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COURT
OF APPEALS

SECOND DISTRICT OF TEXAS

FORT WORTH

NO. 2-07-293-CV

NORTHWEST
CONSTRUCTION
APPELLANT

COMPANY,
INC.

V.

THE
OAK PARTNERS, L.P.,
APPELLEES

MORGAN
DEVELOPMENT

AND
SUPPLY, INC.,

METROPLEX
MASONRY, INC.,

ARI-TEX,
INC., MAX PLUMBING

CONTRACTORS,
INC.,

S
& S TILE, LTD., AND

KENT-ANDERSON
CONCRETE, L.P.

D/B/A
ANDERSON CONCRETE

CONSTRUCTION

------------

FROM THE 355TH DISTRICT COURT OF HOOD
COUNTY

------------

AND

NO. 2-07-328-CV

IN
RE NORTHWEST
RELATOR

CONSTRUCTION
COMPANY, INC.

------------

ORIGINAL PROCEEDING

------------

OPINION

------------

This
consolidated mandamus proceeding and interlocutory appeal arise from the
trial court=s
order denying relator and appellant Northwest Construction Company,
Inc.=s
motion to compel arbitration in the underlying suit involving construction
of an assisted living center in Granbury, Texas.  In both the appeal and mandamus
proceeding, Northwest raises the following four issues:  (1) whether there is a valid
arbitration clause binding the parties that encompasses the dispute; (2)
whether the trial court had jurisdiction to determine if Northwest waived
its right to arbitrate the dispute; (3) whether the trial court erred by
ruling that Northwest waived its right to arbitrate by substantially
invoking the judicial process to the detriment of the other parties; and
(4) whether appellees have waived their right to rely on mediation as a
condition precedent to the enforceability of the arbitration clause.  We affirm the trial
court=s
order in part and reverse it in part.  We also dismiss
Northwest=s
petition for writ of mandamus.

Background
Facts

On
April 27, 2004, Northwest entered into a construction contract with The
Oak Partners, L.P., an appellee and real party in interest, to design and
construct an assisted living facility in Granbury, Texas.  The contract referenced the
facility to be constructed as Amore
particularly described in the design development plans and specifications
and design criteria identified in Exhibit B@
attached to the contract.
Exhibit B, in turn, provided that the project specifications were
the AProject
Manual for The Courtyards at Lake Granbury, Granbury, Texas, prepared by
GSR Andrade Architects dated April 16, 2004.@  The April 16, 2004 Project Manual
included a provision incorporating into it A[t]he
>General
Conditions of the Contract for Construction=,
AIA Document A201, Fourteenth Edition, 1997, Articles 1 through 14
inclusive.@  A new Project Manual dated May 28,
2004 contained the same language.

AIA
Document A201-1997 contains an arbitration clause, which reads as follows,
in pertinent part:

Claims
not resolved by mediation shall be decided by arbitration which, unless
the parties mutually agree otherwise, shall be in accordance with the
Construction Industry Arbitration Rules of the American Arbitration
Association currently in effect.
The demand for arbitration shall be filed in writing with the other
party to the Contract and with the American Arbitration Association, and a
copy shall be filed with the Architect.

The
term AClaim@
is defined as

a
demand or assertion by one of the parties seeking, as a matter of right,
adjustment or interpretation of Contract terms, payment of money,
extension of time or other relief with respect to the terms of the
Contract.  The term
AClaim@
also includes other disputes and matters in question between the Owner and
Contractor arising out of or relating to the Contract.

After
entering into the contract with Oak Partners, Northwest entered into
subcontractor agreements with S & S Tile, Ltd., Morgan Development and
Supply, Inc., Metroplex Masonry, Inc., Ari-Tex, Inc., Kent-Anderson
Concrete L.P. d/b/a Anderson Concrete Construction, and Max Plumbing
Contractors, Inc.  Each of the
subcontract agreements contained the following
provisions:

The
terms of the dispute resolution and claims procedure contained in the
General Contract shall be binding upon Subcontractor, whether or not
Subcontractor records or files a mechanic=s
lien, stop notice or prosecutes suit thereon or against any bond posted by
Contractor; and Subcontractor hereby acknowledges that this Subcontract
waives, affects, and impairs rights it would otherwise have in connection
with such liens, stop notices and suits on said
bonds.

.
. . .

Any
disputes or controversies not resolved or settled by the parties under the
previous provisions shall be submitted to binding arbitration in
accordance with the Construction Industry Rules of the American
Arbitration Association and any judgment upon the award by the arbitrators
may be entered by any court having jurisdiction.  The venue for any hearing under
this arbitration provision shall be in Dallas County, Texas.

After
Northwest constructed the facility, Oak Partners sued Northwest on August
30, 2005, in the 355th District Court of Hood County, alleging that
Northwest had breached the contract; Oak Partners claimed that the
facility had failed to pass inspections by the Texas Department of Aging
and Disability Services because certain parts of the design and
construction were not in accordance with the Department=s
applicable rules and regulations.
Northwest filed its original answer in the suit on December 12,
2005.

