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Full Opinion
PERRY HOMES, A Joint Venture, Home Owners Multiple Equity, Inc., and Warranty Underwriters Insurance Company, Petitioners,
v.
Robert E. CULL and S. Jane Cull, Respondents.
Supreme Court of Texas.
*584 Geoffrey H. Bracken, Gardere Wynne Sewell, L.L.P., Houston, TX, Stacy R. Obenhaus, Gardere Wynne Sewell LLP, Dallas, TX, Kent Hance, Hance Scarborough Wright Woodward & Weisbart LLP, Austin, TX, Gary W. Javore, Johnson Cristopher Javore & Cochran, Inc., San Antonio, TX, for Petitioners.
Thomas M. Michel, Griffith, Jay, & Michel LLP, Fort Worth, TX, Evan (Van) Lane Shaw, Law Offices of Van Shaw, Dallas, TX, for Respondent.
M. Scott Norman Jr., Texas Association of Builders, Austin, TX, for Amicus Curiae.
Justice BRISTER delivered the opinion of the Court, in which Justice HECHT, Justice O'NEILL, Justice WAINWRIGHT, and Justice MEDINA joined, and in which Chief Justice JEFFERSON, Justice GREEN, Justice JOHNSON, and Justice WILLETT joined as to parts I-V.
Since 1846, Texas law has provided that parties to a dispute may choose to arbitrate rather than litigate.[1] But that choice cannot be abused; a party cannot substantially invoke the litigation process and then switch to arbitration on the eve of trial.[2] There is a strong presumption against waiver of arbitration,[3] but it is not irrebuttable and was plainly rebutted here. The Plaintiffs vigorously opposed (indeed spurned) arbitration in their pleadings and in open court; then they requested hundreds of items of merits-based information and conducted months of discovery under the rules of court; finally only four days before the trial setting they changed their minds and decided they would prefer to arbitrate after all. Having gotten what they wanted from the litigation process, they could not switch to arbitration at the last minute like this.
The Plaintiffs argue and we agree that sending them back to the trial court not only deprives them of a substantial award but also wastes the time and money spent in arbitration. But they knew of this risk when they requested arbitration at the last minute because all of the Defendants objected. Accordingly, we vacate the arbitration award and remand the case to the trial court for a prompt trial.
I. Background
In 1996, Robert and Jane Cull bought a house from Perry Homes for $233,730. They also bought a warranty from Home Owners Multiple Equity, Inc. and Warranty Underwriters Insurance Company. The warranty agreement included a broad arbitration clause providing that all disputes the Culls might have against Perry Homes or the warranty companies were subject to the Federal Arbitration Act, and would be submitted to the American Arbitration *585 Association (AAA) or another arbitrator agreed upon by the parties.[4]
Over the next several years, the home suffered serious structural and drainage problems. According to the Culls, the Defendants spent more effort shifting blame than repairing the home. When the Culls sued in October 2000, the warranty companies (but not Perry Homes) immediately requested arbitration; the Culls vigorously opposed it, and no one ever pressed for a ruling. At the same time, the Culls' attorneys began seeking extensive discovery from all of the Defendants.
After most of the discovery was completed and the case was set for trial, the Culls changed their minds about litigating. Instead they asked the trial court to compel arbitration under precisely the same clause and conditions to which they had originally objected. The trial judge expressed reservations, saying:
I really have a problem with people who have competent counsel who wait 14 months and after all this much effort in the courthouse has taken place, to come in and say that they have not waived that arbitration. That arbitration clause was there when the lawsuit was filed.
Nevertheless, the trial court ordered arbitration because the Defendants had not shown any prejudice from litigation conduct:
[A]ll I have heard from [defense counsel] insofar as what is the prejudice suffered by people you represent is that they have participated in litigation activities that may or may not have been required by the arbitrator. So without anything further, I am going to grant the motion to abate the case for arbitration.
