FILED

16-0854
5/5/2017 3:12:56 PM
tex-16870544
SUPREME COURT OF TEXAS
BLAKE A. HAWTHORNE, CLERK

No. 16-0854

IN THE

SUPREME COURT OF TEXAS

HIAWATHA HENRY, ADDIE HARRIS, MONTRAY NORRIS,

and ROOSEVELT COLEMAN, JR., on behalf of
themselves and for all other similarly situated

Petitioners,

v.

CASH BIZ, LP, CASH ZONE, LLC

D/B/A CASH BIZ and REDWOOD FINANCIALS, LLC

Respondents.

On Petition for Review From the

Fourth Court of Appeals, San Antonio, Texas
Cause No. 04-15-00469-CV

PETITIONERS’ REPLY BRIEF ON THE MERITS

HANSZEN LAPORTE, L.L.P.

Daniel R. Dutko
Texas Bar No. 24054206
11767 Katy Freeway, Suite 850
Houston, Texas 77079
Telephone: (713) 522-9444
Facsimile: (713) 524-2850
ddutko@hanszenlaporte.com
ATTORNEY FOR PETITIONERS
 TABLE OF CONTENTS

INDEX OF AUTHORITIES .................................................................................... iii

ARGUMENT .............................................................................................................1

A. Cash Biz claims to be the victim ................................................................3

B. Cash Biz waived its right to arbitrate under the FAA ...............................4

C. Cash Biz ignores case law from Texas and case law directly on point ..... 5

PRAYER ..................................................................................................................11

CERTIFICATE OF COMPLIANCE .......................................................................12

CERTIFICATE OF SERVICE ................................................................................12

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 INDEX OF AUTHORITIES

CASES

Amalgamated Local No. 55, United Auto., Aerospace & Agr. Implement Workers
of Am. v. Metal & Alloy Div. of Silver Creek Precision Corp.
396 F. Supp. 667, 670 (W.D.N.Y. 1975) ......................................................... 7

Bocquet v. Herring,
972 S.W.2d 19 (Tex.1998) .............................................................................. 2

Cash Biz, LP v. Henry,

2016 WL 4013794 (Tex. App.—San Antonio July 27, 2016, no. pet. h.) .. 1, 7

Consorcio Rive, S.A. de C.V. v. Briggs Of Cancun, Inc.,

134 F. Supp. 2d 789 (E.D. La. 2001)............................................................... 6

Griffin v. Burlington Volkswagen, Inc.,

411 N.J. Super. 515, 988 A.2d 101 (App. Div. 2010)..................................... 6

In re Christus Spohn Health Sys. Corp.,

231 S.W.3d 475 (Tex. App.—Corpus Christi 2007, no pet.).................. 5, 7, 8

Perry Homes v. Cull,

258 S.W.3d 580 (Tex. 2008) ........................................................................... 2

Prescott-Follett & Associates, Inc. v. Delasa/Prescott Follett & Associates,

2002 WL 31528463, at *4 (E.D. La. Nov. 8, 2002) .................................... 6, 7

Principal Invs., Inc. v. Harrison,

366 P.3d 688, 697-98 (Nev. 2016) .......................................................... 5, 8, 9

Subway Equip. Leasing Corp. v. Forte,

169 F.3d 324 (5th Cir. 1999) ........................................................................ 5

Taft v. Burttram,
254 Ga. 687, 333 S.E.2d 585, 586 (1985) .................................... 5, 9, 10, 11

Vine v. Pls Fin. Services, Inc.,

2016 WL 8138800 (W.D. Tex. June 6, 2016) .............................................. 5

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RULES

Tex. R. Civ. Evid. 103 ............................................................................................ 2

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 ARGUMENT

In its brief, Cash Biz does not refute Borrowers’ claims it filed criminal

charges to achieve repayment of the civil loans through the criminal process. Cash

Biz, faced with overwhelming evidence, does not contradict Borrowers’ arguments

on this issue; thus, conceding it filed criminal charges to achieve repayment of its

loans. This is in direct contradiction to the majority opinion:

Cash Biz's actions, though presumably vindictive, do not

evince a desire to achieve repayment of any loans
through the criminal process. Thus, Cash Biz's actions
were not sufficiently active or deliberate to constitute
substantial invocation of the judicial process.