S
& S Tile and Max Plumbing sued Oak Partners and Northwest in separate
suits in the 355th District Court, claiming they were owed money on the
project.  On January 11, 2006,
Northwest filed a motion to consolidate the Max Plumbing and Oak Partners
cases.  The trial court
granted the motion the next day and consolidated the cases.  On January 19, 2006, Northwest
filed a motion to consolidate the S & S Tile case with the two
consolidated cases.  Before
the trial court ruled on the motion to consolidate, S & S Tile filed a
motion for summary judgment.
While that motion was pending, the trial court granted
Northwest=s
motion to consolidate the S & S Tile case with the other two cases on
February 2, 2006.

Northwest
filed a counterclaim against Oak Partners on February 3, 2006, alleging
that Oak Partners breached the contract by failing to pay for change
orders, causing delays, and refusing to release retainage.  Northwest also brought causes of
action for quantum meruit, promissory estoppel, and foreclosure of
statutory and constitutional liens; a Prompt Payment Act claim; and a
claim for attorneys=
fees.

Northwest
and Oak Partners filed responses to S & S Tile=s
motion for summary judgment on March 10, 2006.  The motion was set for a hearing
on March 17, 2006, but S & S Tile and Northwest entered into a rule 11
agreement to remove the motion from the court=s
docket.[1]  The motion was never
reset.

On
February 17, 2006, Kent-Anderson filed a separate suit against Northwest
and Oak Partners, which the trial court consolidated with the other three
cases upon Northwest=s
motion.  Oak Partners then
filed a first amended petition adding GSR as an additional defendant and
alleging causes of action for breach of contract and negligence.  After the addition of GSR as a
defendant, subcontractors Morgan Development and Supply, Inc., Metroplex
Masonry, Inc., and Ari-Tex, Inc. intervened in the
suit.

Northwest
filed a motion for partial summary judgment on May 2, 2007.  In it, Northwest sought a ruling
that Oak Partners could not recover damages arising from design flaws or
errors or omissions in the project design.  Northwest asserted the affirmative
defenses of estoppel, contractual bar, violation of the express negligence
rule, and waiver.  Oak
Partners filed a response on May 30, 2007.  GSR also filed a response and an
affidavit in opposition to the motion.

On
June 25, 2007, Northwest filed a First Amended Original Counterclaim and
Original Cross-Claim, re-alleging its claims against Oak Partners, adding
declaratory and unjust enrichment claims, and alleging cross-claims
against GSR and the subcontractors.
On July 9, 2007, Northwest filed a AMotion
to Compel Arbitration@
and a AMotion
for Leave to Designate Responsible Third Parties,@
which it expressly made contingent upon the trial court=s
denial of its motion to compel arbitration.

The
trial court denied Northwest=s
motion to compel arbitration on the ground that Northwest had waived its
right to arbitration by substantially invoking the judicial process to the
detriment of all of the opposing parties in the case.[2]   Before this court, Oak
Partners is the only party opposing Northwest=s
request for arbitration.
Accordingly, we will review whether the trial court properly denied
Northwest=s
motion to compel arbitration.

This
Court=s
Jurisdiction

To
determine whether we have jurisdiction over the interlocutory appeal in
addition to the mandamus petition, we must decide whether the trial court
denied Northwest=s
motion to compel pursuant to the Federal Arbitration Act (FAA), the Texas
General Arbitration Act (TGAA), or both.  See 9 U.S.C.A. ''
1‑16 (West 1999 & Supp. 2007); Tex. Civ. Prac. & Rem. Code
Ann. ''
171.001‑.098 (Vernon 2005); In re Citigroup Global Mkts., Inc., 202
S.W.3d 477, 480 (Tex. App.CDallas
2006, orig. proceeding).  In
Texas, a trial court=s
denial of arbitration under the FAA may be challenged only by mandamus and
not by interlocutory appeal.
In re D. Wilson Constr. Co., 196 S.W.3d 774, 779 (Tex. 2006)
(orig. proceeding); Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266,
272 (Tex. 1992) (orig. proceeding).
But a party may seek to enforce an arbitration agreement under both
the FAA and TGAA if, like the agreement here, it does not say whether the
FAA or TGAA applies.  D.
Wilson Constr. Co., 196 S.W.3d at 778‑79.  Texas appellate courts have
jurisdiction over interlocutory appeals from the denial of arbitration
under the TGAA only or under both the FAA and TGAA.  Tex. Civ. Prac. & Rem. Code
Ann. '
171.098(a)(1); D. Wilson Constr. Co., 196 S.W.3d at
778‑79.

Here,
the agreement upon which Northwest relies does not purport to be governed
by either the FAA or the TGAA.
In its motion to compel, Northwest sought arbitration under both
the FAA and TGAA.  Oak
Partners contends in its response to the petition for writ of mandamus
that Northwest did not bring forward any evidence of interstate commerce
showing that the agreement is enforceable under the FAA; thus, according
to Oak Partners, enforceability of the agreement is governed by the TGAA
only.

The
trial court=s
order denying arbitration does not specify whether the denial was under
the FAA or TGAA.  Northwest
filed both a petition for writ of mandamus and an interlocutory appeal in
this court, contending that the agreement is enforceable under the TGAA as
well as the FAA.  Accordingly,
we have jurisdiction over both the appeal and the mandamus unless the FAA
pre‑empts the TGAA in this instance.
See id. at 779‑80.

