Affirmed and Majority and Dissenting Opinions filed January 30, 2014.




                                     In The

                    Fourteenth Court of Appeals

                             NO. 14-12-00279-CV

                       RSL FUNDING, LLC, Appellant
                                       V.

  CHAVEZE D. PIPPINS, DANIEL P. MORRIS, DONNA M. O'BRIEN,
    METROPOLITAN LIFE INSURANCE COMPANY, METLIFE
INSURANCE COMPANY OF CONNECTICUT & METLIFE INVESTORS
                USA INSURANCE CO., Appellees

             On Appeal from the County Civil Court at Law No. 4
                           Harris County, Texas
                       Trial Court Cause No. 994875

                                OPINION


      RSL Funding, LLC brings this interlocutory appeal from the trial court’s
ordering the stay of arbitration proceedings and denying the stay of related trial
proceedings. The underlying dispute concerns rights related to certain annuities
issued by Metropolitan Life Insurance Company, MetLife Insurance Company of
Connecticut, and MetLife Investors USA Insurance Co. (collectively, the MetLife
parties) to Chavese D. Pippins, Daniel P. Morris, and Donna O’Brien (collectively,
the Individuals). The Individuals subsequently executed assignment agreements
with RSL concerning their rights in the annuities. While the original investment
contracts between the MetLife parties and the Individuals did not contain
arbitration clauses, the assignment agreements between the Individuals and RSL
did contain such clauses. Claims, counter-claims, and cross-claims were pleaded
among the parties to the litigation. When RSL attempted to enforce the arbitration
clause and stay the trial proceedings, the trial court denied RSL’s motion and
instead entered an order staying the arbitration. RSL now complains this was
error. We affirm.

                                       Background

       Each of the Individuals signed annuity contracts with the MetLife parties
and subsequently entered contracts to assign their annuity rights to RSL.1 The
assignment agreements between RSL and the Individuals each contained an
arbitration clause stating broadly that any disputes under the agreements would be
subject to arbitration if one of the parties so demanded. These clauses stated:

       Disputes under this Agreement of any nature whatsoever including
       but not limited to those sounding in constitutional, statutory, or
       common law theories as to the performance of any obligations, the
       satisfaction of any rights and/or the enforceability hereof . . . shall be
       resolved through demand by any interested party to arbitrate the
       dispute in accordance with the laws of the State of Texas (including
       the Federal Arbitration Act which shall be controlling) . . . . The
       parties hereto agree that the issue of arbitrability shall likewise be
       decided by the arbitrator, and not by any other person. That is, the
       question of whether a dispute itself is subject to arbitration shall be

       1
        O’Brien had two annuity contracts with the MetLife parties which she agreed to assign
to RSL; Pippins and Morris had one contract each.

                                             2
       decided solely by the arbitrator and not, for example by any court. In
       so doing the intent of the parties is to divest any and all courts of
       jurisdiction in disputes involving the parties, except for the
       confirmation of the award and enforcement thereof.

The agreements also contained provisions permitting RSL to assign the right to
purchase the annuities to a “designated assignee.”                     Each of the Individuals
thereafter signed Bills of Sale conveying their annuity rights to RSL Special-IV,
Ltd., which was apparently RSL’s designated assignee.2

       When the Metlife parties balked at recognizing RSL or RSL Special-IV’s
rights as payees, RSL filed a lawsuit on June 20, 2011, in a Harris County court-at-
law, naming the MetLife parties and the Individuals as defendants. The procedural
history of this relatively simple case is rather lengthy and complex. Because that
history is integral to our analysis, we will recount it in some detail.3

       In its original petition, RSL alleged it received assignments from each of the
Individuals of their respective annuity rights, but the MetLife parties refused to
redirect the payments to RSL or its assignee. RSL sought a declaratory judgment
that the assignments from the Individuals were enforceable and binding on all
parties and alleged the MetLife parties breached the respective annuity contracts by
not paying the amounts due to RSL or its assignee. RSL attached to its petition
affidavits from each of the Individuals stating that they had sold their annuity
rights to RSL’s assignee, RSL Special-IV.

       In an amended petition filed on September 16, RSL alleged that it was a
“special servicing agent” for RSL Special-IV and Marla B. Matz, and “[i]n its


       2
           The bills of sale apparently do not include arbitration clauses.
       3
         As will be discussed below, a central question in this appeal is whether RSL waived its
right to demand arbitration by substantially invoking the litigation process to the Individuals’
detriment or prejudice.