Cash Biz, LP v. Henry, 04-15-00469-CV, 2016 WL 4013794 *8 (Tex. App.—San

Antonio July 27, 2016, no. pet. h.).

Instead, Cash Biz claims “there is no evidence that Respondents ‘attempted

to collect from Plaintiffs.’” (Respondents’ brief, page 44). In making this

argument, Cash Biz wholly dismisses the evidence relied on by the trial court as

containing “arguments, inferences, conclusions and unverified quotes from out-of-

court interviews” and presents “no legally sufficient evidence” to support the trial

court’s order.

As this Court knows, Borrowers were not permitted to conduct discovery

before Cash Biz’s motion to compel arbitration was considered and this appeal

was filed. Therefore, Borrowers relied on the evidence it could find. Borrowers

relied on an extensive investigation conducted by Texas Appleseed, numerous

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articles written about Cash Biz directly related to the issues in this case, and

information from the Harris County Justice of the Peace courts, where Cash Biz

filed over 400 criminal charges against its borrowers. (CR 140-141, 151-159, and

186-245).

Cash Biz had every opportunity to object to this evidence at the trial court

level, but did not object, thus waiving any objections. Tex. R. Evid. 103. This

evidence was properly before the trial court and is evidence the majority opinion

should have considered, but did not. Tex. R. Evid. 103.

The evidence was relied on by the trial court to come to its factual

determinations. The majority opinion was required to review these factual

determinations under the abuse of discretion standard. See Perry Homes v. Cull,

258 S.W.3d 580, 602 (Tex. 2008); Bocquet v. Herring, 972 S.W.2d 19, 20–21

(Tex.1998). Cash Biz argues several times in its brief that the majority opinion

applied the abuse of discretion standard to the trial court’s ruling: “Majority

Opinion of the Fourth Court of Appeals properly determined, the trial court abused

its discretion as a matter of law in reaching this conclusion, . . .” (Respondents’

brief, page 26). However, the majority opinion did not apply the abuse of

discretion standard to the trial court’s factual determinations.

Instead, the majority opinion applied the de novo standard of review to the

trial court’s factual determinations. This is evidenced by the fact the majority

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opinion looked at the record and simply disregarded most of the evidence relied on

by the trial court, including the Texas Appleseed investigations and the numerous

investigative articles:

To prove Cash Biz waived arbitration, the Borrowing

Parties presented evidence consisting of a series of
criminal case summaries and a case list of criminal cases
initiated in Harris County Justice of the Peace court.

Cash Biz at *7.

If the majority opinion had applied the abuse of discretion standard to the

trial court’s factual determinations, it would have analyzed all of the evidence

relied on by the trial court and deferred to the trial court’s factual determinations,

instead of picking the only evidence the majority opinion thought was reliable.

A. Cash Biz claims to be the victim

Cash Biz makes the bizarre argument it is the victim and Borrowers and

Texas Appleseed are seeking to unjustifiably punish Cash Biz. (Respondents’

brief, page 2). Cash Biz still does not seem to grasp the implications of filing

criminal charges against more than 400 people to enforce civil debts.

Regardless of Cash Biz’s improper arguments in this case, there are

undisputed facts Cash Biz cannot refute:

• The arbitration agreement, written and insisted upon by Cash Biz,

says all “disputes” are to be resolved in arbitration including “all
federal or state law claims.” (CR 85).

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 • Cash Biz was required to seek arbitration for “(f) all claims asserted
by us (Cash Biz) against you (Borrowers), including claims for
money damages to collect any sum we claim you owe us and/or the
Lender”. (CR 81).

• If Cash Biz sought arbitration against Borrowers, it was required to

hire an arbitrator for each Borrower, pay an arbitration fee for each
Borrower, and hire an attorney to represent Cash Biz at each
individual arbitration proceeding. (CR 82).