The order was signed December 6, 2001, four days before the case was set for trial. The Defendants filed petitions for mandamus in the court of appeals and this Court, both of which were denied without opinion within a few days.[5]
After a year in arbitration, on December 24, 2002, the arbitrator awarded the Culls $800,000, including restitution of the purchase price of their home ($242,759), mental anguish ($200,000), exemplary damages ($200,000), and attorney's fees ($110,000). The Defendants moved to vacate the award, again arguing (among other things) that the case should never have been sent to arbitration after so much activity in court. The trial court overruled the objection, confirmed the award, and added post-judgment interest duplicating that already in the award; the court of appeals affirmed after deleting the duplicative interest.[6] We granted the Defendants' petition to consider whether the arbitration award should be set aside because the Culls waived their right to arbitration.
II. When Should Orders Compelling Arbitration Be Reviewed?
At the outset, the Culls assert it is too late to review the trial court's order referring this case to arbitration. First, they argue the pre-arbitration mandamus proceedings establish the law of the case *586 and preclude the Defendants from raising the same arguments now. We recently rejected this argument, holding that as mandamus is a discretionary writ, "its denial, without comment on the merits, cannot deprive another appellate court from considering the matter in a subsequent appeal."[7] Mandamus is only available when a final appeal would be inadequate;[8] if filing for mandamus precluded a final appeal, that requirement would be self-fulfilling. Because the earlier proceedings here were denied without comment on the merits, they do not foreclose our review.
Second, the Culls argue that an order compelling arbitration can only be reviewed before arbitration occurs. The Culls address none of the cases in which this Court and the United States Supreme Court have reviewed such orders after arbitration.[9] Nor do they address the general rule that parties waive nothing by foregoing interlocutory review and awaiting a final judgment to appeal.[10]
But most important, the Culls do not address section 16 of the Federal Arbitration Act, which expressly prohibits pre-arbitration appeals:
Except as otherwise provided in section 1292(b) of title 28 [providing for certified questions to federal circuit courts], an appeal may not be taken from an interlocutory order . . . directing arbitration to proceed under section 4 of this title [providing for orders compelling arbitration]. . . .[11]
This ban on interlocutory appeals of orders compelling arbitration was added by Congress in 1988 to prevent arbitration from bogging down in preliminary appeals.[12] We have held that routine mandamus review of such orders in state court would frustrate this federal law.[13]
*587 The Culls assert that post-arbitration review is unavailable because an arbitration award can be vacated only for statutory grounds like corruption, fraud, or evident partiality.[14] But reviewing the trial court's initial referral to arbitration is not the same as reviewing the arbitrator's final award; as the United States Supreme Court has held, courts conduct ordinary review of the former and deferential review only of the latter.[15]
We agree that post-arbitration review of referral may create (as the Culls allege) a "huge waste of the parties' resources." But if review is available before arbitration, parties may also waste resources appealing every referral when a quick arbitration might settle the matter. Frequent pre-arbitration review would inevitably frustrate Congress's intent "to move the parties to an arbitrable dispute out of court and into arbitration as quickly and easily as possible."[16] We recognize the potential for waste, but that is a risk a party must take if it moves for arbitration after substantially invoking the litigation process.
III. Do Courts or Arbitrators Decide Waiver?
The Culls also assert that waiver of arbitration by litigation conduct is an issue to be decided by arbitrators rather than courts. To the contrary, this Court and the federal courts have held it is a question of law for the court.[17] Rather than referring such claims to arbitrators, we have decided them ourselves at least eight times,[18] as does every federal circuit court.[19]
*588 The Culls argue this was all changed in 2002 by Howsam v. Dean Witter Reynolds, in which the United States Supreme Court said the "presumption is that the arbitrator should decide `allegation[s] of waiver, delay, or a like defense to arbitrability.'"[20] For several reasons, we disagree that this single sentence changed the federal arbitration landscape.
First, "waiver" and "delay" are broad terms used in many different contexts. Howsam involved the National Association of Securities Dealers' six-year limitations period for arbitration claims, not waiver by litigation conduct; indeed, it does not appear the United States Supreme Court has ever addressed the latter kind of waiver. Although the federal courts do not defer to arbitrators when waiver is a question of litigation conduct, they consistently do so when waiver concerns limitations periods or waiver of particular claims or defenses.[21] As Howsam involved the latter rather than the former,[22] its reference to waiver must be read in that context.
