080. After the defendants, who had initially moved to compel arbitration, refused to arbitrate, the court found that “dilatory conduct by Defendants constitutes a default in proceeding with the arbitration and warrants vacating the order staying the case and referring the matter to arbitration.” Id. at *6. The court vacated its order referring the case to arbitration and ultimately granted default judgments against the defendants. Id. at *8 and Futurewei Techs. Inc. v. E. Oliver Capital Group, LLC, No. 4:09CV455, 2011 U.S. Dist. LEXIS 53826 (E.D.T.X. [Sherman Div.] May 19, 2011)(mem. op.). Because the defendants in Futurewei defaulted in arbitration under 9 4
U.S.C. § 3, the court was not required to continue the stay of the judicial proceedings in favor of arbitration. Futurewei, 2011 U.S. Dist. LEXIS 39080 at *4 and 6. Likewise, the lower court in the present case should have vacated the stay because Heritage defaulted. It is proper to vacate a stay when the progress of arbitration is hindered because “conditions have so changed that it is no longer needed or is rendered inequitable.” Miller v. AAACON Auto Transport, Inc., 545 F.2d 1019, 1020 (5 th Cir. 1977). It was not equitable to maintain the stay and require the parties to arbitrate after Heritage slept on its rights for four years. Furthermore, Heritage relies on cases in which there was a delay in moving to compel arbitration. These cases are also distinguishable from the present matter. Here, there was no delay in moving to compel arbitration. Heritage’s delay was in initiating arbitration proceedings after a court ordered the parties to arbitrate. Heritage relies heavily on Prudential Securities Inc. v. Marshall to support the proposition that a party does not waive the right to arbitrate merely by delay. 909 S.W.2d 896, 899 (Tex. 1995). Heritage’s reliance on Prudential is misplaced. First, Prudential involves waiver based upon invocation of judicial process. Id. at 898. As discussed above, the present matter does not involve a waiver based upon invocation of the judicial process. Furthermore, in Prudential, the Court found that the defendants “consistently and timely” sought to invoke their rights to arbitration. Id. at 898. Only 18 months passed from the time the cause of action accrued in April 1994 until the Supreme Court delivered its opinion in November 1995. Id. Certainly any “delay” in Prudential cannot be equated to the delays in this case, where Heritage failed to initiate 5
Page 1 and 2: No.11-0100 IN THE SUPREME COURT OF
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Page 5 and 6: TO THE HONORABLE SUPREME COURT OF T
Page 7: claims, and (ii) Heritage’s claim
Page 11 and 12: 1019, 1020 (5 th Cir. 1977). See al
Page 13 and 14: excessive, unreasonable, and prejud
Page 15 and 16: y which it was required to initiate
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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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