Limited litigation activity does not constitute an implied waiver of the right to arbitrate without the requisite showing of prejudice from that activity, according to the Texas Supreme Court.

In In re Fleetwood Homes of Texas, L.P., No. 06-0943, 2008 WL 2487094 (Tex. June 20, 2008), mobile home manufacturer Fleetwood entered into a dealership contract with Gulf. The contract contained an arbitration agreement encompassing any dispute between the parties. Fleetwood later cancelled the agreement, allegedly due to breach by Gulf. In response, Gulf filed a court action for breach. Fleetwood moved to compel arbitration. The motion was denied by the trial court, and the denial was affirmed by the intermediate court.

Gulf maintained that Fleetwood had expressly waived its right to compel arbitration during pre-trial negotiations and discovery procedures. According to the Court, none of Fleetwood's pre-trial statements constituted express waiver. As to implied waiver, the Court found none in Fleetwood's activities because Gulf had failed to show that it had suffered any prejudice. See EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 90 (Tex. 1996) (holding that implied waiver, no matter the extent of litigation activities, will not be found without some prejudice to the non-moving party).

The Court also held that the agreement's limitations on discovery and its attorney's fees provision did not render it unconscionable. To the Court, limitations on discovery are "one of arbitration's most distinctive features," and "limits on discovery for both parties does not make it unconscionable." Finally "allowing both parties to recover fees hardly makes an agreement 'one-sided,'" even if, absent such an agreement, prevailing plaintiffs are only allowed such fees under Texas law.