Second, the Howsam court specifically stated that "parties to an arbitration contract would normally expect a forum-based decisionmaker to decide forum-specific procedural gateway matters."[23] Thus, the NASD's six-year limitations rule in that case was a gateway matter for the NASD arbitrator because "the NASD arbitrators, comparatively more expert about the meaning of their own rule, are comparatively better able to interpret and to apply it."[24] By contrast, when waiver turns on conduct in court, the court is obviously in a better position to decide whether it amounts to waiver.[25] "Contracting parties would expect the court to decide whether one party's conduct before the court waived the right to arbitrate."[26]
*589 Third, as the Howsam Court itself stated, parties generally intend arbitrators to decide matters that "grow out of the dispute and bear on its final disposition," while they intend courts to decide gateway matters regarding "whether the parties have submitted a particular dispute to arbitration."[27] Waiver of a substantive claim or delay beyond a limitations deadline could affect final disposition, but waiver by litigation conduct affects only the gateway matter of where the case is tried.[28]
Finally, arbitrators generally must decide defenses that apply to the whole contract, while courts decide defenses relating solely to the arbitration clause.[29] Thus, for example, arbitrators must decide if an entire contract was fraudulently induced, while courts must decide if an arbitration clause was.[30] As waiver by litigation conduct goes solely to the arbitration clause rather than the whole contract, consistency suggests it is an issue for the courts.
Every federal circuit court that has addressed this issue since Howsam has continued to hold that substantial invocation of the litigation process is a question for the court rather than the arbitrator including the First,[31] Third,[32] Fifth,[33] and Eighth Circuits.[34] Legal commentators appear to agree.[35] So do we.
IV. When Is the Litigation Process Substantially Invoked?
We have said on many occasions that a party waives an arbitration clause by substantially *590 invoking the judicial process to the other party's detriment or prejudice.[36] Due to the strong presumption against waiver of arbitration, this hurdle is a high one.[37] To date, we have never found such a waiver, holding in a series of cases that parties did not waive arbitration by:
filing suit;[38]
moving to dismiss a claim for lack of standing;[39]
moving to set aside a default judgment and requesting a new trial;[40]
opposing a trial setting and seeking to move the litigation to federal court;[41]
moving to strike an intervention and opposing discovery;[42]
sending 18 interrogatories and 19 requests for production;[43]
requesting an initial round of discovery, noticing (but not taking) a single deposition, and agreeing to a trial resetting;[44] or
seeking initial discovery, taking four depositions, and moving for dismissal based on standing.[45]
These cases well illustrate the kind of conduct that falls short. But because none amounted to a waiver, they are less instructive about what conduct suffices. We have stated that "allowing a party to conduct full discovery, file motions going to the merits, and seek arbitration only on the eve of trial" would be sufficient.[46] But what if (as in this case) only two out of these three are met? And how much is "full discovery"?
We begin by looking to the standards imposed by the federal courts. They decide questions of waiver by applying a totality-of-the-circumstances test on a case-by-case basis.[47] In doing so, they *591 consider a wide variety of factors including:
whether the movant was plaintiff (who chose to file in court) or defendant (who merely responded);[48]
how long the movant delayed before seeking arbitration;[49]
whether the movant knew of the arbitration clause all along;[50]
how much pretrial activity related to the merits rather than arbitrability or jurisdiction;[51]
how much time and expense has been incurred in litigation;[52]
whether the movant sought or opposed arbitration earlier in the case;[53]
whether the movant filed affirmative claims or dispositive motions;[54]
what discovery would be unavailable in arbitration;[55]
whether activity in court would be duplicated in arbitration;[56] and
when the case was to be tried.[57]
Of course, all these factors are rarely presented in a single case. Federal courts have found waiver based on a few, or even a single one.[58]
We agree waiver must be decided on a case-by-case basis, and that courts should look to the totality of the circumstances. Like the federal courts, this Court has considered factors such as:
when the movant knew of the arbitration clause;[59]
*592 how much discovery has been conducted;[60]
who initiated it;[61]
whether it related to the merits rather than arbitrability or standing;[62]
how much of it would be useful in arbitration;[63] and
whether the movant sought judgment on the merits.[64]
Thus, we disagree with the court of appeals that waiver is ruled out in this case solely because the Culls "did not ask the court to make any judicial decisions on the merits of their case."[65] While this is surely a factor,[66] it is not the only one. Waiver involves substantial invocation of the judicial process, not just judgment on the merits.
