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A state court in Texas held that a party did not waive its right to arbitrate when the opposing party actually invoked the judicial process by bringing a motion for summary judgment.
In Matthews v. USA Employment, L.L.C., Nos. 01-06-01016-CV, 01-07-00001-CV, 2007 WL 926566 (Tex. App. Mar. 29, 2007), the plaintiffs, thirteen teachers from India, signed contracts with USA Employment (USAE), which agreed to find teaching jobs in the United States for the plaintiffs.
The agreements all contained an arbitration clause. USAE brought an action against the teachers for overpayment of fees under the agreements, and the teachers' answers alleged unenforceability of the agreements and breach of contract by USAE. When the teachers moved to compel arbitration, USAE argued that the teachers waived their arbitration rights.
However, the Court disagreed and held that the parties should arbitrate their dispute. First, the Court held that the Federal Arbitration Act (FAA) applied to the parties dispute. The agreements placed the teachers in positions in four different states; therefore, they necessarily involved interstate commerce.
Then, the Court held that the teachers had not waived their right to arbitrate because they did not substantially invoke the judicial process and, even if they had, USAE failed to show that it was prejudiced by the teachers' actions.
Additionally, the Court pointed out that USAE's argument that it would be prejudiced because the case "was already presented for a decision on the merits-through USAE's Motion for Summary Judgment" failed because it showed only that USAE – the party opposing arbitration – invoked the judicial process.
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