MH Consultants, Inc v. Lisa Martinez and Narciso Martinez

Fourth Court of Appeals
San Antonio, Texas
OPINION

No. 04-25-00230-CV

MH CONSULTANTS, INC.,
Appellant

v.

Lisa MARTINEZ and Narciso Martinez,
Appellees

From the 229th Judicial District Court, Duval County, Texas
Trial Court No. DC-21-204
Honorable Baldemar Garza, Judge Presiding

Opinion by: Velia J. Meza, Justice

Sitting: Irene Rios, Justice
Lori Massey Brissette, Justice
Velia J. Meza, Justice

Delivered and Filed: December 23, 2025

AFFIRMED

MH Consultants, Inc. seeks to compel arbitration pursuant to a purchase contract relating

to the sale of a manufactured home. The home was sold to Lisa and Narciso Martinez who

encountered issues immediately after delivery. The Martinezes sued MH Consultants for money

damages. Nearly three years into that suit, MH Consultants filed a motion to compel arbitration.

The trial court denied the motion and this interlocutory appeal followed. We hold that MH
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Consultants waived its right to compel arbitration by substantially invoking the judicial process.

We therefore affirm the trial court’s order.

BACKGROUND

In January 2021, the Martinezes signed a purchase contract for a manufactured home. On

the same day, they separately signed an arbitration agreement, which covered “[a]ll

claims . . . arising out of or relating in any way to the sale, purchase, or occupancy of the

[manufactured home].” The agreement also stated that “validity or enforceability” must be

determined under the Federal Arbitration Act.

On September 24, 2021, the Martinezes filed their original petition in district court in Duval

County. The petition alleged that MH Consultants delivered a damaged manufactured home and

that MH Consultants failed to adequately repair the damage. MH Consultants thereafter engaged

in substantial discovery, including filing a motion to compel and seeking discovery sanctions, and

filed a motion for summary judgment. Additionally, MH Consultants sought multiple continuances

of the trial setting, each on the eve of trial.

On July 29, 2024, MH Consultants filed a motion to compel arbitration. The Martinezes

argued MH Consultants impliedly waived the arbitration clause by actively litigating in district

court. The trial court denied the motion and MH Consultants timely appealed.

DISCUSSION

MH Consultants argues that it never waived the right to compel arbitration under the

purchase agreement and, therefore, the trial court should have compelled arbitration. 1

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In support, MH Consultants asserts that (1) it became aware of the arbitration clause shortly before filing the motion
to compel, (2) only “one set of discovery” had been conducted, including depositions by both sides, (3) its filings
before the motion to compel, including a motion for summary judgment, were “from a defensive posture,” (4) the only
affirmative relief it has requested is for attorney’s fees and costs, (5) the discovery already conducted could be used
in the arbitration proceedings and there will be no duplication of efforts, and (6) it filed the motion a year before trial
was scheduled.

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We review the denial of a motion to compel arbitration for abuse of discretion, deferring

to the trial court on factual determinations supported by the evidence and reviewing legal

determinations de novo. Henry v. Cash Biz, LP, 551 S.W.3d 111, 115 (Tex. 2018). Whether the

claims in dispute fall within the scope of a valid arbitration agreement is a question of law, which

we review de novo. Id. We also review de novo whether a party has waived the right to arbitration

by substantially invoking the judicial process. See Perry Homes v. Cull, 258 S.W.3d 580, 589 (Tex.

2008).

Because the trial court did not specify its reasons for denying the motion to compel, we

must affirm the trial court’s decision on any appropriate legal theory urged below.

1 Scope and Validity of Arbitration Clause

We start with MH Consultant’s initial burden under the Federal Arbitration Act to show

(1) the existence of a valid arbitration agreement and (2) that the claims at issue fall within the

scope of that agreement. Wagner v. Apache Corp., 627 S.W.3d 277, 282 (Tex. 2021)

First, the arbitration agreement was attached to MH Consultant’s motion to compel. The

attachment includes the signatures of all parties involved and is authenticated by a business records

affidavit. The Martinezes did not challenge validity or authenticity in any way in the trial court.

Second, the arbitration clause itself is broad and applies to “[a]ll claims, disputes, and

controversies arising out of or relating in any way to the sale, purchase, or occupancy” of the

manufactured home, including “claims based on contract, tort, statute, or any alleged breach,

default, or misrepresentation.” Each cause of action in this suit arises out of the purchase and

delivery of the manufactured home at issue. The Martinezes sued MH Consultants for breach of

contract, violation of the Texas Deceptive Trade Practices Act, and negligence. As to the contract

theory, the Martinezes alleged MH Consultants breached the purchase agreement by “failing to

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deliver the manufactured home in an adequate condition” and by “failing to remedy” the damage

to the home. As to the DTPA, they alleged that MH Consultants engaged in deceptive acts in

relation to the sale of the manufactured home. And as to negligence, they alleged that MH

Consultants negligently “fail[ed] to finish contractual duties” and “fail[ed] to use ordinary care in

the delivery of the home.”