We also disagree with the Defendants that different standards should apply to plaintiffs and defendants. As parties may begin arbitration without a court order, it is certainly relevant that a plaintiff chose to file suit instead. But Texas procedure also contemplates that parties may file suit in order to compel arbitration.[67] Thus, while the movant's status is a factor to consider, it does not alone justify a finding of waiver or change the basic nature of the totality-of-the-circumstances test.[68]
We recognize, as we have noted before, "the difficulty of uniformly applying a test based on nothing more than the totality of the circumstances."[69] But there appears to be no better test for "substantial invocation."[70] As the United States Supreme Court has said about minimum contacts, tests based on "reasonableness" are never susceptible to mechanical application "few answers will be written in black and white[;] [t]he greys are dominant *593 and even among them the shades are innumerable."[71] How much litigation conduct will be "substantial" depends very much on the context; three or four depositions may be all the discovery needed in one case,[72] but purely preliminary in another.[73]
Moreover, this test is quite similar to one we have long recognized and recently applied to arbitration estoppel. Estoppel is a defensive theory barring parties from asserting a claim or defense when their representations have induced "action or forbearance of a definite and substantial character" and "injustice can be avoided only by enforcement."[74] In arbitration cases, we have held a nonparty who enjoys substantial direct benefits from a contract may be estopped from denying an arbitration clause in the same contract.[75] By the same token, a party who enjoys substantial direct benefits by gaining an advantage in the pretrial litigation process should be barred from turning around and seeking arbitration with the spoils.
The answer to most questions regarding arbitration "flow inexorably from the fact that arbitration is simply a matter of contract between the parties."[76] Like any other contract right, arbitration can be waived if the parties agree instead to resolve a dispute in court. Such waiver can be implied from a party's conduct, although that conduct must be unequivocal.[77] And in close cases, the "strong presumption against waiver" should govern.[78]
V. Is a Showing of Prejudice Required?
Although convinced that the Culls had substantially invoked the litigation process, the trial court compelled arbitration because the Defendants did not prove an arbitrator would not have allowed the same discovery. "Even substantially invoking the judicial process does not waive a party's arbitration rights unless the opposing party proves that it suffered prejudice as a result."[79] On at least eight occasions, we have said prejudice is a necessary requirement of waiver by litigation *594 conduct.[80]
The Defendants ask us to reconsider this requirement. They point out that Texas law does not require a showing of prejudice for waiver, but only an intentional relinquishment of a known right.[81] Waiver "is essentially unilateral in its character" and "no act of the party in whose favor it is made is necessary to complete it."[82] Thus, they argue we cannot impose a waiver rule for arbitration contracts that does not apply to all others.[83]
We decline the Defendants' invitation based on both federal and state law. The Defendants say the federal courts are split on the issue, but the split is not very wide. Of the twelve regional circuit courts, ten require a showing of prejudice,[84] and the other two treat it as a factor to consider.[85] We have noted before the importance of keeping federal and state arbitration law consistent.[86]
*595 Under Texas law, waiver may not include a prejudice requirement, but estoppel does. In cases of waiver by litigation conduct, the precise question is not so much when waiver occurs as when a party can no longer take it back. As noted above, Texas estoppel law does not allow a party to withdraw a representation once the other party takes "action or forbearance of a definite and substantial character."[87] Using precisely the same terms, the Restatement does not allow a party to withdraw an option contract when the offeree has taken substantial action based upon it.[88] In these contexts, prejudice is an element of the normal contract rules.
Thus, we agree with the courts below that waiver of arbitration requires a showing of prejudice.
VI. Was Arbitration Waived Here?
A. Did the Culls Waive Arbitration?
It remains only to apply these rules to this case.
