May 26, 2008

EDITOR'S NOTES

The state of Texas has a longstanding precedent, dating back to 1846, that affords parties the right to arbitrate rather than litigate a dispute. The Texas Supreme Court says that right comes with privileges that must not be abused: “A party cannot substantially invoke the litigation process and then switch to arbitration on the eve of trial.” Republic Ins. Co. v. PAICO Receivables, LLC, 383 F.3d 341, 348 (5th Cir. 2004). Two homeowners tried to do just that when they vehemently waived their arbitration rights and went directly to litigation. The efforts of months of costly and time-consuming pretrial discovery were cast aside on the eve of the trial when the couple changed course and requested arbitration. The split decision of the Texas Supreme Court, presented this week, offers polar views on the waiver of arbitration rights.

Changing course is also the subject of this week’s second case in which a contractor relied on a subcontractor’s bid to help win a prime contract, but then broke its promise to use the sub on the project. Could the sub sue for the loss of its projected profits? A New York court said no, but the sub could recoup bid preparation costs.

The final case questions the role of an owner’s agent, an engineer in this case, that was blamed for project interference.

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