                                                   3
capacity as plaintiff, [it was] representing the interests of RSL Special-IV, Ltd. and
its designee Marla B. Matz.            RSL further explained that “[i]n an effort to
accommodate MetLife,” which had allegedly asserted that only natural persons
could own the annuities, “Marla B. Matz, a natural person, has been designated as
the owner of the three annuities by RSL Special-IV, Ltd. and RSL Funding, LLC
as special agent for RSL Special-IV, Ltd.” RSL further sought a declaration that
RSL Special-IV or Matz owned “the Pippins, Morris, and O’Brien annuities” and
had the exclusive rights to receive the monthly payments. Also on September 16,
RSL moved the court to require the MetLife parties “to deposit annuity funds into
the Court’s registry funds.”4

       On September 23, the MetLife parties filed a “Counterclaim and Cross-
Claim for Interpleader.” In this pleading, the MetLife parties requested permission
to deposit the annuity payments into the court’s registry as the payments became
due and sought declaratory judgment concerning which party or parties possessed
the right to receive the payments. The MetLife parties designated their pleading as
a counterclaim against RSL and as a cross-claim against the Individuals.

       On September 27, 2011, RSL filed a motion to compel arbitration against
Pippins, alleging that “contrary to his contractual obligation,” “Pippins refused to
cooperate . . . and informed RSL that he intended to cancel the transaction and not
cooperate with assignment related issues.”               RSL further accused Pippins of
“materially breaching his contracts with RSL” and requested that the trial court
enter “an order compelling Pippins to participate in arbitration.”5


       4
           In the alternative, RSL suggested the court direct the MetLife parties to make the
payments to Matz. The Individuals filed a motion requesting the funds be disbursed to Matz, but
the trial court denied this motion.
       5
         A letter appears in the record from Pippins to one of the MetLife parties requesting that
he again be named the “Payee and Beneficiary” of his annuity and that payments again be made
                                                4
       On October 4, the trial court entered an order directing the MetLife parties to
deposit into the court’s registry all annuity payments they were then holding and
deposit future payments when and as they came due.                 Although the court
referenced both RSL’s motion to require the MetLife parties to make such deposits
and the MetLife parties’ own “motion for interpleader relief,” the court stated that
it was entering the order to deposit sua sponte. Thereafter, the parties began the
discovery process. MetLife and RSL exchanged discovery requests and deposed
each others’ representative, and the Individuals depositions were either taken or at
least noticed.

       On November 10, the Individuals filed cross-claims against the MetLife
parties, alleging bad faith, breach of fiduciary duty, and breach of contract. On
November 28, the Individuals filed a counterclaim against RSL for breach of
contract. Specifically, the Individuals alleged that neither RSL nor RSL Special-
IV paid the Individuals the lump sums required under their agreements in exchange
for the annuity rights conveyed to RSL Special-IV and subsequently Matz. The
Individuals further claimed severe financial distress and an inability to pay their
own living expenses as a direct result of the breach of the agreements.6 Because
the Individuals claimed damages exceeding the jurisdictional limits of the county
court at law in which RSL had originally filed suit, they also filed a motion to
transfer the case to a Harris County district court. The trial court denied the
motion to transfer.

       The Individuals nonsuited all of their claims on November 30. On the same
day, the Individuals filed an original petition as plaintiffs in a Harris County


to him at his address.
       6
         The counterclaim against RSL was filed by the counsel apparently hired by RSL to
represent the Individuals.

                                           5
district court raising the same claims against both the MetLife parties and RSL that
they previously had raised in the county court of law. On December 1, RSL also
filed a nonsuit of all of its claims in the county court of law, without prejudice
against refiling.     In this document, RSL states that it sued all of the named
defendants for declaratory relief and the MetLife parties for breach of contract.
RSL further sought in the document dismissal of the MetLife parties’
counterclaims, arguing that these claims were merely “mirror-image claims”
intended to resist RSL’s affirmative claims and did not constitute requests for
affirmative relief in their own right. RSL further suggested that such nonsuit and
dismissal meant that no claims or parties would remain alive in the lawsuit.7 RSL
followed this filing by filing its own cross-claims in the district court where the
Individuals had earlier filed their petition.            In that pleading, RSL sought a
declaration regarding who owned the annuities at issue and also damages from the


