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Use it or lose it: Don’t wait to assert right to compel arbitration

8/13/25

By: Patrick T. Mulry

Arbitration of construction defect claims – especially residential homeowner claims – has recently become fertile ground for appellate decisions in Texas; at least six opinions in June 2025 are related to denials by a trial court of motions to compel arbitration or refusals to enter arbitral awards as judgments of the trial court. Residential contractors – and mass builders in particular – have been insisting on arbitration clauses in their original sale contracts in an effort to combat outsized jury awards to homeowners.

When compelling arbitration in Texas, a bedrock principle is that a party waives its right to compel arbitration if it first substantially invokes the judicial process to another party’s detriment or prejudice and/or through litigation conduct inconsistent with a claim to the right. Perry Homes v. Cull, 258 S.W.3d 580, 589-90 (Tex. 2008); G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502, 511 (Tex. 2015).

What action or activity constitutes waiver through substantial invocation is a question that intermediate appellate courts have struggled with ever since the Texas Supreme Court announced the doctrine in Perry and its list of 13 non-exclusive factors. These two cases indicate at the least that extensive litigation conduct can waive the right to arbitrate.

In the first case, a contractor filed its motion to compel arbitration after the case had been on file for three years. The contractor had sued six subcontractors as third-party defendants, asserted counterclaims against the plaintiff condominium owner’s association, engaged in extensive discovery and sought judicial rulings on merits-related issues, including involving the Residential Construction Liability Act. The court ruled that such actions constituted substantial invocation of the judicial process, such that the contractor waived its right to the arbitration required in its relevant contract. Thomas Craig Constr., Inc. v. Park Square Condo. Owner’s Assoc, No. 01-22-00918-CV, 2025 WL 1759012 (Tex.App.—Houston [1^st Dist.], June 26, 2025)(mem. op.).

In the second case, the defendant filed its motion to compel arbitration a year after being sued and after having filed a request for temporary injunction and an emergency motion seeking continuance of its temporary injunction hearing; entry into numerous pretrial agreements; taken the depositions of two of plaintiff’s key witnesses; engaged in other pretrial discovery to the extent that it eventually filed an emergency motion to compel requested documents; and participated in no less than seven hearings before the court not related to arbitration. Again, the court ruled that such activity constituted waiver of the right to compel arbitration through substantial invocation of the judicial process. TAC Total Automation Controls, Inc. v. MSC Industrial Supply, S. de R.L. de C.V., No. 08-24-00150-CV, 2025 WL 1803384 (Tex.App.—El Paso, June 30, 2025)(mem. op.).

Neither of these opinions is an example of an edge case, and these could both be cited as examples of how extensive litigation conduct needs to be in order to cross the line of substantiality but waiver has been found in other cases with more limited circumstances.

Avoiding waiver of arbitration by litigation conduct requires advance thought and planning by defendants who may be knocked off their heels by plaintiff’s claims. To avoid waiving the right to compel arbitration, or for assistance with any construction litigation issues, please contact Patrick T. Mulry at patrick.mulry@fmglaw.com or your local FMG attorney.

 Information conveyed herein should not be construed as legal advice or represent any specific or binding policy or procedure of any organization. Information provided is for educational purposes only. These materials are written in a general format and not intended to be advice applicable to any specific circumstance. Legal opinions may vary when based on subtle factual distinctions. All rights reserved. No part of this presentation may be reproduced, published or posted without the written permission of Freeman Mathis & Gary, LLP.