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According to a Texas appellate court, a party waives its right to arbitrate when it files a motion to compel arbitration ten days before a trial on damages, after partial summary judgment has been entered, and after it has already requested an alternative trial date.
In Interconex, Inc. v. Ugarov, No. 01-05-00524-CV, 2006 WL 2506562 (Tex. App. Aug. 31, 2006), Russian authorities confiscated several personal items belonging to Ugarov, who then sued Interconex, the company hired to coordinate his move from Russia to Texas, for failing to obtain the appropriate export permits.
Interconex did not answer Ugarov’s complaint, and the trial court granted partial summary judgment in favor of Ugarov. Interconex filed a motion to set aside the default judgment, and at the hearing, which Interconex scheduled six months later, the trial court denied Interconex’s motion. However, the trial court rescheduled a jury trial on damages pursuant to Interconex’s request. Ten days before the trial, Interconex filed a motion to compel arbitration. The trial court denied the motion, holding that Interconex had waived its right to arbitrate.
On appeal, Interconex argued that the trial court erred by denying its motion to compel arbitration. The Court examined whether Interconex had waived its right to arbitrate. Waiver occurs when a party has “substantially invoked the judicial process” and as a result, the party opposing arbitration suffers “actual prejudice.”
The Court found that Interconex had substantially invoked the judicial process by filing its motion to compel arbitration only ten days before the trial on damages. Additionally, the Court found that Interconex’s failure to demand arbitration before the entry of summary judgment and its request to reset the trial date were acts inconsistent with a right to arbitrate.
The Court also concluded that Interconex’s demand for arbitration caused prejudice to Ugarov because he had flown from the Ukraine to Houston specifically to attend the jury trial. Because Ugarov had “incurred costs and expended time in preparation for the jury trial on damages,” he experienced actual prejudice.
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