El Paso COA Rules on Pre-Arbitration Discovery in Mandamus Relief Case

The Eighth District Court of Appeals in El Paso has once again conditionally granted mandamus relief in an arbitration dispute between Dish Network, LLC and a former employee.  In the case, In Re Dish Network, LLC, No. 08-17-00161-CV (Tex. App – El Paso, October 24, 2018), a Texas woman, Delgado, worked as a Human Resources Manager for Dish Network, LLC (“Dish”) for approximately eight years before she was terminated in August 2015.  Following her dismissal, Delgado filed a discrimination and retaliation lawsuit against her former employer.  Dish responded to the lawsuit by filing a motion to compel arbitration based on an agreement Delgado signed when she commenced her employment with the company.  In addition, Dish submitted an affidavit to authenticate the agreement to arbitrate that was signed by the company’s senior Human Resources Manager, Leyba.

In response to the affidavit, Delgado sought to depose Leyba and Dish filed a motion to quash the request.  Delgado also asked the trial court to continue a scheduled hearing on Dish’s motion to compel arbitration in order to provide her with time to conduct discovery related to both the validity of the arbitration agreement and whether Dish’s legal counsel should be disqualified.  Despite her request, Delgado failed to file a written reply to Dish’s motion to compel arbitration.

After the trial court granted Delgado’s request to continue the hearing on Dish’s motion to compel, her former employer sought mandamus relief with Texas’s Eighth District Court of Appeals.  The El Paso appellate court conditionally granted Dish’s mandamus request and ordered the trial court to rule on Dish’s motion within 30 days.

Following a hearing, the trial court denied Dish’s motion to quash Delgado’s deposition request.  In addition, the court set a hearing regarding the company’s motion to compel arbitration for a date that was more than 30 days in the future.  Delgado then sought to extend the deadline for compliance with the Eighth District’s order and Dish filed an emergency motion to stay the case and a new mandamus petition with the appellate court.

In the company’s mandamus petition, Dish claimed “the trial court clearly abused its discretion by denying DISH’s motion to quash the deposition of Katherine Leyba and allowing Delgado to conduct pre-arbitration discovery before ruling on the motion to compel arbitration.”  According to Dish, Delgado was “not entitled to pre-arbitration discovery under Texas law,” nor did the El Paso appellate court’s prior grant of mandamus relief “authorize the trial court to order pre-arbitration discovery” in the case.

In the court’s opinion, the Eighth District Court of Appeals first addressed the correct standard of review.  The El Paso court stated mandamus relief is appropriate where a relator demonstrates “the trial court clearly abused its discretion” by acting “arbitrarily, capriciously, and without reference to guiding principles.”  In addition, the appellate court said such “relief is appropriate when a trial court improperly orders pre-arbitration discovery.”

Next, the Court of Appeals reminded the parties that Texas law favors arbitration before adding “Section 171.021 of the Civil Practice and Remedies Code mandates a trial court to order the parties to arbitrate on the application of a party showing an agreement to arbitrate and the opposing party’s refusal to arbitrate.” After that, the El Paso court stated:

Motions to compel arbitration are ordinarily decided in summary proceedings “on the basis of affidavits, pleadings, discovery, and stipulations.” Kmart Stores of Texas L.L.C. v. Ramirez, 510 S.W.3d 559, 565 (Tex.App.–El Paso 2016, pet. denied), quoting Jack B. Anglin Co., Inc. v. Tipps, 842 S.W.2d 266, 269 (Tex. 1992). A summary motion to compel arbitration is essentially a motion for partial summary judgment, subject to the same evidentiary standards. In re Jebbia, 26 S.W.3d 753, 756-57 (Tex.App.–Houston [14th Dist.] 2000, orig. proceeding); see Jack B. Anglin, 842 S.W.2d at 269; Kmart Stores of Texas, 510 S.W.3d at 565. A party seeking to compel arbitration must establish the existence of an arbitration agreement and show that the claims raised fall within the scope of the agreement. In re Oakwood Mobile Homes, Inc., 987 S.W.2d 571, 573 (Tex. 1999)(orig. proceeding). If the movant has proven there is an arbitration agreement as a matter of law, the trial court must compel arbitration. In re Jebbia, 26 S.W.3d at 757.

