ARBITRATION CLAUSE AS A DEFENSE
Merely asserting arbitration (or arbitrability) as a defense in the defendant's original answer - rather than filing a motion for an order to compel arbitration -- does not require the court to do anything with respect to arbitration; including putting the case on hold (abatement).
It follows that the right to arbitrate, if any, may still be lost if the defendant does not take any further action with respect to arbitration, and instead embraces litigation. Under the existing case law it is not entirely clear at what point a party that has the right to arbitrate loses that right.
On the topic of waiver, the Texas Supreme Court has announced a “totality of the circumstances” test that is really not a standard at all, because it allows for the consideration of numerous factors and provides little or no guidance as to how to weigh their relative importance.
Suffice it to say that the more eagerly the defendant litigates, without taking action to enforce the arbitration clause, the more likely the right to arbitrate will be forfeited under the doctrine of waiver.
The starkest scenario is for the defendant to wait until after trial or an adverse summary judgment has been rendered, and then raise the issue after suffering defeat.
In Devine v. American Express Centurion Bank, the debtor (who now sits on the Texas Supreme Court), did just that. He lost in the trial court, and then argued on appeal that his right to arbitrate should have been respected. Too late, said the Ninth Court of Appeals (Beaumont), and reversed only the award of attorney’s fees. Devine had filed a counter-affidavit on the matter of amount and reasonableness of the Plaintiff’s fees, which created a fact issue unsuitable for resolution by summary judgment. But it affirmed the trial court’s judgment on Amex’s principal claim.
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