       7
          On December 8, 2011, the trial court paradoxically signed both RSL’s nonsuit order,
which included language purporting to dismiss the MetLife parties’ counterclaims, as well as an
order expressly stating that to the extent the nonsuit sought dismissal of the counterclaims it was
denied and such claims were live and retained in the action. On the same day, the trial court
stated in open court that it intended to retain the counterclaims as live causes of action. All
parties thereafter continued to litigate as though live claims were still before the court.
        RSL suggests on appeal, without expressly arguing, that the trial court may have lost
plenary power 30-days after it signed the order of nonsuit. We disagree. As a matter of reason,
although there is a conflict on the face of the orders and it cannot be determined which order was
signed first, it must be recognized that the sole purpose of the order retaining the claims is to
retain the claims even in the face of the dismissal; whereas, the main purpose of the dismissal
appears to have been to dismiss RSL’s claims pursuant to its nonsuit. This reading also
comports with the trial judge’s oral pronouncement that she intended to retain the MetLife
parties’ claims and not dismiss them as requested by RSL’s counsel as well as the fact all parties
continued in the litigation as though there were still live claims extant.
        Moreover, even if we were to find that these two orders were irreconcilably in conflict,
that would mean they cancel each other out and neither is therefore effective; thus, the MetLife
parties’ claims would not have been dismissed. See Dean’s Campin’ Co. v. Hardsteen, No. 13-
05-468-CV, 2008 WL 3984161, at *4 (Tex. App.—Corpus Christi Aug. 29, 2008, pet. denied);
Hawk Leasing Co. v. Tex. Workforce Comm’n, 971 S.W.2d 598, 602-03 (Tex. App.—Dallas
1998, no pet).

                                                6
MetLife parties for breach of contract. RSL is careful in this pleading to complain
only of the MetLife parties and not the Individuals.          RSL then filed its own
pleadings in the district court where the Individuals had earlier filed their petition.

      On January 20, 2012, RSL filed a plea to the jurisdiction in the county court
at law, asserting that the amount in controversy in the case (i.e., the annuity
payments owed by the MetLife parties) exceeded the court’s jurisdictional cap of
$100,000, citing Texas Government Code sections 25.003 and 25.1032. RSL also
demanded a jury trial and filed an answer to the interpleader action in the county
court at law.

      On January 30, 2012, the Individuals filed a motion to withdraw the funds
deposited into the court’s registry. No reason or basis is given in the motion for
the request. An amended motion with updated amounts followed on February 24.

      Meanwhile, on February 3, RSL filed a motion for summary judgment,
seeking a determination that RSL Special-IV or Matz had a right to receive the
monthly annuity proceeds from Pippins’ annuity and seeking an order compelling
the MetLife parties to direct future payments to either RSL Special-IV or Matz.
The motion was based on the signing of the agreements by Pippins and on alleged
concessions made by an employee of one the MetLife parties in a deposition. It is
not entirely clear why RSL sought summary judgment regarding only Pippins’
annuity, but evidence demonstrated Pippins also sold or attempted to sell the right
to receive his annuity income to another lump-sum funding company.

      On February 17, RSL filed a motion to stay the trial proceedings pending
resolution of arbitration proceedings RSL had instituted against the Individuals.
Attached to the motion was an arbitration demand RSL had filed with an




                                           7
arbitrator.8      In the arbitration filing, RSL complained that the Individuals
“attempted to exercise dominion and control over annuity funds that belong to
RSL.” RSL further sought recovery therein for the Individuals’ breach of their
assignment agreements and for a “declaration of all rights.” Around this same
time, the Individuals’ trial counsel—who had filed the Individuals’ motions to
withdraw funds and apparently had been compensated by RSL up to this point—
filed a motion to withdraw. It was this same counsel, however, who filed the
Individuals’ motion and amended motion to withdraw funds.

         On March 16, the district court granted the MetLife parties’ motion to abate
the district court proceedings in deference to the ongoing proceedings in the county
court at law.9 There appears to have been no further action taken in the district
court after this order was entered.

         New counsel appeared for the Individuals and filed a Notice of Withdrawal
of Motions to Withdraw Funds before such motions could be presented to the
court.       The Individuals then filed a combined motion to stay arbitration and
opposition to RSL’s motion to stay the trial proceedings. In that document, the
Individuals argued that (1) arbitration would not resolve any issues pending before


         8
         RSL initially demanded arbitration with only O’Brien and Pippins, but not Morris, who
was included in the request to withdraw funds from the court’s registry. The arbitration demand
later was amended to include Morris.
       It should also be noted that the alleged right for RSL Special-IV or Matz to receive
payments from the O’Brien annuities was apparently not scheduled to begin until March 2012.
RSL stated in its motion to stay that it anticipated O’Brien would seek to withdraw funds from
the court’s registry at that time. No explanation is offered as to why the MetLife parties had
already apparently deposited funds related to O’Brien’s annuities or the fact that she had already
requested to withdraw those funds. [dbl-ck to make sure not confusing the fact she had two]
         9
          The MetLife parties assert that RSL filed a response to the abatement motion opposing
it, specifically arguing that the district court rather than the county court at law was the correct
forum in which to resolve the parties’ disputes. However, the MetLife parties do not cite this
document in their briefing, and it has not otherwise been discovered in the appellate record.