To
determine whether an agreement that does not purport to be under either
the FAA or TGAA is governed only by the FAA (i.e., whether the FAA
pre‑empts the TGAA), thus precluding an appellate court=s
jurisdiction over an interlocutory appeal, we must determine whether (1)
the agreement is in writing, (2) it involves interstate commerce, (3) it
can withstand scrutiny under traditional contract defenses, and (4) state
law affects the enforceability of the agreement.  9 U.S.C.A. '
2; D. Wilson Constr. Co., 196 S.W.3d at 780; In re Nexion Health
at Humble, Inc., 173 S.W.3d 67, 69 (Tex. 2005) (orig.
proceeding).  For the FAA to
pre-empt the TGAA, state law must refuse to enforce an arbitration
agreement that the FAA would enforce, either because (1) the TGAA has
expressly exempted the agreement from coverage, or (2) the TGAA has
imposed an enforceability requirement not found in the FAA.  D. Wilson Constr. Co., 196
S.W.3d at 780.   In other
words, the FAA pre‑empts only contrary state law, not consonant state
law.  Id. at
779.

We
conclude that the FAA does not pre-empt the TGAA here.  Northwest has not directed us to,
nor have we found, any evidence of interstate commerce in the record.  Likewise, Northwest did not direct
the trial court to any such evidence.  Because this suit involves a
construction project, it is possible that materials may have come from out
of state, but Northwest has not directed us to anything in the record to
support that conclusion, nor have we found any evidence in the record that
would support such a conclusion.
See, e.g., In re Nasr, 50 S.W.3d 23, 25-26 (Tex.
App.CBeaumont
2001, orig. proceeding) (holding that construction contract involved
interstate commerce because list of subcontractors in record included
Wal-Mart).  We hold that
Northwest has failed to prove that the arbitration agreement involves
interstate commerce; thus, the FAA does not pre-empt the TGAA in this
instance, and we have jurisdiction over Northwest=s
interlocutory appeal.  For the
same reason, we do not have jurisdiction to grant relief on
Northwest=s
petition for writ of mandamus.
See In re D. Wilson Constr. Co., 196 S.W.3d at 779.  Because we have jurisdiction over
the interlocutory appeal only, we will address Northwest=s
issues within the context of that proceeding.

Existence
of Valid Arbitration Agreement

In
its first issue, Northwest contends that it proved the existence of a
valid arbitration agreement and that all of the claims asserted against it
in the underlying suit are within the scope of that agreement.  Oak Partners responds that
Northwest failed to prove that all claims were within the scope of a valid
arbitration agreement because

Northwest
. . . did not present any evidence at the hearing on its Motion to
Compel.  The only documents
presented were unsworn and unauthenticated exhibits to its Motion to
Compel, and even those exhibits do not contain enough information to make
an informed decision regarding whether the documents refer to each other
or are all a part of the construction contract at issue in this case.

In
Jack B. Anglin Co. v. Tipps, the Texas Supreme Court held that
Athe
trial court may summarily decide whether to compel arbitration on the
basis of affidavits, pleadings, discovery, and stipulations@;
the trial court is not required to conduct an evidentiary hearing unless
the Amaterial
facts necessary to determine the issue@
are controverted.  842 S.W.2d
266, 269 (Tex. 1992).
Northwest attached the contract, and the pertinent documents that
were incorporated into it by reference, to its motion to compel.  The trial court clearly reviewed
these documents at the hearing on the motion to compel.[3]  See Tex. R. Evid. 201; Barnard v.
Barnard, 133 S.W.3d 782, 786 (Tex. App.CFort
Worth 2004, pet. denied) (A[T]he
trial court may take judicial notice of its file at any stage of
proceedings and is presumed to have done so with or without a request from
a party.@).  At the conclusion of the hearing,
the trial court concluded, AWell,
of course, it appears that there=s
an arbitration provision here in this contract.  The issue would certainly seem to
be whether or not there has been a waiver.@

We
conclude that the trial court properly determined, based on the procedure
promulgated in Tipps, that a valid arbitration existed and that the
claims in the underlying suit were included within the scope of that
agreement.[4]  We sustain Northwest=s
first issue; however, we must address its remaining issues relating to
whether the trial court properly determined that it waived its right to
arbitrate.

Subject
Matter Jurisdiction of Trial Court

Northwest
argues in its second issue that the trial court did not have subject
matter jurisdiction to decide whether it waived its right to arbitration
because, once a trial court decides that a dispute is subject to
arbitration, the arbitrator must determine any defenses to arbitration
raised by an opposing party, including
waiver.

