Honorable Kirsten Cohoon, Judge Presiding Opinion by: Liza A. Rodriguez, Justice Sitting: Rebeca C. Martinez, Chief Justice Liza A. Rodriguez, Justice Sandee Bryan Marion, Chief Justice (Ret.)[1] Delivered and Filed: May 29, 2024 REVERSED AND REMANDED Earth Motorcars, LLC (“Earth Motorcars”) appeals from the trial court’s interlocutory order denying its motion to compel arbitration and to stay proceedings. We reverse the trial court’s order and remand the cause to the trial court for entry of an order (1) compelling the parties to arbitrate pursuant to the delegation clause and (2) staying trial court proceedings pending the outcome of the arbitration. BACKGROUND This dispute arises from a contractual dispute. On June 22, 2022, Brian Todd Glowka entered into a contract to purchase a 2022 Ford Raptor from Earth Motorcars (the “Vehicle Purchase Agreement”). At the same time, Glowka and Earth Motorcars also signed an Agreement to Arbitrate. After paying a deposit and taking possession of the vehicle, Glowka paid for additional tinting and weather liner on the vehicle, which he alleged cost $3,183.23. After delays in securing title from Earth Motorcars, Glowka canceled the pending payment draft from his bank for the remaining $100,000 owed on the vehicle. Glowka demanded reimbursement from Earth Motorcars for his deposit, the weather liner, and the window tinting. On November 22, 2022, Glowka filed suit against Earth Motorcars and brought claims for breach of contract, deceptive trade practices, fraud, theft, and conversion. On December 2, 2022, Earth Motorcars filed two motions: (1) a motion to transfer venue to Dallas County where the sale of the vehicle occurred, and (2) a motion to compel arbitration based upon the arbitration agreement entered into between Glowka and Earth Motorcars as part of the Vehicle Purchase Agreement. In its motion to compel, Earth Motorcars requested that the trial court stay proceedings while Glowka’s claims were addressed in mediation. Also on December 2, 2022, Glowka moved for a temporary restraining order and temporary injunction, requesting that the trial court prevent Earth Motorcars from reporting the vehicle as stolen or otherwise trying to repossess the vehicle. On December 15, 2022, the trial court granted the temporary injunction in part and ordered that Earth Motorcars should not report the vehicle had been stolen during the pendency of the litigation. Earth Motorcars appealed from that interlocutory order. It then repossessed the vehicle. Because there was no active controversy between the parties with respect to the temporary injunction, this court dismissed the appeal of the temporary injunction as moot and vacated the trial court’s temporary injunction. See Earth Motorcars, LLC v. Glowka, No. 04-23-00018-CV, 2023 WL 3733914, at *2 (Tex. App.—San Antonio May 31, 2023, no pet.). On January 13, 2023, Glowka filed an amended petition that dropped its breach of contract claim. Glowka’s amended petition alleged claims for wrongful repossession and trespass, deceptive trade practices, fraud, civil theft, and conversion. Glowka further brought a declaratory judgment action, requesting that the trial court declare the contract for sale void because Earth Motors had no title to the vehicle. Also on January 13, 2023, Glowka filed a motion for default judgment and a motion for contempt and sanctions. On January 24, 2023, Earth Motorcars’s motion to transfer venue and motion to compel arbitration was set for a hearing on February 14, 2023. On February 7, 2023, Glowka filed a second amended petition, adding allegations of reckless damage or destruction to real property. Glowka also added three additional defendants: Emilio Moreno, Adam Anthony Garcez, and Luckas Echols. He alleged wrongful conduct by Moreno and Garcez in repossessing the vehicle. He alleged Echols was a salesman and employee of Earth Motorcars. Also on February 7, 2023, Glowka filed a response to Earth Motorcars’s motion to compel arbitration, arguing that the arbitration agreement was invalid, unconscionable, and unenforceable. After a hearing on February 14, 2023, the trial court denied Earth Motorcars’s motion to compel arbitration. Earth Motorcars then filed this interlocutory appeal. ARBITRATION Earth Motorcars argues the trial court erred in denying its motion to compel arbitration and to stay proceedings because it established the existence of the agreement to arbitrate and Glowka failed to prove a defense precluding arbitration. A. Standard of Review We review a trial court’s order denying a motion to compel arbitration for abuse of discretion. Henry v. Cash Biz, L.P., 551 S.W.3d 111, 115 (Tex. 2018). “We defer to the trial court’s factual determinations if they are supported by evidence but review its legal determinations de novo.” Id. “Whether the claims in dispute fall within the scope of a valid arbitration agreement and whether a party waived its right to arbitrate are questions of law, which are reviewed de novo.” Id. B. Existence of Arbitration Agreement and Scope of Agreement “A party seeking to compel arbitration must establish the existence of a valid arbitration agreement and that the claims at issue fall within the scope of that agreement.” Id. “If the party seeking to compel arbitration meets this burden, the burden then shifts, and to avoid arbitration, the party opposing it must prove an affirmative defense to the provision’s enforcement, such as waiver.” Id. “Any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.” Id. (citation omitted). It is undisputed that at the same time Earth Motorcars and Glowka entered into the Vehicle Purchase Agreement, they also entered into an Agreement to Arbitrate, in which they agreed that binding arbitration would be “the sole method of resolving any claim, dispute or controversy (the “Claims”), except that either Party may file a claim in small claims court as an alternative to proceeding with arbitration.”