Reversing a trial court ruling denying a motion to compel arbitration of a loan dispute, a Texas Court of Appeals held that a party's involvement in separate lawsuits relating to the underlying loans did not amount to waiver of its arbitration rights because it did not substantially invoke the judicial process nor prejudice the opposing party.

In In re International Bank of Commerce, No. 13 -07-693-CV, 2008 WL 192260 (Tex. Ct. App. Jan. 18, 2008), the Cantus obtained approximately fifty loans throughout a fifteen year period from the International Bank of Commerce (IBC). In June 2007, the Hidalgo County taxing authorities notified IBC that it was auctioning various properties the Cantus had posted as collateral.

IBC informed the Cantus that failing to pay taxes on their properties constituted defaults under the loan agreement terms. When the Cantus failed to cure their default, IBC posted their property for non-judicial foreclosure. The Cantus then sued IBC, arguing that IBC had orally represented that it would not foreclose the properties. Moreover, they claimed IBC had committed fraud and sought injunctive relief enjoining IBC from foreclosing the properties.

IBC moved to compel arbitration pursuant to the loan contracts' arbitration agreement. The Cantus opposed arbitration, arguing IBC had waived its right to arbitrate by filing, in other suits relating to the loans, a petition in intervention giving notice of IBC's first priority lien on accounts receivable and requesting declaratory relief. In response, IBC argued it had not waived its right to arbitrate, as it expressly mentioned when seeking declaratory relief that it did so "subject to and without waiver of [IBC's] rights to compel arbitration." Moreover, the contract's arbitration agreement contained "self help" clauses stating that the parties could seek ancillary or provisional judicial relief without waiving their arbitration rights. The trial court denied the motion and IBC appealed.

The Court held that IBC's participation in the separate lawsuit relating to the loan did not waive its arbitration rights. The Federal Arbitration Act creates a strong presumption against waiver of arbitration rights. Accordingly, the party seeking to avoid arbitration must show that the opposing party substantially invoked the judicial process in a prejudicial manner. To show prejudice, the party opposing arbitration must show the other party either obtained access to information not discoverable in arbitration or that it incurred costs and fees due to the other party's delay.

The Court concluded that the "self-help" clauses permitted IBC to intervene to secure its legal rights in the related cases. Further, IBC did nothing in the other cases inconsistent with its right and intent to arbitrate, as it merely sought to give notice of its status as a preferred creditor. Moreover, the Court concluded that IBC's action in responding to an interpleader action did not substantially invoke the judicial process as it only responded to the action and asserted relevant defenses. Finally, IBC expressly mentioned in its various responses that it did so without waiving its right to arbitrate.