In
support of its contention, Northwest relies on Howsam v. Dean Witter
Reynolds, Inc., 537 U.S. 79, 123 S. Ct. 588 (2002).  In that case, the United States
Supreme Court held that A>procedural=
questions which grow out of the dispute and bear on its final
disposition=
are presumptively not for the judge, but for an arbitrator, to
decide. . . .
So, too, the presumption is that the arbitrator should decide
>allegation[s]
of waiver, delay, or a like defense to arbitrability.=@  Id. at 84, 123 S. Ct. at
592 (citations omitted).  The
issue in Howsam was not whether the trial court had subject
matter jurisdiction to determine such procedural questions; rather, it
was whether the presumption in favor of arbitration should be employed
when determining which Aforum-based
decisionmaker@Can
arbitrator or trial court judgeCis
the more appropriate choice Ato
decide forum-specific procedural gateway matters.@  Id. at 84-86, 123 S. Ct. at
592-93.  In Howsam, the
petitioner had instituted an arbitration proceeding under the National
Association of Securities Dealers (NASD) rules, and the respondent filed
suit in federal court asking for a declaration that the arbitration could
not proceed because NASD=s
rules prohibited arbitrations after Asix
(6) years ha[d] elapsed from the occurrence or event giving rise to
the . . . dispute.@  Id. at 81-82, 123 S. Ct. at
590-91.  In determining that
the arbitrator was the more appropriate Aforum-based
decisionmaker@
to decide whether the NASD rule operated to bar arbitration of the
dispute, the Supreme Court noted that ANASD
arbitrators, comparatively more expert about the meaning of their own
rule, [would be] better able to interpret and to apply it.@  Id. at 85, 123 S. Ct. at
593.  The Court also relied on
its prior decision in Moses H. Cone Memorial Hospital v. Mercury
Construction, in which it stated that

[t]he
Arbitration Act establishes that, as a matter of federal law, any
doubts concerning the scope of arbitrable issues should be resolved in
favor of arbitration, whether the problem at hand is the construction
of the contract language itself or an allegation of waiver, delay, or a
like defense to arbitrability.

460
U.S. 1, 24-25, 103 S. Ct. 927, 941 (1983) (emphasis added); see also In
re Serv. Corp. Int=l,
85 S.W.3d 171, 173 (Tex. 2002) (quoting above passage from Moses,
yet going on to address merits of trial court=s
decision on waiver).

After
carefully considering the Court=s
precise language and holding in Howsam, and the Moses H.
Cone case which it cites, we conclude that the issue here is not one
of subject matter jurisdiction; rather, it is whether the
presumption in favor of arbitrability should apply to the
determination of which Aforum-based
decisionmaker@[5]
is better suited to decide the procedural questions, such as Awaiver,
delay or a like defense to arbitrability.@[6]  Because the issue is not one of
subject matter jurisdiction, Northwest was required to raise it in the
trial court; it did not.
See Tex. R. App.
P. 33.1(a); Mack Trucks, Inc. v. Tamez, 206 S.W.3d 572, 577
(Tex. 2006).  In fact, at the
hearing on the motion to compel, Northwest told the trial court that it
would have to decide the issue, arguing that

the
court must consider three questions; was there an agreement or set of
agreements to arbitrate, whether the dispute . . . is
subject to those agreements to arbitrate?  If you answer . . . those first
two questions, >Yes,=
then you must abate the action and must order the case to arbitration,
unless Oak Partners or one of the other parties is able to prove
waiver.@
[Emphasis added.]

Northwest
and Oak Partners both devoted the majority of their arguments at the
motion to compel hearing to whether Northwest had substantially invoked
the judicial process to Oak Partners=
detriment.  Accordingly, we
conclude and hold that Northwest failed to preserve its complaint that the
arbitrator, rather than the trial court, should have determined whether it
waived its right to arbitrate by substantially invoking the judicial
process to its opponents=
detriment.  We overrule
Northwest=s
second issue.

Whether
Northwest Waived its Right to Arbitrate by Substantially Invoking the
Judicial Process to Oak Partners=
Detriment

Northwest
contends in its third issue that the trial court incorrectly concluded
that Northwest had waived its right to arbitrate any part of the dispute
by substantially invoking the judicial process to its
opponents=
detriment.

Because
public policy favors arbitration, there is a strong presumption against
finding that a party has waived its right to arbitration; the burden to
prove waiver is thus a heavy one.
In re Bank One, N.A., 216 S.W.3d 825, 827 (Tex. 2007); In
re Bruce Terminix Co., 988 S.W.2d 702, 704‑05 (Tex. 1998); Jones v.
Citibank (South Dakota), N.A., 235 S.W.3d 333, 340 (Tex.
App.CFort
Worth 2007, no pet.).  Any
doubts regarding waiver are resolved in favor of arbitration.  Bruce Terminix Co., 988
S.W.2d at 705; Jones, 235 S.W.3d at 340; Southwind Group,
Inc. v. Landwehr, 188 S.W.3d 730, 735 (Tex. App.CEastland
2006, orig. proceeding).
Waiver may be express or implied, but it must be intentional.  EZ Pawn Corp. v.
Mancias, 934 S.W.2d 87, 89 (Tex. 1996); Jones, 235 S.W.3d at
340; Southwind Group, Inc., 188 S.W.3d at 735.  Whether waiver occurs depends on
the individual facts and circumstances of each case.  Jones, 235 S.W.3d at 340;
Southwind Group, Inc., 188 S.W.3d at 735; Williams Indus., Inc.
v. Earth Dev. Sys. Corp., 110 S.W.3d 131, 135 (Tex. App.CHouston
[1st Dist.] 2003, no pet.).

