BEAUMONT – The 9th District Court of Appeals has affirmed a trial court's decision over a stay in a complicated complaint over hydrocarbon sales.
Chief Justice Steve McKeithen and Judicial Judges Charles Kreger and Leanne Johnson affirmed Feb. 1. the 1st District Court in Jasper County's order granting a motion to stay arbitration filed by appellees American Fluorite Inc., GeoSouthern Energy Partners LP, and GeoSouthern Energy Corp. Appellant BBX Operating LLC had filed an accelerated interlocutory appeal challenging the trial court's decision.
The original 2015 complaint brought on by the appellees was over a set of agreements (subject contracts) they entered into with BBX, which appellees argued were breached when BBX failed to pay for hydrocarbon sales in full. Appellees charged “breach of contract, conversion, section 91.402 of the Natural Resources Code, foreclosure of a statutory lien and declaratory judgment, according to the opinion.
In 2016, the appellees and appellant agreed to a Rule 11 agreement of good faith that listed eight specific provisions; however BBX filed a motion to enforce the Rule 11 contract after appellees refused to drop the original lawsuit against BBX. Appellees countered with their own motion of enforcement, alleging BBX failed to pay money owed them and a trial court heard the cross motions in 2017.
According to the appellees, BBX it had not made timely payments, which brought a complex back-and-forth between the two parties.
“On Feb. 24, 2017, BBX filed an emergency motion to stay enforcement of order granting plaintiffs’ motion to enforce Rule 11 agreement and denying defendants’ motion to enforce Rule 11 Agreement,” according to the opinion. “Therein, BBX alleged that it had not received notice of the court’s Jan. 24, 2017, order and its counsel was in the process of preparing a petition for writ of mandamus to challenge the order.”
Furthermore, “the trial court held a hearing on the emergency motion on March 1, 2017,” according to the opinion, adding, “following the hearing, the trial court entered an amended order on March 1, 2017, denying the emergency motion and denying BBX’s motion to enforce the Rule 11 agreement.”
Days later BBX filed a demand for arbitration and appellees filed an amended petition. BBX then countered with a petition for writ of mandamus to which appellees filed a motion to stay. BBX then responded to the appellees' motion, stating “at no time has BBX asserted a counterclaim, sought recovery of the amounts now sought in the arbitration proceeding, or requested affirmative relief (other than enforcement of the Rule 11 agreement),” according to the opinion.
Authoring judge Johnson pointed out that on appeal, BBX argued three issues, including “that it established the existence of an agreement to arbitrate, that the claims submitted to arbitration are within the scope of the arbitration agreement, and that appellees failed to prove any defenses to the existence of the agreement,” and, “it did not waive its contractual right to arbitration because it did not substantially invoke the judicial process, but even if it did, appellees failed to meet their burden to show they were prejudiced,” according to the opinion.
In review, Johnson noted that “whether a party has waived arbitration is decided on a case-by-case basis, based upon the totality of the circumstances,” according to the opinion.
In his analysis, Johnson notes the 9th Circuit “cannot agree with BBX’s argument that it did not substantially invoke the litigation process by seeking enforcement of the Rule 11 agreement in the trial court or on mandamus to this court,” according to the opinion.
Johnson continued, noting “the trial court could have reasonably concluded that an ‘inherent unfairness’ existed as a result of BBX’s ‘attempt to have it both ways by switching between litigation and arbitration to its own advantage,”’ according to the opinion.
“We overrule appellant’s third issue. Having determined that BBX waived its right to arbitration, we affirm the trial court’s order on that basis, and we need not address appellant’s first and second issues,” Johnson concluded.