The policy in favor of arbitration is “so compelling” that a court should compel arbitration

“unless it can be said with positive assurance that an arbitration clause is not susceptible of an

interpretation which would cover the dispute at issue.” Prudential Sec. Inc. v. Marshall, 909

S.W.2d 896, 899 (Tex. 1995) (orig. proceeding) (internal quotation omitted). The Martinezes’

contract, negligence, and DTPA claims clearly arise from the purchase of the manufactured home

at issue. Because the claims fall within the plain language of the arbitration clause, we hold that

MH Consultants carried their initial burden under the FAA.

2 Waiver

There is a strong presumption in favor of compelling arbitration and the Martinezes had

the burden to prove a defense to arbitration. See Royston, Rayzor, Vickery, & Williams, LLP v.

Lopez, 467 S.W.3d 494, 499–500 (Tex. 2015). Waiver is such a defense to arbitration. G.T. Leach

Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502, 511 (Tex. 2015).

The first step in assessing waiver by litigation conduct is determining whether the party

seeking to compel arbitration has substantially invoked the judicial process. Perry Homes, 258

S.W.3d at 590–91. The second step—at least historically—has been to find waiver only where

prejudice has occurred, or will occur, to the opposing party. Id.

In responding to the motion to compel, the Martinezes argued MH Consultants

substantially invoked the judicial process because it “actively engaged in the litigation” for three

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years by propounding discovery, participating in mediation, and seeking multiple continuances of

the trial setting. 2 We agree.

2.1 Substantial Invocation of the Judicial Process

“Whether a party has substantially invoked the judicial process depends on the totality of

the circumstances.” G.T. Leach Builders, 458 S.W.3d at 512. We must consider the following

factors:

• whether the movant was plaintiff (who chose to file in court) or defendant (who
merely responded);
• how long the party moving to compel arbitration waited to do so;
• the reasons for the movant’s delay;
• whether and when the movant knew of the arbitration agreement during the period
of delay;
• how much discovery the movant conducted before moving to compel arbitration,
and whether that discovery related to the merits;
• whether the movant requested the court to dispose of claims on the merits;
• whether the movant asserted affirmative claims for relief in court;
• the extent of the movant’s engagement in pretrial matters related to the merits (as
opposed to matters related to arbitrability or jurisdiction);
• the amount of time and expense the parties have committed to the litigation;
• whether the discovery conducted would be unavailable or useful in arbitration;
• whether activity in court would be duplicated in arbitration; and
• when the case was to be tried.

Perry Homes, 258 S.W.3d at 591; G.T. Leach Builders, 458 S.W.3d at 512. Rarely are all factors

presented in a single case and, “[g]enerally, no one factor is, by itself, dispositive.” RSL Funding,

LLC v. Pippins, 499 S.W.3d 423, 430 (Tex. 2016).

We begin with a brief summary of MH Consultants’ litigation activity in this case.

Regarding the discovery process, it propounded 116 requests for production and 41 interrogatories,

conducted 5 depositions, filed a motion to compel discovery and sought discovery sanctions. MH

2
In their briefing before this court, the Martinezes additionally argue that the arbitration clause is unenforceable
because it is unconscionable. However, they did not present this argument to the trial court and we may not consider
it for the first time on appeal. See 950 Corbindale, L.P. v. Kotts Capital Holdings Ltd. P’ship, 316 S.W.3d 191, 196
(Tex. App.—Houston [14th Dist.] 2010, no pet.) (refusing to consider appellees’ argument that arbitration clause was
unconscionable because argument was not presented to trial court).

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Consultants also participated in mediation and filed a hybrid traditional and no-evidence summary

judgment motion. 3

MH Consultants entered into an agreed docket control order setting a jury trial for February

26, 2024. Each side submitted witness and exhibit lists, designated experts, and filed motions in

limine. Three days before that setting, MH Consultants sought a continuance because its trial

counsel suffered from a kidney stone. The motion was granted and trial was moved to July 29,

2024. Ten days before the new setting, MH Consultants sought another continuance because its

counsel was again unavailable—this time for a pre-planned vacation. Shortly thereafter, MH

Consultants filed its motion to compel arbitration.

Crucially, MH Consultants waited 34 months—nearly three years—before seeking

arbitration. As an explanation for the delay, MH Consultants represents that it became aware of

the arbitration clause shortly before filing its motion to compel. But MH Consultants was a direct

party to the arbitration agreement and produced it during discovery, well before moving to compel

arbitration. Cf. EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 90 (Tex. 1996) (stating that a party

who has the opportunity to read an arbitration agreement and signs it is charged with knowing its

contents).

Considering the totality of the circumstances, we conclude MH Consultants substantially

invoked the judicial process.

2.2 Prejudice

We next consider whether the Martinezes were prejudiced. In response to the motion to

compel, the Martinezes argued that prejudice was no longer required under Morgan v. Sundance,

3
The appellate record does not show whether this motion was ruled upon.

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Inc., 596 U.S. 411 (2022), and, in the alternative, they have been prejudiced by “substantial and

significant discovery already conducted.”