A
party does not waive arbitration merely by delay; instead, the party
urging waiver must establish that any delay resulted in prejudice.  In re Vesta Ins. Group,
Inc., 192 S.W.3d 759, 763 (Tex. 2006); Prudential Secs. Inc. v.
Marshall, 909 S.W.2d 896, 898-99 (Tex. 1995) (orig. proceeding);
Jones, 235 S.W.3d at 340.
Therefore, the test for determining waiver is two‑pronged:  (1) did the party seeking
arbitration substantially invoke the judicial process, and (2) did the
opposing party prove that it suffered prejudice as a result.  Jones, 235 S.W.3d at
340.

Substantial
Invocation of Judicial Process

Merely
taking part in litigation does not constitute substantial invocation of
the judicial process.  See
In re Vesta Ins. Group, 192 S.W.3d at 763; Bruce Terminix Co.,
988 S.W.2d at 704; Jones, 235 S.W.3d at 340.  To substantially invoke the
judicial process, a party must make a specific and deliberate act after
suit is filed that is inconsistent with its right to arbitrate, such as
engaging in extensive discovery or requesting a jury.  Nationwide of Bryan, Inc. v.
Dyer, 969 S.W.2d 518, 522 (Tex. App.CAustin
1998, no pet.).  Substantially
invoking the judicial process may occur when the party seeking arbitration
actively has tried, but failed, to achieve a satisfactory result in
litigation before turning to arbitration.  Jones, 235 S.W.3d at 340;
Southwind Group, Inc., 188 S.W.3d at 736; Williams Indus.,
Inc., 110 S.W.3d at 135.
Examples include moving for summary judgment or seeking a final
resolution of the dispute.
Williams Indus., Inc., 110 S.W.3d at 135.  Another factor to consider is how
much activity has taken place in the suit.  Vireo, P.L.L.C. v. Cates,
953 S.W.2d 489, 497 (Tex. App.CAustin
1997, pet. denied).  Actions
constituting waiver may include the movant=s
engaging in some combination of the following:  filing an answer, setting up a
counterclaim, pursuing discovery, and moving for a continuance prior to
moving for a stay pending arbitration.  Cent. Nat=l
Ins. Co. of Omaha v. Lerner,
856 S.W.2d 492, 494 (Tex. App.CHouston
[1st Dist.] 1993, orig. proceeding); see also In re Vesta Ins.
Group, 192 S.W.3d at 764 (holding, in FAA-controlled case,
AWe
agree that allowing a party to conduct full discovery, file motions going
to the merits, and seek arbitration only on the eve of trial defeats the
FAA=s
goal of resolving disputes without the delay and expense of
litigation.@).[7]

The
evidence here shows that during the approximately nineteen months from the
time it filed its answer in the suit to the time it filed its motion to
compel arbitration, Northwest served four sets of interrogatories, and one
set each of requests for production and requests for admissions, to Oak
Partners; served one set each of interrogatories, requests for disclosure,
and requests for production on the subcontractors; filed four subpeonas
for production of documents from third parties; filed a counterclaim and
amended counterclaim against Oak Partners; filed cross-claims against the
subcontractors; filed a motion for partial summary judgment seeking to
preclude Oak Partners from seeking any damages related to design defects
in the facility; agreed to extensions of the expert designation deadlines;
and agreed to at least one extension of the trial setting.  Northwest points out that it never
received a ruling on its partial motion for summary judgment and that the
motion did not request a final ruling on all of Oak Partners=
claims; it also characterizes its discovery as Aminimal.@

Northwest
focuses on its various activities in the suit in isolation; however, when
viewed together, all of Northwest=s
actions in the suit indicate an intention to avail itself of the judicial
process.  Northwest admitted
at the hearing on the motion to compel that it sought discovery to aid in
mediation and that the failure of mediation was the impetus for its motion
to compel arbitration.  In
other words, it appears that Northwest was prepared to avail itself of the
judicial process so long as it was able to achieve the results it
desired.  When Northwest
finally filed its motion to compel in July 2007, trial was set for
September 24, 2007.  We
conclude and hold that Northwest=s
activity in the suit constituted substantial invocation of the judicial
process.  See In re Vesta
Ins. Group, 192 S.W.3d at 764; Lerner, 856 S.W.2d at 495;
see also Price v. Drexel Burnham Lambert, Inc., 791 F.2d 1156,
1159, 1162 (5th Cir. 1986).

Prejudice
to Opposing Parties

Northwest
claims that even if it substantially invoked the judicial process, Oak
Partners and the other parties to the suit, i.e., the subcontractors,
failed to show prejudice as a result; thus, the trial court erred by
finding that Northwest had waived its right to arbitrate the dispute.  According to Northwest, the
discovery it sought and obtained in the suit is also discoverable in
arbitration under the Construction Industry Arbitration Rules of the
American Arbitration Association, and Oak Partners cannot show that its
attorneys=
fees would not have been available to it in arbitration.  Further, Northwest contends that
even if Oak Partners is able to show prejudice, the subcontractors did not
bring forward any evidence of prejudice; thus, the trial court erred in
determining that Northwest waived arbitration as to all of the parties in
the suit.

