In the recently decided cattle-feeding dispute, Bonsmara Natural Beef Company, LLC v. Hart of Texas Cattle Feeders, No. 19-0263, the parties asked the Texas Supreme Court to “wrangle issues regarding the effect of forgoing an interlocutory appeal and the availability of their chosen forum for arbitration.” Specifically, it addressed whether a litigant, after a wrongly-decided motion to compel arbitration, who didn’t exercise its right to an interlocutory appeal, and who lost a jury trial on the merits, could wipe the trial away by appealing the denial of its motion to compel. In deciding that a litigant could, the Texas Supreme Court allows certain litigants a right to a do-over. In other words, a second bite at the cattle.
The Bonsmara Litigation
The background of Bonsmara isn’t that exciting. Plaintiff Bonsmara Natural Beef Company, LLC (“Bonsmara”)1 sued Hart of Texas Cattle Feeders, LLC (“Hart”)2 for various claims related to a custom cattle-feeding agreement. Hart moved to compel arbitration under the cattle-feeding agreement. The trial court denied Hart’s motion to compel arbitration. Hart did not challenge the trial court’s ruling by interlocutory appeal. Instead, it filed a mandamus petition requesting that the court of appeals order the trial court to compel arbitration. The court of appeals denied Hart’s request, ruling that Hart could have pursued an interlocutory appeal and thus had an adequate remedy at law. The case progressed in the trial court where Bonsmara ultimately obtained a favorable judgment against Hart after a jury trial. After the entry of judgment, Hart appealed, arguing that the trial court incorrectly denied its motion to compel. The court of appeals agreed, ruling that the trial court should have compelled arbitration. Bonsmara appealed.
The Texas Supreme Court’s Opinion in Bonsmara
The Texas Supreme Court affirmed the court of appeals, holding that “a party does not forfeit its right to challenge a ruling on appeal from a final judgment simply by opting not to pursue an interlocutory appeal of that ruling.” In other words, the court found that Hart gets a second chance to litigate its dispute with Bonsmara, but in arbitration. In so holding, the Texas Supreme Court relied heavily on two arguments: (1) the fact that statute authorizing interlocutory appeal contains permissive rather than mandatory language, and (2) the fact that Bonsmara didn’t raise any equitable considerations such as waiver.
What does Bonsmara mean for litigants going forward?
Bonsmara poses an interesting strategic question for parties to an arbitration agreement who have their motion to compel denied. They’ll have to make the strategic choice to either immediately file an interlocutory appeal, or to go through the court process to see whether they can win in that forum, betting that they have a possible “re-do” in arbitration if they get a bad result. While some would suggest that parties should wait — after all two shots at a win is better than one — waiting is not without risk. The Texas Supreme Court made clear that certain equitable principles like waiver — which was not raised by the plaintiffs in Bonsmara — may apply to prevent a party from getting a second chance to litigate in a different forum. Despite this qualifying language in the court’s opinion, it’s difficult to see why waiver, or other equitable principles, would apply, given the Court’s view that the interlocutory appeal is permissive rather than mandatory. Would the Court hold that a party waived its right to appeal a decision by not seeking a permissive interlocutory appeal? The answer to that question remains unclear, but it would be difficult to align with the Court’s current logic. In the meantime, parties — including those opposing motions to compel arbitration — should be aware of Bonsmara’s holding, as it may affect the finality of a trial that began with a motion to compel arbitration. For now, Bonsmara allows certain parties to have their steak and eat it too by giving them a second bite of the cattle.
1 George Chapman, individually, was an additional plaintiff with Bonsmara.
2 James Michael Hayes, Lynn Landrum, and Henry O. Picket II — all individually — were additional defendants with Hart.