Unquestionably, the Culls substantially invoked the litigation process, as their conduct here far exceeds anything we have reviewed before. Before arbitration was ordered, the Culls did not deny taking ten depositions, and the court's file (of which the trial judge took judicial notice) included:
their initial objection to arbitration covering 79 pages;
the Defendants' responses to requests for disclosure;
the Culls' five motions to compel, attached to which were 76 requests for production of documents regarding complaints, inspections, repairs, and settlements relating to eight other homes in the same subdivision;
Perry Homes' two motions for protective orders regarding six designees noticed for deposition by the Culls on nine issues (including purchase and preparation of the lot, design and construction of the foundation, sale of this home and others in the subdivision, and attempts to deal with the Culls' and other foundation complaints), with an attachment requesting 67 categories of documents (including all photos, videos, correspondence, insurance policies, plans, soil tests, permits, subcontractors, contracts for sale, and repairs relating to the house or the suit, all complaints about any house in the subdivision, and Perry Homes' articles of incorporation, by-laws, minutes, and financials); and
the Culls' notices of depositions for three of the Defendants' experts with 24 categories of documents requested from each (including all documents relating to this case, all their articles, *596 publications, or speeches given in their fields of expertise, all courses or seminars they had attended, all persons they had studied under, and all reference books or treatises in their libraries).
There is simply no question on this record that the Culls conducted extensive discovery about every aspect of the merits.[89]
But under the totality-of-the-circumstances test, discovery is not the only measure of waiver. Here, when the warranty defendants initially moved to compel arbitration, the Culls filed a 79-page response opposing it, asserting that the AAA "is incompetent, is biased, and fails to provide fair and appropriate arbitration panels." They complained of the AAA's fees, and asserted that as a result the "purported arbitration clause is unconscionable and unenforceable, and this Court's enforcement of such would be nothing short of ridiculous and absurd." This, plus their prayer asking the trial court to deny the motion to compel arbitration "in its entirety," belies the court of appeals' conclusion that "the Culls merely opposed the use of the AAA" rather than arbitration itself.[90] In some federal courts, the Culls' objection alone could suffice to waive arbitration.[91]
The Culls also moved for arbitration very late in the trial process. It is true that Perry Homes moved to continue the trial setting when the Culls sought arbitration, requesting about ten weeks to finish deposing experts. Because the trial court ordered arbitration, no one knows whether the case would have gone to trial (including the unnamed court clerk cited by the dissent). But in view of the written discovery and depositions already completed, the record is nevertheless clear that most of the discovery in the case had already been completed before the Culls requested arbitration. The rule that one cannot wait until "the eve of trial" to request arbitration is not limited to the evening before trial; it is a rule of proportion that is implicated here.[92]
Then 14 months after filing suit and shortly before the December 2001 trial setting, the Culls changed their minds and requested arbitration. They justified their change of heart on the basis that they wanted to avoid the delays of an appeal. But their change unquestionably delayed adjudication of the merits; instead of a trial beginning in a few days or weeks, the plenary arbitration hearing did not begin until late September of 2002 almost ten months after the Culls abandoned their trial setting. Moreover, to the extent arbitration reduces delay, it does so by severely limiting both pretrial discovery and post-trial review. Having enjoyed the benefits of extensive discovery for 14 *597 months, the Culls could not decide only then that they were in a hurry.
It is also unquestionably true that this conduct prejudiced the Defendants. "Prejudice" has many meanings, but in the context of waiver under the FAA it relates to inherent unfairness that is, a party's attempt to have it both ways by switching between litigation and arbitration to its own advantage:
[F]or purposes of a waiver of an arbitration agreement[,] 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.[93]
Thus, "a party should not be allowed purposefully and unjustifiably to manipulate the exercise of its arbitral rights simply to gain an unfair tactical advantage over the opposing party."[94]
Here, the record before the trial court showed that the Culls objected to arbitration initially, and then insisted on it after the Defendants acquiesced in litigation. They got extensive discovery under one set of rules and then sought to arbitrate the case under another. They delayed disposition by switching to arbitration when trial was imminent and arbitration was not. They got the court to order discovery for them and then limited their opponents' rights to appellate review. Such manipulation of litigation for one party's advantage and another's detriment is precisely the kind of inherent unfairness that constitutes prejudice under federal and state law.
B. A Response to the Dissents
Although we have repeatedly said arbitration agreements can be waived, today's dissents would effectively hold they cannot. That would favor arbitration too much; because most agreements can be waived by the parties' conduct,[95] arbitration contracts should not be more enforceable than other contracts. That is not what Congress intended when it enacted the FAA.[96] Indeed, one dissent cannot even bring itself to say the Culls substantially invoked the litigation process. If the litigation conduct here is not enough, it is hard to imagine what would be.