The
prejudice on which courts focus includes such things as (1) the
movant=s
access to information that is not discoverable in arbitration and (2) the
opponent=s
incurring costs and fees due to the movant=s
actions or delay.  Williams
Indus., Inc., 110 S.W.3d at 135.
Although delay alone does not necessarily show prejudice, it is a
material factor to consider.
Sedillo v. Campbell, 5 S.W.3d 824, 828 (Tex.
App.CHouston
[14th Dist.] 1999, no pet.).
Showing prejudice is generally an evidentiary burden.  Williams Indus., Inc., 110
S.W.3d at 135.

Northwest
contends that all of the discovery it propounded would be available to it
in an arbitration proceeding under the AAA=s
construction-related arbitration rules, which the parties agreed to employ
in the event of arbitration.
Those rules provide that A[a]t
the request of any party or at the discretion of the arbitrator,
consistent with the expedited nature of arbitration, the arbitrator may
direct (i) the production of documents and other information, and (ii) the
identification of any witnesses to be called.@  They also compel the parties to
Aexchange
copies of all exhibits they intend to submit at the [arbitration]
hearing@
at least five business days prior to the hearing.  The rules further provide that
A[t]here
shall be no other discovery, except as indicated herein or as ordered by
the arbitrator in extraordinary cases when the demands of justice require
it.@

Oak
Partners correctly points out that the applicable arbitration rules do not
provide for requests for admissions or for interrogatories, which
constituted the bulk of the discovery Northwest sought from Oak
Partners.[8]  Oak Partners incurred legal fees
for counsel and local counsel to review and respond to this discovery.[9]  At the hearing on
Northwest=s
motion to compel, Oak Partners offered as evidence an affidavit from its
counsel averring that Northwest had served on Oak Partners four sets of
interrogatories and one set each of a request for admissions, request for
disclosure, and request for production.  Oak Partner=s
counsel also averred that AOak
Partners has answered, responded, and/or objected to all of this discovery
sent by Northwest.@[10]

Oak
Partners also introduced evidence that it incurred attorney=s
fees and expenses in responding to Northwest=s
motion for partial summary judgment.
Northwest did not cancel the partial summary judgment trial date
until after Oak Partners had filed its response and incurred these fees
and expenses.  Moreover, Oak
Partners contends that, regardless of the fees and expenses involved in
responding to the motion, it was prejudiced because Northwest Anow
has in one document, forced Oak Partners to marshal its evidence, and even
more damaging, marshal the thought processes and legal analysis of Oak
Partners=
attorneys on these issues.@

Northwest
responds that the construction industry arbitration rules provide for
summary dispositions by the arbitrator:  AIn
addition to the final award, the arbitrator may make other decisions,
including interim, interlocutory, or partial rulings, orders, and
awards.@  Thus, according to Northwest, Oak
Partners could not have been prejudiced by responding to the motion for
partial summary judgment when the same procedure would have been available
to Northwest in arbitration.

Again,
Northwest focuses only on the effects of its actions in isolation.  Not only did it delay nineteen
months before moving to compel arbitration, during which time it actively
pursued litigation in the trial court, Northwest also sought discovery
that cannot be characterized as only minimal.[11]  It actively sought relief from the
trial court, forcing Oak Partners to respond and to incur
attorneys=
fees for lead counsel and local counsel that are directly linked to
Northwest=s
actions in the suit, which fees Oak Partners documented in its response to
the motion to compel.[12]  Unlike in cases cited by
Northwest, here, Oak Partners introduced evidence supporting its claims of
prejudice.  Cf. In re Vesta
Ins. Group, 192 S.W.3d at 763 (ABecause
Cashion offered none of these documents in the trial court and presented
no details about any of them, the record does not show whether these
[discovery] requests were limited or extensive, whether they sought
information for affirmative claims or defensive ones, or even whether they
addressed the merits or merely the arbitration issue.@);
Granite Constr. Co. v. Beaty, 130 S.W.3d 362, 367 (Tex.
App.CBeaumont
2004, no pet.); Williams Indus., Inc., 110 S.W.3d at 139-41.  Accordingly, we conclude and hold
that Oak Partners showed prejudice from Northwest=s
substantial invocation of the judicial process.  See Price, 791 F.2d at
1161-62 (A[W]here
a party fails to demand arbitration during pretrial proceedings, 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.@).

Northwest
did not just move to arbitrate Oak Partners=
claims, however; it also sought to arbitrate the claims involving the
subcontractors.  None of the
subcontractors presented evidence to the trial court regarding
prejudice.  Thus, we cannot
conclude that waiver was proved as to the subcontractors.  See, e.g., Granite Constr.
Co., 130 S.W.3d at 367; Williams Indus., Inc., 110 S.W.3d at
139-41.  Because the trial
court=s
order denied Northwest=s
motion to compel in its entirety as to all parties, we conclude and hold
that the trial court erred by refusing to compel arbitration of the claims
between Northwest and the subcontractors.[13]  We therefore sustain
Northwest=s
third issue in part as to the claims involving the subcontractors; we
overrule it in part as to the claims between Northwest and Oak
Partners.

Mediation
as Condition Precedent to Arbitration

At
the hearing on the motion to compel, one of the subcontractors, Ari-Tex,
argued that the arbitration agreement with the subcontractors required
Northwest to mediate before resorting to arbitration and that Northwest
had failed to mediate with the subcontractors;[14]
therefore, arbitration could not be compelled until Northwest had
attempted to mediate its disputes with the subcontractors.  Ari-Tex has not responded to
Northwest=s
appeal; however, Northwest brings a fourth issue contending that appellees
have waived their right to rely on mediation as a condition precedent to
enforceability of the arbitration clause.