• Instead of attempting to recover its claims to collect “any sum we

claim you owe us” in arbitration, Cash Biz filed criminal charges
against more than 400 of its customers.

• The only reason Cash Biz filed criminal charges against Borrowers
was to recover the money Borrowers owed Cash Biz. (RR page 11,
lines 16-20 and RR page 26, lines 3-14).

Cash Biz is not the victim and their actions, not anyone else’s, waived their

arbitration clause. Cash Biz will not be unjustifiably punished if Borrowers’

claims are not sent to arbitration. Cash Biz has lawyers and will be able to defend

its actions in front of a jury.

If a jury trial is a punishment for Cash Biz, then arbitration is a reward.

Should Cash Biz really be rewarded for their actions?

B. Cash Biz waived its right to arbitrate under the FAA

When all of Cash Biz’s arguments are fully distilled, what they seek is to

avoid arbitration by ignoring case law that applies the FAA and holds Cash Biz’s

actions substantially invoked the judicial process. Under the FAA, all that

Borrowers have to establish is that Cash Biz engaged “in some overt act in court

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that evinces a desire to resolve the arbitrable dispute through litigation rather than

arbitration.” Subway Equip. Leasing Corp. v. Forte, 169 F.3d 324, 328 (5th Cir.

1999).

The facts are clear, Cash Biz ignored its own arbitration clause and filed

criminal charges solely to resolve the dispute through litigation rather than

arbitration. As the court in Vine v. PLS held in an identical case:

Defendants allegedly engaged in the overt act of

representing to Texas district attorneys that Plaintiffs had
committed theft by check in criminal court proceedings,
which “evinces a desire to resolve the arbitrable dispute
through litigation rather than arbitration.”

Vine v. PLS Fin. Services, Inc., EP-16-CV-31-PRM, 2016 WL 8138800, at *6

(W.D. Tex. June 6, 2016), reconsideration denied, EP-16-CV-31-PRM, 2016 WL

8138799 (W.D. Tex. Aug. 11, 2016).

C. Cash Biz ignores case law from Texas and case law directly on point

Cash Biz ignores Vine v. PLS, as well as other case law directly on point

such as Principal Invs., Inc. v. Harrison, 366 P.3d 688, 697-98 (Nev. 2016), In re

Christus Spohn Health Sys. Corp., 231 S.W.3d 475, 481 (Tex. App.—Corpus

Christi 2007, no pet.), and Taft v. Burttram, 254 Ga. 687, 333 S.E.2d 585 (1985).

Instead, Cash Biz relies on cases from other jurisdictions that are factually

and legally distinguishable. For example, in Consorcio Rive, the Court could not

even consider the waiver argument made because waiver was not a defense to

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arbitration under the Convention on the Recognition and Enforcement of Foreign

Arbitral Awards:

Waiver of the right to arbitrate is not among the seven

defenses to enforcement of a foreign arbitral award set
forth in the Convention. Thus, as a matter of law,
defendant's argument that the arbitration award should
not be enforced by this Court because plaintiff waived it
is unavailing.

Consorcio Rive, S.A. de C.V. v. Briggs Of Cancun, Inc., 134 F. Supp. 2d 789, 795

(E.D. La. 2001).

In Griffin v. Burlington Volkswagen, Inc., the issue of substantially invoking

the judicial process is not even addressed and a waiver argument is only

mentioned by the New Jersey District Court, but not analyzed because it is “clearly

without merit.” Griffin v. Burlington Volkswagen, Inc., 411 N.J. Super. 515, 517,

988 A.2d 101, 102 (App. Div. 2010).

In Prescott-Follett, an unpublished federal case from Louisiana District

Court, the dispute was between Prescott–Follett and Delasa/Prescott, two

companies litigating over the operating agreement entered into by both companies.