The dissents make several mistakes in their analyses. First, they misconstrue the standard of review. Every *598 abuse-of-discretion review is not identical because "a trial judge's discretion may be applied to scores of situations and in many different ways."[97] Reviewing a declaratory judgment fee award (where trial judges have broad discretion)[98] is not the same as reviewing admission of hearsay (where trial judges follow detailed rules),[99] even though an abuse-of-discretion standard applies to both.[100] Moreover, a totality-of-the-circumstances test presumes a multitude of potential factors and a balancing of evidence on either side; if appellate courts must affirm every time there is some factor that was not negated or some evidence on either side, then no ruling based on the totality-of-the-circumstances could ever be reversed. That standard of review would be the same as no review at all. By applying such a standard, both dissents would allow trial judges to send any case to arbitration no matter what has occurred in court.
Under a proper abuse-of-discretion review, waiver is a question of law for the court,[101] and we do not defer to the trial court on questions of law.[102] We do defer to a trial court's factual findings if they are supported by evidence,[103] but there was no factual dispute here regarding whether the Culls initially opposed arbitration, whether they conducted extensive merits discovery, or whether they sought arbitration late in the litigation process. This leaves only the conclusion whether such conduct constitutes prejudice, a legal question we cannot simply abandon to the trial court.[104]
*599 Second, the dissents define prejudice in a way that makes it impossible to prove. While recognizing that "waiver" has a special definition in the arbitration context, the dissents overlook that "prejudice" does too. Instead of the inherent-unfairness standard used by the federal courts,[105] they impose what appears to be an irretrievable-loss standard. One dissent would go so far as to hold that no amount of discovery, no matter how extensive, can show prejudice if the fees incurred might be compensated in the final arbitration award, even if erroneously.[106] No one could ever show prejudice under this standard, because even if a contract allowed no reimbursement of discovery costs (as in this case),[107] it is always hypothetically possible that a rogue arbitrator might reimburse costs regardless. The same dissent would find no prejudice from extensive discovery without proof that an arbitrator would have prohibited it. That again is impossible; arbitrators have almost unbridled discretion regarding discovery, so no one can predict what they might do in advance. Presuming (as the dissents do) that broad discovery is generally available in arbitration simply ignores one of its most distinctive features.[108]
Third, both dissents quibble with the Defendants' proof of prejudice because it was insufficiently detailed.[109] This confuses proof of the fact of prejudice with proof of its extent; the Defendants had to show substantial invocation that prejudiced them, not precisely how much it all was. Referral to arbitration should be decided summarily with the evidence limited to disputed facts;[110] as the Culls did not dispute that the parties had conducted more than a dozen depositions and other extensive discovery on the merits, requiring proof of each one would have merely made the referral hearing longer and more *600 expensive. The pre-arbitration record proved that discovery was extensive; the evidence demanded by the dissents would have merely showed how much it cost.
Finally, the dissents' focus on discovery ignores all the other circumstances that the totality-of-the-circumstances test requires us to consider. Because we must consider all the circumstances, the amount of discovery needed to show prejudice will vary depending on what the other circumstances are. As the Fifth Circuit has held, prejudice should be easier to show against a party that initially opposed arbitration than against one who sought it from the start:
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.[111]
It is these other circumstances that make this case different from In re Vesta.[112] The parties seeking arbitration in Vesta had not opposed arbitration from the outset and then invoked it after getting all the discovery they wanted.[113] Nor was the Vesta case close to trial, as was the case here. The parties in Vesta had taken four depositions (rather than 15); they had also exchanged standard requests for disclosure and one request for production, but only one of those documents was in the record so there was no evidence whether this limited discovery related to the merits (as the extensive discovery here clearly did).[114] And while the party opposing arbitration in Vesta allegedly incurred more than $200,000 in expenses, most of that was incurred in getting discovery rather than providing it;[115] a party who requests lots of discovery is not prejudiced by getting it and taking it to arbitration in the same way that a party who produces lots of discovery outside the stricter discovery limits in arbitration.[116]
Applying the proper standard of review and the proper definition of prejudice, we disagree with the dissents that the Defendants have failed to show prejudice here.