                                                 8
the court, at least in part because Matz and RSL Special-IV were not parties to the
arbitration; (2) the arbitrator chosen by RSL appeared to be “partial or biased
towards RSL”; (3) the arbitration provisions in the assignment agreements were
unconscionable; and (4) RSL had waived its right to demand arbitration by
substantially invoking the litigation process to the detriment of the other parties.10
The MetLife parties also filed a response to RSL’s motion, principally arguing
waiver due to substantially invoking the litigation process. The trial court signed
an order granting the Individuals’ motion to stay arbitration on March 30, without
specifying its basis. During a related hearing on March 28, the court orally denied
RSL’s motion to abate the trial proceedings, mentioning that RSL had itself started
the litigation by filing suit instead of an arbitration, had requested relief from the
court “innumerable times,” and had participated in a dozen hearings involving
“hundreds if not thousands[] of pages of exhibits and motions.” 11 RSL’s counsel
also acknowledged at the hearing that it had reset its motion for partial summary
judgment several times for hearing, even after filing the motion to abate the trial
proceedings.


       10
           In the opposition, the Individuals’ counsel also sought sanctions and made serious
allegations of impropriety against Stewart Feldman—RSL’s CEO, a licensed attorney, and the
sole shareholder in the law firm representing RSL—regarding his conduct in the litigation. The
allegations included that Feldman attempted to instruct the Individual’s new counsel on how to
proceed in the litigation (even after RSL contends the Individuals became adverse parties) and
not to take any action adverse to the position of Feldman and RSL. Allegations were also raised
that Feldman repeatedly attempted to contact the Individuals directly despite warnings that he
should not do so. RSL’s counsel even acknowledged in a hearing that this latter accusation was
true. Feldman apparently contends that the agreements signed by the Individuals gave RSL
exclusive control of the litigation and the Individuals’ involvement therein. The accusations
were discussed in a hearing before the court regarding the motions to stay.
       11
           The court further took the request for sanctions against Feldman under advisement and
instructed Feldman not to communicate directly with the Individuals in the interim. In the
hearing, counsel for the Individuals represented that all his clients wanted was to “get paid [by
RSL] and go away,” so that RSL and MetLife could continue their dispute, but that RSL seemed
reluctant to allow that to happen.

                                               9
                                       Governing Law

       In two issues, RSL contends the trial court erred in overruling RSL’s motion
to stay the litigation pending arbitration and instead ordering a stay of the
arbitration.12 As set forth above, in their combined motion to stay arbitration and
opposition to RSL’s motion to stay the trial proceedings, the Individuals raised
several grounds in contesting RSL’s arbitration demand; however, we will
primarily focus on the waiver ground in this opinion. A party can be held to have
waived an arbitration clause if it has substantially invoked the judicial process to
the other party’s detriment or prejudice. Perry Homes v. Cull, 258 S.W.3d 580,
589–90 (Tex. 2008). Waiver is a question of law subject to de novo review, and
we will only defer to the trial court’s discretion on any factual disputes that need to
be resolved. See id. at 587, 598. Waiver is a matter for the courts and not for
arbitrators. Id. at 587.

       The party opposing arbitration has the burden of proving waiver, and there is
a strong presumption against such a finding. Id. at 590. Whether a party has


       12
          In its Reply Brief, RSL suggests that at least parts of this appeal may have become
moot because of filings made in this court during the pendency of the appeal. Although RSL
only expressly suggests that the waiver ground raised by the Individuals and the MetLife parties
below has been rendered moot, we briefly address this contention to the extent it may have
relevance to the unchallenged ground from below on which this opinion is based.
        Specifically, RSL points to a letter to this court allegedly signed by two of the
Individuals, O’Brien and Morris, and attached to RSL’s Motion to Clarify Stay Pending
Interlocutory Appeal. In this letter, it is urged that the arbitration be allowed to continue even
during the pendency of the appeal. RSL contends in its Reply Brief that this letter, along with
another letter allegedly sent to the court by Pippins, indicates the Individuals have withdrawn
their objections to arbitration, thus mooting at least a portion of the appeal. However, no letter
from Pippins as identified in the Reply Brief appears in our files. Furthermore, the signature by
O’Brien that appears in the letter attached to the Motion to Clarify does not appear original to
that document but appears transferred from another source. No explanation is offered for this
appearance. Moreover, no motion to dismiss the appeal or notice of withdrawal of opposition to
arbitration has been received in this court. The documents referred to by RSL in its Reply Brief
do not moot any issues in this appeal.