Id. After the operating agreement litigation commenced, Delasa/Prescott filed

charges in Nicaragua against Talavera and Wheelock, shareholders of Prescott–

Follett, for theft. Id. Neither Talavera nor Wheelock were parties to the operating

agreement lawsuit, neither were signatories to the operating agreement containing

the arbitration clause, and their criminal charges in no way related to the operating

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agreement which contained the arbitration clause. Id. The court held the filing of

criminal charges against Talavera and Wheelock, two non-parties and non-

signatories, could not substantially invoke the judicial process because they were

non-parties. Prescott-Follett & Associates, Inc. v. Delasa/Prescott Follett &

Associates, CIV.A. 01-3178, 2002 WL 31528463, at *4 (E.D. La. Nov. 8, 2002).

Likewise, in Amalgamated Local No. 55, United Auto., Aerospace & Agr.

Implement Workers of Am. v. Metal & Alloy Div. of Silver Creek Precision Corp.,

the criminal charge was filed against an officer of the corporation, not against the

corporation who entered into the arbitration agreement. Further, the criminal

charge did not even relate to the arbitrable disputes:

The action instituted in City Court was not instituted to

resolve the merits of the dispute between the parties; nor
could it have served that purpose since it was a criminal
complaint based upon different issues than those before
this court and brought against an individual, Manuel
Llop, not the defendant corporation.

Amalgamated Local No. 55, United Auto., Aerospace & Agr. Implement Workers

of Am. v. Metal & Alloy Div. of Silver Creek Precision Corp., 396 F. Supp. 667,

670 (W.D.N.Y. 1975).

Compare these cases to a Texas case, In re Christus Spohn Health Sys.

Corp. Christus Spohn was a premises liability case arising out of a murder in a

hospital parking garage. Debra Slough worked as a nurse for a hospital and was

abducted and murdered by Jesus Alvarez. In re Christus Spohn Health System

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Corporation, 231 S.W.3d 475, 478 (Tex. App.–Corpus Christi 2007, no pet.).

Slough's husband filed a civil suit against the hospital, which temporally

overlapped with the criminal case against Alvarez. Id. As part of its strategy in the

civil case, the hospital sought an order of contempt against the husband's counsel

in the criminal case. Id. at 481. Specifically, the hospital pursued a contempt

proceeding because it believed the husband's counsel was seeking to obtain

Alvarez's sworn statement. Id. The hospital aimed to prevent the husband's counsel

from using Alvarez's sworn statement against the hospital in the civil trial. Id.

The Corpus Christi court of appeals held the hospital's actions in the

criminal case were “part of its strategic plan of defense in the underlying matter

that would be inconsistent with a right to arbitrate.” Id. The court concluded a

party can invoke the judicial process by strategically filing a contempt motion in a

related criminal matter. See id.

In Principal Invs., Inc. v. Harrison, the Nevada Supreme Court held that a

payday loan company that obtained default judgments against its borrowers in

separate actions before the current litigation waived its right to arbitration under

the loan contracts. Principal Invs., Inc. v. Harrison, 366 P.3d 688, 697-98 (Nev.

2016). In that case, during a seven-year period, Rapid Cash filed more than 16,000

individual collection actions in justice of the peace court in Clark County, Nevada

against its borrowers seeking repayment of the loans. Id. at 690. Relying on

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affidavits of service by its process server, Rapid Cash obtained thousands of

default judgments. Id. at 690-91. The borrowers filed a class-action lawsuit against

Rapid Cash alleging fraud upon the court through false affidavits of service, abuse

of process, negligence, civil conspiracy and violation of fair debt collection laws.

Id. at 691. Rapid Cash moved to compel arbitration under the provision contained

in the loan agreements, but the trial court denied the motion based on waiver due

to the collection actions in justice court. Id. at 691-92. Acknowledging that FAA

waiver law requires “prior litigation of the same legal and factual issues as those

the party now wants to arbitrate,” the Nevada Supreme Court affirmed the finding

of waiver, reasoning the class-action claims “arise out of, and are integrally related

to, the litigation Rapid Cash conducted in justice court.” Id. at 697.