*601 C. Did the Warranty Companies Waive Arbitration?
Finally, the Culls argue the warranty companies cannot object to arbitration for two reasons.
First, the warranty companies originally requested arbitration (which the Culls opposed), so it could be argued that it is unfair to hold the Culls to their original position without holding the warranty companies to theirs. Of course, we cannot hold both parties to their original positions as those positions were contradictory. More important, while the parties' original demands are relevant factors, the test is the totality of the circumstances. Looking to all the circumstances, it is quite clear from the parties' extensive co-participation in months of discovery that everyone waived their right to arbitration whether they asserted that right early (as did the warranty companies) or late (as did the Culls).
Second, the Culls argue that the only objection to the trial court's order compelling arbitration was filed by Perry Homes, not the warranty companies. It is true that only Perry Homes' attorneys signed the motion, but in that motion and at the hearing held on it they represented that they were authorized to do so on behalf of all the Defendants. If the Culls wanted to question their authority to speak for the warranty companies, they should have done so by sworn motion.[117]
* * *
Accordingly, we reverse the court of appeals' judgment, vacate the arbitration award, and remand this case to the trial court for a prompt trial.
Justice O'NEILL filed a concurring opinion.
Justice JOHNSON filed an opinion concurring in part and dissenting in part, in which Chief Justice JEFFERSON and Justice GREEN joined.
Justice WILLETT filed an opinion concurring in part and dissenting in part.
Justice O'NEILL, concurring.
Most members of the Court agree that the Culls substantially invoked the litigation process before requesting arbitration; the point of disagreement is whether Perry Homes adequately proved it suffered prejudice as a result. I join the Court's opinion, but write separately to note that I believe the proof required to demonstrate prejudice in any given case should be measured by the degree to which the litigation process has been invoked. In some circumstances, a party's invocation of the judicial process may be so substantial that a court could presume the party resisting arbitration has been prejudiced and the right to arbitration has been waived. In my view, such a presumption may easily be drawn on this record.
Justice JOHNSON, joined by Chief Justice JEFFERSON and Justice GREEN, concurring in part and dissenting in part.
I disagree that the trial court abused its discretion in compelling arbitration. I concur with the disposition of part VI-C. I dissent from parts VI-A and VI-B of the Court's opinion and dissent from its judgment.
The parties agree that their arbitration agreement covers the dispute and that the Federal Arbitration Act (FAA) applies. Thus, whether the Culls waived the right to arbitrate is a question of law. In re Oakwood Mobile Homes, Inc., 987 S.W.2d *602 571, 574 (Tex.1999); In re Bruce Terminix Co., 988 S.W.2d 702, 703-04 (Tex.1998). The Court has said previously, and says again today, that prejudice is a required element of waiver of the right to arbitrate cases subject to the FAA. 258 S.W.3d at 595; see In re Bank One, N.A., 216 S.W.3d 825, 827 (Tex.2007). The party asserting waiver has the burden to prove prejudice. See In re FirstMerit Bank, N.A., 52 S.W.3d 749, 753-54 (Tex.2001) (noting that if an agreement to arbitrate exists and the party opposing arbitration fails to prove its defenses, then a trial court has no discretion and its only option is to compel arbitration); In re Bruce Terminix Co., 988 S.W.2d at 704 ("Even substantially invoking the judicial process does not waive a party's arbitration rights unless the opposing party proves that it suffered prejudice as a result."). In the context of the issue before us, prejudice means detriment. See In re Bank One, 216 S.W.3d at 827 ("A party waives an arbitration clause when it substantially invokes the judicial process to the other party's detriment."). We review a trial court's order compelling arbitration for an abuse of discretion. See In re Bruce Terminix Co., 988 S.W.2d at 705. That standard is in accord with the general practice of reviewing a trial court's actions for an abuse of discretion when a trial court has discretion to grant or deny relief based on its factual determinations. See Bocquet v. Herring, 972 S.W.2d 19, 20-21 (Tex.1998) (noting that the abuse of discretion standard of review as to a trial court's factual determinations applies when a trial court has discretion either to grant or deny relief based on its factual determinations). The