                                               10
waived arbitration is decided on a case-by-case basis, based upon the totality of the
circumstances. Id. at 591. While the court in Perry Homes did not offer detailed
criteria that must be present or considered in order to find waiver, it did list a
variety of factors that courts have found to be relevant to the analysis, including:

   • whether the party who pursued arbitration was the plaintiff or the
     defendant;
   • how long the party who pursued arbitration delayed before seeking
     arbitration;
   • when the party who pursued arbitration learned of the arbitration
     clause’s existence;
   • how much the pretrial activity related to the merits rather than
     arbitrability or jurisdiction;
   • how much time and expense has been incurred in litigation;

   • whether the party who pursued arbitration sought or opposed
     arbitration earlier in the case;
   • whether the party who pursued arbitration filed affirmative claims or
     dispositive motions;
   • how much discovery has been conducted and who initiated the
     discovery;
   • whether the discovery sought would be useful in arbitration;

   • what discovery would be unavailable in arbitration;

   • whether activity in court would be duplicated in arbitration;

   • when the case was to be tried; and

   • whether the party who pursued arbitration sought judgment on the
     merits.

Id. at 591–92. As the Perry Homes court pointed out, all of these factors are rarely
presented in a single case, and waiver has been established based on only a few or



                                          11
even a single one.        Id. at 591.13     Just how much litigation conduct will be
considered “substantial” depends on the context. Id. at 593.

       In regards to waiver of an arbitration clause, “prejudice refers to the inherent
unfairness 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 that same issue.”        Id. at 597 (quoting Republic Ins. Co. v. PAICO
Receivables, LLC, 383 F.3d 341, 346 (5th Cir. 2004)). Such unfairness results
when a party attempts “to have it both ways by switching between litigation and
arbitration to its own advantage.” Id. A party’s delay in demanding arbitration
does not by itself waive the right; however, when a party fails to demand
arbitration and then “engages in pretrial activity inconsistent with an intent to
arbitrate, the party later opposing a motion to compel arbitration may more easily
show that its position has been compromised.”                 Id. at 600 (quoting PAICO
Receivables).

                             Invoking the Litigation Process

       We begin by examining whether RSL substantially invoked the litigation
process before requesting arbitration; we will then consider whether sufficient
prejudice or detriment was shown to justify the trial court’s denial of that request.
RSL acknowledges it actively pursued litigation against the MetLife parties, but
explains that because it had no right to demand arbitration with those parties, it was
compelled to litigate its claims against them. We, in fact, agree with RSL that any
litigation activity it engaged in solely regarding the MetLife parties should not be a
factor in analyzing whether it invoked the litigation process before demanding


       13
          Most of the listed factors were gleaned by the Perry Homes court from federal cases;
the court also stressed “the importance of keeping federal and state arbitration law consistent.”
258 S.W.3d at 591, 594.

                                               12
arbitration with the Individuals. Cf. Pennzoil Co. v. Arnold Oil Co., 30 S.W.3d
494, 499-500 (Tex. App.—San Antonio 2000, orig. proc.).14

       We disagree with RSL, however, regarding whether it substantially invoked
the litigation process with respect to the Individuals before requesting arbitration.
RSL filed its lawsuit against both the MetLife parties and the Individuals. See
Perry Homes, 258 S.W.3d at 591 (identifying fact that party requesting arbitration
was the one that filed the lawsuit as relevant factor).15 RSL characterizes its
declaratory judgment action against the Individuals as a “friendly dec action,”
insisting that because its interests and those of the Individuals were to some degree
aligned when suit was initiated, it cannot be held to have substantially invoked the
litigation process against the Individuals prior to the time that an “arbitrable
dispute” arose between those parties. RSL maintains that an arbitrable dispute did
not arise until the Individuals sought release of the funds in the court’s registry to
themselves.16 We do not agree that an “arbitrable dispute” arises only when one