2.2.1 Is a showing of prejudice still required?

The Texas Supreme Court has repeatedly held that waiver requires a showing of prejudice

in the arbitration context. See Perry Homes, 258 S.W.3d at 594–95 (recognizing “the importance

of keeping federal and state arbitration law consistent”). After Perry Homes was decided, the

United States Supreme Court held that prejudice should not be considered in determining whether

waiver of an arbitration clause has occurred under the FAA. Morgan, 596 U.S. at 416–19. Neither

the Texas Supreme Court nor this court has addressed whether Morgan has the effect of abrogating

Perry Homes. Cf. Morgan, 596 U.S. at 416 (passing on issue of whether state substantive law

should control waiver analysis under FAA); see also Washington Mut. Fin. Group, LLC v. Bailey,

364 F.3d 260, 267 n.6 (5th Cir. 2004) (acknowledging uncertainty about whether state law or

“federal substantive law of arbitrability” applies when determining equitable defenses).

Our sister courts, however, have chosen to opine on the question. On one side, the Fifth

Court of Appeals has held that “at least in cases involving the FAA” prejudice is “no longer

required in order to establish waiver.” Excavation Sys., Inc. v. Orellana, 697 S.W.3d 702, 709

(Tex. App.—Dallas 2024, no pet.). On the other side, the Eighth Court of Appeals appears to have

concluded that prejudice is still required. F.T. James Constr., Inc. v. Hotel Sancho Panza, LLC,

657 S.W.3d 623, 635 (Tex. App.—El Paso 2022, no pet.).

And in the middle, the First, Thirteenth, and Fourteenth Courts have expressed doubt that

Morgan directly controls. Thomas Craig Constr., Inc. v. Park Square Condo. Owner’s Ass’n, No.

01-22-00918-CV, 2025 WL 1759012, at *14 (Tex. App.—Houston [1st Dist.] June 26, 2025, no

pet.) (mem. op.) (“Texas might no longer require a showing of prejudice in FAA cases.”); McMillin

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Tex. Homes, LLC v. Oliver, No. 13-23-00286-CV, 2024 WL 484683, at *3, n.8 (Tex. App.—

Corpus Christi–Edinburg Feb. 8, 2024, no pet.) (mem. op.) (“[T]he Texas Supreme Court has not

yet determined what effect, if any, Morgan has on state waiver law.”); Preferred Pools of Houston,

Inc. v. Gossai, No. 14-23-00635-CV, 2024 WL 4457032, at *7 (Tex. App.—Houston [14th Dist.]

Oct. 10, 2024, no pet.) (mem. op.) (noting that “[w]hether [Morgan] would govern in state

court . . . is unsettled and a matter for the Texas Supreme Court to determine”).

We need not opine on the applicability of Morgan because the record here shows prejudice

under the Perry Homes standard. See Fid. Auto Group, LLC v. Hargroder, 689 S.W.3d 1, 16, n.3

(Tex. App.—Beaumont 2024, no pet.) (passing on question where record shows prejudice); see

also McMillin Tex. Homes, LLC, 2024 WL 484683, at *3 n.8 (passing on question where record

shows no substantial invocation of judicial process).

2.2.2 The record shows prejudice.

In this context, prejudice “refers to the inherent unfairness in terms of delay, expense, or

damage to a party’s legal position that occurs when the party’s opponent forces it to litigate an

issue and later seeks to arbitrate that same issue.” Perry Homes, 258 S.W.3d at 597 (quoting

Republic Ins. Co. v. PAICO Receivables, LLC, 383 F.3d 341, 346 (5th Cir. 2004)). A party arguing

waiver need not show the precise amount of prejudice—only the “fact of prejudice.” Perry Homes,

258 S.W.3d at 599.

MH Consultants argues that “only a minimal amount of discovery has been conducted” all

of which “is equally available in arbitration.” However, the record shows that MH Consultants

engaged in substantial discovery, sought sanctions relating to its numerous discovery requests,

participated in mediation, and filed a traditional and no-evidence motion for summary judgment.

Each of these actions required a response from the Martinezes.

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While some discovery may continue to be useful in arbitration, the record indicates that

discovery is completed. MH Consultants filed a no-evidence summary judgment, which may only

be filed after an “adequate time for discovery,” and the parties were fully prepared to go to trial on

two separate occasions. And MH Consultants sought two continuances—each on the eve of trial

after the parties exchanged witness lists and filed motions in limine. See Ellman v. JC Gen.

Contractors, 419 S.W.3d 516, 522 (Tex. App.—El Paso 2013, no pet.) (finding prejudice after

party revealed “trial strategy through the filing of its trial fact and expert witness lists”).

Each of MH Consultants’ actions in this litigation required a response from the Martinezes.

After 34 months of active litigation, MH Consultants finally filed its motion to compel arbitration.

On this record, we hold that the trial court did not abuse its discretion by concluding that the

Martinezes were prejudiced by MH Consultants’ substantial invocation of the litigation process.

CONCLUSION

Because we conclude the Martinezes have satisfied both elements of waiver required under

Perry Homes, the trial court’s order denying MH Consultants’ motion to compel arbitration is

affirmed.

Velia J. Meza, Justice

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