Be Careful What You Wish For...[Texas Arbitration Edition]
The case of Cull v. Perry Homes is long and winding and fits the old adage of being careful what you wish for; especially in litigation. Robert and Jane Cull of Mansfield, Texas bought a home from Perry Homes for $233,730. They alleged it had serious structural problems. They sued Perry Homes and two warranty companies in Texas District Court. One of the warranty companies moved to compel arbitration with the American Arbitration Association pursuant a contract clause. The Culls responded with a 79-page objection which called the AAA, among other things, “incompetent, biased, and fails to provide fair and appropriate arbitration panels.” The case proceeded in court. There was extensive discovery conducted, including 14 depositions and five motions to compel by the Culls. Four days before trial, the Culls moved to compel arbitration. The trial court agreed. The Supreme Court denied a petition for writ of mandamus blocking the move to arbitration.
The arbitrator gave the Culls an $800,000 award, including punitive damages and damages for mental anguish (things arbitration panels are supposed to protect litigants from versus jury trials).
Perry Homes appealed. The Texas Supreme Court reversed; not the arbitration award itself – for which the law is extremely deferential – but the trial court’s decision to go to arbitration.
The Supreme Court stated that the key issue was whether the party moving to compel arbitration had substantially invoked the litigation process. In this case, it clearly had. There is not much more that the Culls could have done to invoke litigation short of going through the trial itself. The plaintiff’s 79-page objection to the AAA seemed to have a large part in the Court’s decision.
On retrial, the jury awarded the Culls $51 million.
Perry Homes has incrementally gotten what it wished for (an arbitration set out in its contract, a new trial after the arbitration gave a bad result), with increasingly bad results. The Supreme Court’s 2008 opinion received lots of press for its seeming favoring of a well-connected defendant over even its historical favor of arbitration.
The case continually made for favoring arbitration is that it reduces cost and time. This frequently does not occur. Perhaps we should go back to favor arbitration only in cases where experts are needed to determine the outcome, not for run-of-the mill private litigation that has until recently been the purview of our public courts.