       14
            In Arnold Oil, the San Antonio Court of Appeals held that the party opposing
arbitration was not prejudiced because it expended resources in the litigation before an
arbitration demand was made where those same expenditures would have occurred anyway
because the party opposing arbitration made the same claims against another party in the
litigation that was not a party to any arbitration agreement. 30 S.W.3d at 499-500. Here, RSL
cannot be held to have substantially invoked the litigation process by steps it took in the
litigation that were directed solely at the MetLife parties.
       15
          RSL’s petitions in this case do not mention the arbitration clauses, although RSL was
clearly aware of them throughout the litigation as its early demand for arbitration with Pippins
demonstrates.
       16
          In its opening brief, RSL does not cite any authority supporting the proposition that
simply because its interests were to some degree aligned with the Individuals means that it was
not substantially invoking the litigation process in respect to the Individuals. In its Reply Brief,
RSL argues that under section 37.006 of the Texas Civil Practice and Remedies Code, it was
required to include the Individuals in the declaratory judgment action against the MetLife parties
because the Individuals possessed an “interest that would be affected by the declaration” sought.
Tex. Civ. Prac. & Rem. Code § 37.006.
      It should also be noted that, at least at the beginning of the litigation, RSL was
compensating the attorney representing the Individuals, although it appears that not all of the
                                                13
party is no longer satisfied with the forum it initially selected. Even a “friendly
dec action” “sounds in . . . statutory or common law theories as to the performance
of any obligations, the satisfaction of any rights and/or the enforceability hereof”
and would therefore be arbitrable under the arbitration clause.

       Furthermore, there is indication in the record that the relationship between
RSL and the Individuals was not as amicable as RSL suggests. Certainly, the
parties RSL represented in the lawsuit, RSL Special-IV and Matz, stood to gain by
a declaration that they, and not the Individuals, were entitled to receive the
monthly annuity payments; as any declaratory judgment action is designed to do, it
would put to rest the question of rights between the parties. RSL even appears to
acknowledge at points in its briefing that there was always at least a potential for
dispute between itself and the Individuals, a potential that would end if RSL
received the relief it sought, i.e., a declaration that RSL Special-IV or Matz was
entitled to receive the monthly annuity payments instead of the Individuals.

       For example, RSL points out that even when the Individuals ultimately
retracted their motions to withdraw funds, RSL could “never know for sure the
[Individuals’] real position here, giving rise to a live controversy the parties must
arbitrate.” (Internal quotation marks omitted.) But this was true during the entire
course of the proceedings and especially so after RSL became aware very early in
the litigation of Pippins’ attempt to sell his annuity rights to another company as
well as his request to one of the MetLife parties that he again be named the “Payee
and Beneficiary” of his annuity. It was at that point RSL filed its first request for
arbitration, alleging Pippins was refusing to cooperate in the lawsuit and had
materially breached his contracts with RSL. Although RSL did not pursue the

attorney’s filings in the case supported RSL’s position in the litigation. As mentioned above,
RSL also contends that the agreements executed by the Individuals obligated them to cooperate
with RSL in the litigation.

                                             14
request to ruling, it demonstrates that disputes and potential disputes existed in the
relationship between RSL and the Individuals all along.17

       Moreover, on November 28, the Individuals filed a counterclaim against
RSL, alleging that it had breached the assignment agreements that RSL used as the
basis for its declaratory judgment claim against the Individuals. The Individuals
claimed severe financial distress had resulted from that breach. RSL, however, did
not file a request for arbitration in response to these claims against it, even though
the claims would certainly fall within the broad “[d]isputes . . . of any nature
whatsoever” language in the arbitration clause. Instead, RSL elected to continue
the litigation process.18        While it is true that the Individuals nonsuited their
affirmative claims against RSL rather quickly in the county court at law, the record
reveals that the Individuals immediately thereafter, on November 30, 2011, filed an
original petition in a Harris County district court raising the same claims against
RSL.19 But RSL waited until February 16, 2012 to file its motion to abate the trial
proceedings pending resolution of the arbitration.

       On February 3, RSL filed a motion for partial summary judgment in the
county court at law. Although RSL describes this motion as only being aimed at

       17
            The fact that the Individuals sought sanctions against RSL’s CEO, Feldman, also
illustrates the lack of harmony among the supposedly aligned parties. See supra n.10–11.
Although a potential rather than live dispute might not by itself be sufficient to require a party to
demand arbitration or risk waiving the right to do so, such disputes help explain why RSL would
have raised declaratory judgment claims against the Individuals.
       18
          There is a suggestion in the briefing that the Individuals’ counterclaims were part of an
attempt by RSL to escape the county court at law with the Individuals’ aid. After all, both RSL
and the Individuals then attempted to have the case transferred to a district court. But whether
the counterclaims were designed for this purpose or not, they were certainly adversarial on the
surface and both RSL and the Individuals continued to invoke the litigation process rather than
pursue arbitration.
       19
         These claims apparently stayed active in the district court until that court granted the
MetLife parties’ motion to abate in deference to the county court at law proceedings in mid-
March, a motion that RSL opposed.

