In re Citigroup Global Markets, No. 06-0886 (per curiam) (orig. proceeding)
Decided: May 16, 2008
The court of appeals held that Citigroup’s (successful) attempt to remove a case to federal court, its (successful) attempt to get an MDL transfer of that case, and then its (successful) request that the MDL court remand the case back to state court was enough to waive an arbitration clause. The Texas Supreme Court disagreed, granting mandamus relief in a per curiam opinion. The Court emphasized that Citigroup had not conducted any discovery or sought relief on the merits but had instead merely engaged in jurisdictional skirmishes.
You may also want to read the summary of this case on Disputing, a blog focusing on alternative dispute resolution.
What’s a little interesting is how this case dealt with Perry Homes.
The Court didn’t use Perry Homes as a benchmark to measure how much litigation conduct was enough. It used a pre-Perry Homes case for that general proposition. ((
Parties that “conduct full discovery, file motions going to the merits, and seek arbitration only
on the eve of trial” waive any contractual right to arbitration. In re Vesta Ins. Group, Inc., 192
S.W.3d 759, 764 (Tex. 2006). The relator here did none of those, but instead spent seven months
removing the case to various federal courts before finally filing an answer in state court with a
contemporaneous motion to compel arbitration. The courts below held the relator’s transfer efforts
waived arbitration. 202 S.W.3d 477. ))
Instead, the Court cited Perry Homes as a broad, totality-of-the-circumstances test about litigation fairness. The Court repeated the language from Perry Homes that waiver occurs “by substantially invoking the judicial process to the other party’s detriment.” The Court also cited Perry Homes for the standard of review, saying that waiver “is a legal question for the court based on the totality of the circumstances.”
Here, Citigroup imposed substantial costs and delays on the other side — it sought three separate transfers that had the net effect of bringing the case right back to state district court — before it sought to arbitrate. But that was not, it appears, the kind of “detriment” the Court is measuring. Up to this point, it seems that the Court has framed “detriment” in terms of substantive litigation advantage, not the sorts of burdens that come from unnecessary delay or attorney’s fees.
Of course, this is a totality-of-the-circumstances test, so one can never tell. We’ll have to wait for some more data points to have a better sense of how this will work after Perry Homes.