ARBITRATION IS GOD – SECOND INSTALLMENT

By Rick Freeman

In IN RE HERITAGE BUILDING SYSTEMS, INC, No. 09-05-445-CV, decided by the Beaumont Court of Appeals on February 9, 2006, we find another decision by the Texas appellate courts that lends further proof to my belief that Arbitration is God in Texas courts.

In this case, Bohler bought materials to construct a prefabricated building from Heritage. On the back of the purchase order was an arbitration clause providing for arbitration by the AAA in Little Rock, Arkansas. Bohler lived in Texas, apparently in the Beaumont Appellate District.

Bohler sued Heritage alleging that components for the building were incorrectly engineered and manufactured. Heritage moved to compel arbitration pursuant to the arbitration clause on the back of the purchase order. Bohler moved to compel mediation.

The trial court ordered mediation to occur within 60 days and deferred ruling on the motion to compel arbitration until after the mediation had occurred. Interestingly, pursuant to Section 154.022 of the Civil Practice and Remedies Code, the trial court ordered that any objection to the mediation be filed within 10 days of the order. Apparently, there was no objection filed; instead, at the end of the 60 day period, Heritage filed a petition for writ of mandamus.

The appellate court granted the writ and ordered that the trial court vacate its order of mediation and compel arbitration of the case. There is no discussion by the appellate court of the effect of the failure of Heritage to file its objection to the order compelling mediation.

The appellate court ruled that the trial court had no discretion to order the case to mediation where there is an arbitration clause. Although Texas has a policy of encouraging settlement of cases through alternative dispute resolution such as mediation, the arbitration clause trumped
Texas policy.

Although, mediating the case within 60 days could have resolved the dispute, the appellate court ruled that allowing the trial court to order mediation would have had the effect of delaying resolution of the case and increasing costs incurred.

Instead of a mediation within 60 days of the order, the defendant did not file its objection within 10 days as ordered by the court, delayed until the 60 day period was about to expire before filing its writ of mandamus, and the appellate court decision was rendered in February of 2006, four months after the court-ordered mediation would have occurred. Total delay to avoid mediation was approximately 6 months and expenses had to be considerably more than a mediation fee.

Arbitration is apparently God-like in the appellate courts of Texas. A boiler plate provision on the back of a purchase order removes ALL discretion from the trial court in its attempt to seek a quick and inexpensive resolution of the dispute.