                                                 15
its claims respective to the MetLife parties, the motion itself does not appear that
limited. The motion in fact seeks a declaration “that RSL Special-IV, Ltd. and /or
or Marla B. Matz is the irrevocable payee and beneficiary of the payments owing
under” the annuity originally issued to Pippins. This is the very claim RSL seeks
to arbitrate against Pippins. RSL has set the motion for hearing on more than one
occasion and as late as April 2012.20 See Perry Homes, 258 S.W.3d at 591-92
(identifying the filing of a dispositive motion or the seeking of judgment on the
merits as factors indicative of substantially invoking the litigation process).

        Under the unique facts of this case, RSL substantially invoked the litigation
process before requesting arbitration against the Individuals.               See id. at 590
(explaining that whether a party has waived its right to demand arbitration is
considered on a case-by-case basis). RSL initiated the litigation and brought the
Individuals into it, engaged in considerable procedural maneuvering, was named a
defendant by the Individuals in two different courts, and sought summary
judgment on an issue it was also seeking to arbitrate.

                                         Prejudice

       We next turn to the question of whether RSL’s substantial invoking of the
judicial process accrued to the Individuals’ detriment or prejudice. Such detriment
or prejudice again “refers to the inherent unfairness in terms of delay, expense, or
damage to a party’s legal position that occurs when the party’s opponent” attempts
“to have it both ways by switching between litigation and arbitration to its own
advantage.” Id. at 597. Delay alone is not sufficient to show prejudice, but when a
party fails to demand arbitration and then “engages in pretrial activity inconsistent
with an intent to arbitrate, the party later opposing a motion to compel arbitration

       20
        In a hearing on the motions, the trial judge took particular interest in the motion for
summary judgment as well as the repeated attempts to set it for hearing.

                                              16
may more easily show that its position has been compromised.” Id. at 600.21 A
trial court may take judicial notice of the record in determining prejudice.
Williams Indus., Inc. v. Earth Dev. Sys. Corp., 110 S.W.3d 131, 141 (Tex. App.—
Houston [1st Dist.] 2003, no pet.) (citing Marble Slab Creamery, Inc. v. Wesic,
Inc., 823 S.W.2d 436, 439 (Tex. App.—Houston [14th Dist.] 1992, no writ)).
Proof of prejudice is required; proof establishing the precise extent of that
prejudice is not. Perry Homes, 258 S.W.3d at 599-600.

       In arguing that the Individuals were not prejudiced by any delay in seeking
arbitration, RSL focuses on the apparent fact that it did not burden the Individuals
with substantial discovery requests prior to demanding arbitration. While RSL did
engage in discovery with the MetLife parties and the MetLife parties sought
discovery from the Individuals, RSL insists that none of that activity can be
attributed to RSL’s invoking of the litigation process.              This reasoning is not
entirely clear, however, because RSL initiated the lawsuit and brought the
Individuals into it.      See generally PAICO Receivables, 383 F.3d at 346-47
(discussing the prejudice resulting when discovery is conducted regarding both

       21
           In discussing prejudice, the Perry Homes court quotes extensively from the Fifth
Circuit’s opinion in PAICO Receivables:
       While the mere failure to assert the right to demand arbitration does not alone
       translate into a waiver of that right, such failure does bear on the question of
       prejudice, and may, along with other considerations, require a court to conclude
       that waiver has occurred. The failure to demand arbitration affects the burden
       placed upon the party opposing waiver. When a timely demand for arbitration
       was made, the burden of proving waiver falls even more heavily on the shoulders
       of the party seeking to prove waiver. A demand for arbitration puts a party on
       notice that arbitration may be forthcoming, and therefore, affords that party the
       opportunity to avoid compromising its position with respect to arbitrable and
       nonarbitrable claims. In contrast, where a party fails to demand arbitration . . .
       and in the meantime engages in pretrial activity inconsistent with an intent to
       arbitrate, the party later opposing a motion to compel arbitration may more easily
       show that its position has been compromised, i.e., prejudiced.
Perry Homes, 258 S.W.3d at 600 (quoting PAICO Receivables, 383 F.3d at 346).