If a party opposing the motion to compel arbitration denies the existence of the agreement, the court is required to summarily determine that issue. TEX.CIV.PRAC.&REM.CODE ANN. § 171.021(b). The non-movant can resist summary arbitration by raising an issue of material fact regarding the existence of the agreement or whether the claims fall within the scope of the agreement. In re Jebbia, 26 S.W.3d at 757. Additionally, the non-movant can resist summary arbitration by presenting some evidence supporting every element of a defensive claim that there is no enforceable agreement to arbitrate. In re Jebbia, 26 S.W.3d at 757. If the non-movant raises an issue of fact, then the trial court must forego summary disposition and conduct an evidentiary hearing referred to as a “Tipps hearing.” See Kmart Stores of Texas, 510 S.W.3d at 565. Conversely, if the movant carries its burden and the non-movant does not raise a material issue of fact, the trial court is required to compel arbitration. In re Jebbia, 26 S.W.3d at 757.

Because Dish filed prima facie evidence regarding the existence of a valid arbitration agreement, “the burden shifted to Delgado to raise a fact issue regarding the existence of the arbitration agreement or to present a defense to its enforcement.”  According to the appellate court, Delgado failed to file a response to Dish’s motion to compel arbitration that would raise a genuine issue of fact.  In addition, the court stated Delgado’s assertion that she did not believe a valid arbitration agreement existed and she was “entitled to pre-arbitration discovery” was “insufficient to create an issue of material fact regarding the existence or validity of the agreement.”

The court then said a party may have a right to limited pre-arbitration discovery under Section 171.086(a)(4) and (6) of the Civil Practice and Remedies Code only “if the trial court lacks sufficient information regarding the scope of an arbitration provision or other issues of arbitrability.”  The El Paso court added:

Contrary to Delgado’s argument that she is not required to do anything to be entitled to pre-arbitration discovery, Section 171.086(a)(4) and (6) plainly contemplates that the party seeking discovery under the statute must file an application for a court order granting such relief. See TEX.CIV.PRAC.&REM.CODE ANN. § 171.086(a)(4), (6)(“a party may file an application for a court order, including an order to . . . (4) obtain from the court in its discretion an order for a deposition for discovery, perpetuation of testimony, or evidence needed before the arbitration proceedings begin….”). We further hold that the motion must show that the pre-arbitration discovery sought by the party is necessary and related to the issues raised by the motion. See In re Houston Pipe Line, 311 S.W.3d at 452 (Opn. on reh’g). This requirement is consistent with our holdings in the In re VNA and In re ReadyOne cases that pre-arbitration discovery is available on a particular – 10 – defense if the party opposing arbitration shows or provides a colorable basis or reason to believe that the discovery requested is material in establishing the defense. See In re VNA, Inc., 403 S.W.3d at 488; In re ReadyOne Industries, Inc., 420 S.W.3d at 186.

Because Delgado failed to file a Section 171.086(a) motion, the record did not support a finding that the trial court lacked “sufficient information to determine whether the arbitration agreement exists,” and “Delgado did not submit evidence contesting any aspect of Leyba’s affidavit,” the Eighth District Court of Appeals in El Paso held “the trial court clearly abused its discretion by denying DISH’s motion to quash the deposition of Leyba.”

The El Paso court also dismissed Dish’s argument that the appellate court’s earlier mandamus order in the case “did not authorize the trial court to order pre-arbitration discovery.”  According to the Court of Appeals:

While we have determined that Delgado failed to properly invoke the trial court’s jurisdiction under the statute to order the deposition of Leyba, the trial court nevertheless retained discretion to order pre-arbitration discovery. Having found that the trial court clearly abused its discretion by denying DISH’s motion to quash the deposition notice and permitting pre-arbitration discovery, we sustain Issue One and conditionally grant the petition for writ of mandamus.

Finally, the Eighth District Court of Appeals in El Paso ordered the trial court to withdraw it previous order, enter an order granting Dish’s motion to quash Delgado’s deposition request, and rule on the company’s motion to compel arbitration within 30 days so long as Delgado fails to establish she is entitled to pre-arbitration discovery under Texas law.

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