In Taft v. Burttram, Norris and Hirshberg, a securities brokerage business,

hired Taft and Kilroy as account executives. Taft v. Burttram, 254 Ga. 687, 333

S.E.2d 585, 586 (1985). Taft and Kilroy later resigned to join a similar business

and after they left they alleged their employment records were altered to show that

they were terminated for cause. They also alleged Norris and Hirshberg mailed

libelous material and related slanderous charges about them to various people

involved in the securities business. Id.

After Taft and Kilroy resigned, Norris and Hirshberg requested the return of

certain information and records and when they received no response, Burttram, an

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officer of Norris and Hirshberg swore out warrants charging Taft and Kilroy with

theft by taking. Id. He contended that they had stolen client lists, confirmation

slips, and other information regarding Norris and Hirshberg's clients when they

left Norris and Hirshberg to join the other business. Taft and Kilroy were then

arrested. Id.

A Fulton County Magistrate dismissed the charges and stated the

controversy was best suited for civil court. Id. Taft and Kilroy then sued Burttram

for malicious prosecution, libel, abuse of process, slander, wrongful interference

with an employment relationship, and intentional infliction of emotional harm.

Burttram then moved to enforce the arbitration clause. The Supreme Court of

Georgia held:

When the appellees failed to abide by this policy, in

swearing out criminal warrants against the appellants
“instead of seeking to arbitrate, this was the clearest kind
of waiver on their part of an agreement to arbitrate.”
Morales Rivera v. Sea Land of Puerto Rico, 418 F.2d
725, 726 (1st Cir.1969). Any other holding would be
contrary to the clear federal policy of encouraging parties
to resolve disputes through arbitration, rather than a
resort to the courts. See Sweater Bee By Banff, Ltd. v.
Manhattan Industries, 754 F.2d 457, 461 (2d Cir.1985),
as the dispute involved in the criminal case and this case,
and the parties involved in both cases for all practical
purposes are identical. The appellees, in choosing the
forum of criminal law rather than arbitration in their first
attempt to sort out their dispute with Taft and Kilroy,
waived their right to compel arbitration. To put it simply,
appellees cannot run with the hare and the hounds.

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Taft v. Burttram, 254 Ga. 687, 333 S.E.2d 585, 586 (1985).

Unlike the cases cited by Cash Biz, these holdings actually address the

issues in this case. When you combine the holdings in Vine, Harrison, Taft, and In

re Christus Spohn., with the language in Cash Biz’s arbitration clause which says

all disputes, including criminal claims, are to be resolved in arbitration, it is clear

that Cash Biz substantially invoked the judicial process by filing criminal charges

against its customers. (CR 85 and RR, 13, lines 2-10).

PRAYER

For the reasons set forth in its briefing and the record, the Borrowers

respectfully request the Court grant this Petition for Review, reverse the majority

opinion, and remand this case back to the trial court.

Respectfully Submitted,

HANSZEN LAPORTE

By: /s/ Daniel R. Dutko

DANIEL R. DUTKO
SBN: 24054206
11767 Katy Freeway, Suite 850
Houston, Texas 77079
(713) 522-9444 phone
(713) 524-2580 fax
E-Mail: ddutko@hanszenlaporte.com
COUNSEL FOR PETITIONERS

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 CERTIFICATE OF COMPLIANCE

I certify that this document was produced on a computer using Microsoft

Word 2010 and contains 2,521 words, as determined by the computer software’s

word-count function, excluding sections of the document listed in Texas Rule of

Appellate Procedure 9.4(i)(1).

/s/ Daniel R. Dutko

Daniel R. Dutko

CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the foregoing Petitioners’
Brief on the Merits, and was served to Respondents, on the 20th day of March,
2017, through the following counsel of record, by electronic service in accordance
with Texas Rule of Appellate Procedure 9.5(b)(1):

Edward S. Hubbard Via E-Service: ehubbard@coatsrose.com

Patrick S. Gaas Via E-Service: pgaas@coatsrose.com
Coats Rose, P.C.
9 Greenway Plaza, Suite 1100
Houston, Texas 77046
Counsel for Respondents

/s/ Daniel R. Dutko

Daniel R. Dutko

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