                                              17
arbitrable and nonarbitrable claims).            But even accepting RSL’s position, the
record still reveals that the Individuals were prejudiced by RSL’s delay in
requesting arbitration. See Perry Homes, 258 S.W.3d at 600 (rejecting a focus
solely on the amount of discovery conducted in a case).

       To begin with, during the period of delay, the Individuals have not received
either their promised lump sum payments from RSL or their monthly annuity
payments from the MetLife parties. They claim severe financial distress as a
result. Although in its order instructing the MetLife parties to deposit the monthly
payments into the court’s registry, the court stated that it was doing so “sua
sponte,” it did so at the urging of the MetLife parties and RSL. In this regard, it
should also be noted that the case was set for expedited trial before RSL sought,
and this court issued, a stay pending appeal.22

       The record further demonstrates that the Individuals filed numerous
pleadings and motions in the trial court that they would not have needed to do had
the case proceeded to arbitration earlier than RSL made its request. See PAICO
Receivables, 383 F.3d at 347 (identifying the time and expense involved in
litigation as key factors demonstrating prejudice).23 Under the unique facts of this
case, the Individuals were prejudiced by RSL’s invoking the litigation process

       22
           An additional factor in this case is that, after filing suit against the Individuals, RSL
hired an attorney to represent them and allegedly attempted to control their conduct in the
litigation. As discussed above, significant allegations of threats and intimidation have been
made against RSL’s CEO Feldman. It is not entirely clear in the record to what extent these
alleged facts may have compromised the Individuals’ positions in any possible arbitration
between RSL and themselves. The Individuals’ RSL-hired attorney filed the motion to withdraw
funds before being replaced by new counsel hired by the Individuals. RSL subsequently sued the
new counsel, who therefore withdrew from his representation of the Individuals, leaving them
pro se.
       23
          The record does not contain any specific evidence regarding expenses incurred by the
Individuals, but precise proof of amounts spent is not required to show prejudice. Perry Homes,
258 S.W.3d at 599-600.

                                                18
prior to filing for arbitration. Because we find that the trial court’s orders granting
a stay of arbitration proceedings and refusing to grant a stay pending arbitration
were supported by the waiver ground, we need not address the other three grounds
raised by the Individuals.24 We overrule RSL’s two issues.

       We affirm the trial court’s orders.


                                              /s/    Martha Hill Jamison
                                                     Justice



Panel consists of Chief Justice Frost and Justices Jamison and McCally (Frost,
C.J., dissenting).



       24
            We have focused in this opinion on the waiver issue because this appears to be the
issue that the parties and the trial court focused on in the proceedings below. We note, however,
that the trial court generally granted the Individuals’ motion to stay arbitration and denied RSL’s
motion to stay the trial proceedings pending arbitration without stating a specific basis for those
actions. Among the other three grounds raised by the Individuals in their motion to stay and
opposition to RSL’s motion, the Individuals argued that that the arbitration would not resolve
any issues that were then pending before the court, at least in part because Marla Matz, who
according to RSL owned the annuity rights, and RSL Special-IV, which according to RSL
purchased the annuity rights from the Individuals and then conveyed them in some fashion to
Matz, were not parties to the arbitration proceeding. RSL has wholly failed to address this
ground in its briefing to this court.
       It is well established in Texas that when a trial court issues a ruling adverse to a party
without specifying its grounds for doing so, the party on appeal must challenge each independent
ground that was asserted by the appellees in the trial court. See, e.g., In re Elamex, S.A. de C.V.,
367 S.W.3d 879, 888 (Tex. App.—El Paso 2012, no pet.) (denial of motion for forum non
conveniens); U.S. Lawns, Inc. v. Castillo, 347 S.W.3d 844, 846-49 (Tex. App.—Corpus Christi
2011, pet. denied) (denial of motion to compel arbitration); Gross v. Carroll, 339 S.W.3d 718,
723 (Tex. App.—Houston [1st Dist.] 2011, no pet.) (grant of motion to dismiss for several
reasons); Hill v. Stephens, No. 14-09-01030-CV, 2010 WL 5238587, at *3 (Tex. App.—Houston
[14th Dist.] Dec. 16, 2010, no pet.) (mem. op.) (grant of motion to dismiss based on official
immunity). This failure to challenge provides an alternative basis for affirming the trial court’s
holdings. See, e.g., In re Elamex, 367 S.W.3d at 888; U.S. Lawns, 347 S.W.3d at 846-49; Gross,
339 S.W.3d at 723; Hill, 2010 WL 5238587, at *3.

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