test for abuse of discretion is not whether, in the opinion of the reviewing court, the trial court's ruling was proper, but whether the trial court acted without reference to guiding rules and principles. See Cire v. Cummings, 134 S.W.3d 835, 838-39 (Tex.2004). The trial court's ruling should be reversed only if it was arbitrary or unreasonable. Id. at 839. Generally, if there is any evidence to support the trial court's ruling then the court did not abuse its discretion. See In re BP Prods. N. Am., Inc., 244 S.W.3d 840, 848 (Tex.2008) (citing Butnaru v. Ford Motor Co., 84 S.W.3d 198, 211 (Tex. 2002)). That is because it is only when the evidence is such that the trial court could have made but one decision, yet made another, that we say the trial court abused its discretion. Id. Our decisions affording deference to trial court rulings when evidence supports those rulings comport with the standard of review utilized by the United States Fifth Circuit Court of Appeals in regard to whether a party has suffered prejudice for purposes of waiving arbitration rights subject to the FAA. The Fifth Circuit's position is that trial court findings on which the legal conclusion of waiver is based are predicate questions of fact "which may not be overturned unless clearly erroneous." Price v. Drexel Burnham Lambert, Inc., 791 F.2d 1156, 1159 (5th Cir.1986); see also Republic Ins. Co. v. Paico Receivables, LLC, 383 F.3d 341, 347 (5th Cir.2004) ("[T]he district court's finding that PRLLC would suffer prejudice if arbitration was compelled is not clearly erroneous.").
The waiver issue in this matter is not determined by general waiver elements, but by waiver as that term is used in regard to avoiding arbitration agreements subject to the FAA. Generally, "waiver" is the intentional relinquishment of a right actually or constructively known, or intentional conduct inconsistent with claiming that right. See Jernigan v. Langley, 111 S.W.3d 153, 156 (Tex.2003). The elements of waiver include (1) an existing right, benefit, or advantage held by a party; (2) the party's actual or constructive knowledge *603 of its existence; and (3) the party's actual intent to relinquish the right or intentional conduct inconsistent with the right. See Tenneco Inc. v. Enter. Prods. Co., 925 S.W.2d 640, 643 (Tex.1996). The Culls' actions and their attorneys' statements in court, taken as a whole, present compelling evidence of those elements.
Waiver as that term is used in regard to arbitration agreements subject to the FAA, however, requires more than is required for general waiverit requires proof that the party asserting waiver as a defense to arbitration has suffered detriment. 258 S.W.3d at 589-90; In re Bank One, 216 S.W.3d at 827. So, when the Culls finally moved to compel arbitration and proved applicability of an arbitration agreement, Defendants unquestionably had the burden to raise and prove their defense of waiver, including prejudice, if they wanted to avoid arbitration. In re Bruce Terminix Co., 988 S.W.2d at 704.
Defendants recognized that to avoid arbitration they had to prove a defense to the arbitration agreement. As part of their response to the Culls' motion to compel arbitration, Defendants pled that (1) after suit was filed, all parties conducted written and oral discovery, (2) the Culls filed several motions and obtained two hearings and court rulings on discovery-related issues, and (3) a trial setting was imminent. Defendants conceded applicability of the arbitration clause, then cited authorities for and took the position that "Plaintiffs have waived arbitration because they substantially invoked the judicial process to the detriment of Defendants." Subsequently, Defendants more clearly detailed the detriment they were claiming:
In this case, the costs incurred by Defendants in responding to the motions to compel filed by Plaintiffs would not have been incurred during the course of arbitration. Similarly, defendants are prejudiced by the fact that it [sic] was required to comply with the Court's orders on such motions to compel, when such means and methods would not have been available in arbitration. Because of Plaintiffs' delay in seeking arbitration, coupled with the resulting prejudice by Defendants being required to respond to multiple discovery motions and comply with orders thereon, Plaintiffs cannot now rely on the Limited Warranty Agreement to compel arbitration.
(Emphasis added). A second part of Defendants' response was a motion for continuance of trial to complete discovery.
At the hearing on the Culls' motion to compel arbitration, the trial judge, who noted at the end of the hearing that "I just finished [an arbitration] with the American Arbitration Association," admitted all