Although
the AIA Document A201-1997 that was incorporated into the
parties=
agreements clearly states that mediation is a condition precedent to
arbitration with regard to at least some claims arising from the
agreements, none of the subcontractors allege any damages from
Northwest=s
failure to mediate with them.
See In re U.S. Home Corp., 236 S.W.3d 761, 764 (Tex.
2007).  Moreover, the
subcontractors initially filed suit against Northwest in district court
rather than seeking mediation pursuant to the agreements.  Thus, they waived their right to
first proceed through mediation.
See id.; Dallas Cardiology Assocs., P.A. v. Mallick,
978 S.W.2d 209, 212-13 (Tex. App.CTexarkana
1998, pet. denied).

Conclusion

Having
overruled Northwest=s
dispositive issues as to Oak Partners, we affirm the part of the trial
court=s
order denying Northwest=s
motion to compel arbitration as to the claims between Northwest and Oak
Partners.  However, having
sustained Northwest=s
dispositive issue as to the subcontractors, we reverse the part of the
trial court=s
order denying arbitration as to the claims between Northwest and the
subcontractors and remand to the trial court with instructions to compel
arbitration as to those claims only.
Having determined that Northwest failed to bring forward any
evidence of interstate commerce, we dismiss its petition for writ of
mandamus.

TERRIE
LIVINGSTON

JUSTICE

PANEL
B:   LIVINGSTON,
DAUPHINOT, and WALKER, JJ.

DAUPHINOT,
J. filed a concurring and dissenting opinion.

DELIVERED:  March 6,
2008

COURT
OF APPEALS

SECOND DISTRICT OF TEXAS

FORT WORTH

NO. 2-07-293-CV

NORTHWEST
CONSTRUCTION
APPELLANT

COMPANY,
INC.

V.

THE
OAK PARTNERS, L.P.,
APPELLEES

MORGAN
DEVELOPMENT

AND
SUPPLY, INC.,

METROPLEX
MASONRY, INC.,

ARI-TEX,
INC., MAX PLUMBING

CONTRACTORS,
INC.,

S
& S TILE, LTD., AND

KENT-ANDERSON
CONCRETE, L.P.

D/B/A
ANDERSON CONCRETE

CONSTRUCTION

------------

FROM THE 355TH DISTRICT COURT OF HOOD COUNTY

------------

AND

NO.
2-07-328-CV

IN
RE NORTHWEST
RELATOR

CONSTRUCTION
COMPANY, INC.

------------

ORIGINAL PROCEEDING

------------

CONCURRING
AND DISSENTING OPINION

------------

I
agree that Northwest=s
petition for writ of mandamus should be dismissed.  I also agree that we should
reverse the trial court=s
order denying arbitration as to the claims between Northwest and the
subcontractors and remand to the trial court with instructions to compel
arbitration on those claims.

I
dissent, however, from the majority=s
conclusion that Oak Partners met its heavy burden to show sufficient
prejudice to overcome the strong presumption against waiver of
arbitration.[15]  I would therefore reverse in its
entirety the trial court=s
order denying arbitration and remand this case to the trial court with
instructions to compel arbitration on all claims.

LEE
ANN DAUPHINOT

JUSTICE

DELIVERED:
March 6, 2008

[1]The
copy of the agreement in the record is signed only by counsel for
S & S Tile and Northwest.

[2]At
trial, the only parties who opposed Northwest=s
motion to compel arbitration were Oak Partners, Kent-Anderson, and
Ari-Tex.  Kent-Anderson has
indicated in both the appeal and mandamus proceeding that it no longer
opposes arbitration, and Ari-Tex has not filed any documents in either
cause in our court.

[3]For
example, during a discussion between Northwest=s
counsel and the trial court regarding the exhibits attached to the motion
to compel, the following exchange occurred:

THE
COURT:
Where are you again?

[NORTHWEST=S
COUNSEL]:  The very first
page.

THE
COURT:
All right.  I see it.

[4]Oak
Partners attached to its response to Northwest=s
motion to compel an affidavit from Teresa Shook, a Director of Assisted
Living Consultants, Inc., which is a managing member of the general
partner of Oak Partners.  In
her affidavit, Shook asserted that AOak
Partners did not agree to be bound by arbitration, and does not agree it
is bound by arbitration.@  But this conclusory statement,
without more, does nothing to controvert the evidence of the agreement as
attached to Northwest=s
motion to compel.  Moreover,
Oak Partners never challenged the existence of an arbitration agreement in
its response, which was premised solely on its contention that Northwest
waived its right to arbitrate.

[5]See
In re Neutral Posture, Inc.,
135 S.W.3d 725, 728 (Tex. App.CHouston
[1st Dist.] 2003, orig. proceeding) (discussing Howsam and holding
that trial court was proper forum for determining issue of
substantive arbitrability).

[6]Thus,
we need not decide whether this court should follow Howsam in the
context of reviewing a trial court=s
decision under the TGAA.
See Grand Homes 96, L.P. v. Loudermilk, 208 S.W.3d 696, 703
(Tex. App.CFort
Worth 2006, pet. filed); see also In re Global Constr. Co.,
166 S.W.3d 795, 798 (Tex. App.CHouston
[14th Dist.] 2005, orig. proceeding) (conditionally granting writ of
mandamus after holding, based on Howsam, that arbitrator rather
than trial court should decide waiver issue in FAA-controlled case).

[7]The
standard for determining waiver of the right to arbitrate is the same
under the TGAA and the FAA.
Southwind Group, Inc., 188 S.W.3d at 735; Brown v.
Anderson, 102 S.W.3d 245, 250 (Tex. App.CBeaumont
2003, pet. denied).

[8]Northwest
acknowledges that requests for admissions and interrogatories are not
available under the applicable rules except Ain
extraordinary cases when the demands of justice require it.@  However, Northwest contends that
all of the information included in those forms of discovery would be
nevertheless discoverable in arbitration via other forms of
discovery.  Regardless, Oak
Partners presented evidence of its expense and time related specifically
to the types of discovery that is unavailable in arbitration, and there is
no evidence that this is the type of extraordinary case in which an
arbitrator would allow additional discovery.

[9]Northwest
attributes any prejudice caused by Oak Partners=
engaging local counsel to Oak Partners=
own decision to sue in its chosen forum.  See LJA Eng=g
and Surveying, Inc. v. Richfield Inv. Corp.,
211 S.W.3d 443, 446-47 (Tex. App.CBeaumont
2006, no pet.); Transwestern Pipeline Co. v. Horizon Oil & Gas
Co., 809 S.W.2d 589, 593 (Tex. App.CDallas
1991, writ dism=d
w.o.j.).  But it is clear from
the billing records submitted by Oak Partners that local counsel did not
even begin to participate in the suit until Northwest filed its
counterclaim and began to participate in those activities that we have
determined substantially invoked the judicial process by indicating an
intent to litigate the suit in Hood County.  Thus, Oak Partners presented
evidence directly relating its expenses to Northwest=s
activity in the suit.

[10]Although
Oak Partners did not include copies of its answers to discovery in the
appellate record, it did provide evidence that it answered the discovery
and incurred expenses in doing so, in the form of billing records from its
lead counsel and local counsel.
Northwest did not present any evidence refuting Oak
Partners=
counsel=s
sworn statement indicating that Oak Partners had responded to all of
Northwest=s
discovery requests.
Additionally, Northwest admitted that it sought discovery for
mediation purposes and that after the initial mediation, it sought
additional discovery for purposes of another
mediation.

[11]See,
e.g., In re Bruce Terminix Co.,
988 S.W.2d at 704 (holding, when movant=s
Ause
of the judicial process was limited to filing an answer and propounding
one set of eighteen interrogatories and one set of nineteen requests for
production,@
that prejudice was not shown because Awhen
only a minimal amount of discovery has been conducted, which may
also be useful for the purpose of arbitration, the court should not
ordinarily infer waiver based upon prejudice@)
(emphasis added).

[12]Northwest
contends that Oak Partners cannot show prejudice due to its incurring
attorneys=
fees as a result of Northwest=s
actions (1) because the construction industry arbitration rules provide
that an arbitration award Amay
include . . . an award of attorneys=
fees if all parties have requested such an award or it is authorized by
law or their arbitration agreement@
and because (2) section 171.048 of the TGAA requires arbitrators to award
attorneys=
fees if they are provided for in the arbitration agreement or they are
provided for by law in a district court in a civil action.  Tex. Civ. Prac. & Rem. Code
Ann. ' 171.048
(Vernon 2005).  But the
language of the construction industry arbitration rules does not
require an arbitrator to award fees even if a party presents
evidence supporting such an award.
Additionally, Northwest=s
claims against Oak Partners include claims for breach of contract and
negligence; Oak Partners=
attorneys=
fees are recoverable only if it prevails on its breach of contract
action.  See id.
'
38.001(8) (Vernon 1997); Green Int=l,
Inc. v. Solis,
951 S.W.2d 384, 390 (Tex. 1997).

[13]We
realize this results in the unfortunate possibility of trying these cases
in different forums but Aconsiderations
of efficiency and convenience cannot override either a
signatory=s
arbitration agreement or a nonsignatory=s
right to a jury trial.@  In re Merrill Lynch Trust Co.
FSB, 235 S.W.3d 185, 192 (Tex. 2007) (orig. proceeding) (holding
arbitration agreement must be enforced regardless of presence of other
people involved in the underlying dispute but not signatories to the
arbitration agreement); see also Kilroy v. Kilroy, 137 S.W.3d 780,
787-88 (Tex. App.CHous.
[1st Dist.] 2004, no pet.) (reversing trial court order staying
arbitrable part of dispute pending determination of issues in
nonarbitrable part of dispute remaining in trial
court).

[14]Ari-Tex
alleged that the subcontractors were not allowed to attend the mediation
between Northwest and Oak Partners.

[15]See
In re D. Wilson Constr. Co.,
196 S.W.3d 774, 783 (Tex. 2006); In re Vesta Ins. Group, Inc., 192
S.W.3d 759, 763 (Tex.
2006).