[2] The Agreement to Arbitrate states that [c]laims include, but are not limited to the following: (1) claims in tort, contract, regulatory, statutory, equitable or otherwise; (2) claims relating to any representations, promises, undertakings, warranties, covenants, or service; (3) claims regarding the interpretation, scope, or validity of this Agreement, or arbitrability of any issue; (4) claims between the Parties; and (5) claims arising out of your relating to the Customer’s application for credit, this Agreement and/or any documents executed, presented, or negotiated during the Dealership Dealings, or any resulting transaction, service, or relationship that arises out of the Dealership Dealings. (emphasis added). Earth Motorcars has thus established the existence of an arbitration agreement. See Henry, 551 S.W.3d at 115. With regard to the scope of the arbitration clause, the above clause in the Agreement to Arbitrate delegates any dispute regarding scope of the agreement to the arbitrator. When the FAA applies to an arbitration agreement, as here,[3] the parties may agree to have an arbitrator, and not the trial court, determine gateway issues like scope of the agreement. “The FAA reflects the fundamental principle that arbitration is a matter of contract.” Wagner v. Apache Corp., 627 S.W.3d 277, 283 (Tex. 2021) (quoting Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63, 67 (2010)). When a party challenges the validity of the arbitration agreement, a trial court should consider the challenge before ordering the parties to arbitration. Taylor Morrison of Tex., Inc. v. Skufca, 650 S.W.3d 660, 674 (Tex. App.—Houston [1st Dist.] 2021, no pet.). “However, because parties have the right to contract as they see fit, they may delegate to the arbitrator gateway questions of arbitrability, such as the validity or enforceability of an arbitration agreement.” Id. Thus, an “agreement to arbitrate a gateway issue is simply an additional, antecedent agreement the party seeking arbitration asks the [trial court] to enforce, and the FAA operates on this additional arbitration agreement just as it does on any other.” Rent-A-Ctr., 561 U.S. at 70. “In other words, ‘[a] delegation provision is itself a separate and severable arbitration agreement.’” Taylor, 650 S.W.3d at 674 (quoting Berry Y&V Fabricators, LLC v. Bambace, 604 S.W.3d 482, 487 (Tex. App.—Houston [14th Dist.] 2020, no pet.)). “Thus, a delegation provision is severable from the remainder of the arbitration agreement, and a party’s challenge to another provision of the contract [i.e., the arbitration agreement], or to the larger contract as a whole, does not prevent a court from enforcing a specific agreement to arbitrate, such as a delegation provision.” Id. Accordingly, if there is a delegation provision, the trial court must compel arbitration so that the arbitrator can decide the “gateway issues the parties have agreed to arbitrate.” Id. (quoting RSL Funding, LLC v. Newsome, 569 S.W.3d 116, 121 (Tex. 2018)). “When faced with [a delegation provision], courts have no discretion but to compel arbitration unless the clause’s validity is challenged on legal or public policy grounds.” Id. (quoting RSL Funding, 569 S.W.3d at 121) (emphasis added) (alteration in original); see Rent-A-Ctr., 561 U.S. at 72 (holding that unless the party opposing arbitration challenges the delegation clause specifically, courts must treat it as valid and enforce it, leaving any challenge to the validity of the entire arbitration agreement for the arbitrator). Here, Glowka did not specifically challenge the delegation provision. See Taylor, 650 S.W.3d at 678. Thus, any issue regarding Glowka’s claims being outside the scope of the arbitration agreement should not be decided by the trial court but is instead delegated to the arbitrator to decide. See Cardinal Senior Care, LLC v. Bradwell, No. 04-21-00557-CV, 2022 WL 17660268, at *5 (Tex. App.—San Antonio 2022, no pet.) (holding that because party opposing arbitration had not specifically challenged the validity of the delegation clause, “the issue of arbitrability—whether the claims fall within the scope of the arbitration agreement—is delegated to the arbitrator to decide, not the trial court”). The trial court could not, therefore, have determined that Glowka’s claims fell outside the scope of the agreement in denying Earth Motorcars’s motion to compel. See id. Moreover, even if the issue of scope had not been delegated to the arbitrator under the Agreement to Arbitrate, the broad language in the Agreement to Arbitrate encompasses the claims brought by Glowka and thus were within the scope of the agreement. See id. at *4-5. C. Unconscionability In response to Earth Motorcars’s motion to compel arbitration, Glowka argued, as defenses, that the Agreement to Arbitrate was both substantively and procedurally unconscionable. See Lennar Homes of Tex., Inc. v. Rafiei, No. 22-0830, 2024 WL 1470909, at *2 (Tex. Apr. 5, 2024) (“The party opposing arbitration bears the burden to show unconscionability.”). “Substantive unconscionability refers to the inherent unfairness of a particular contract or provision; procedural unconscionability deals with the circumstances surrounding a contract’s adoption.” Hogg v. Lynch, Chappell & Alsup, P.C., 553 S.W.3d 55, 73 (Tex. App.—El Paso 2018, no pet.). Glowka argued that the Agreement to Arbitrate was substantively unconscionable because (1) it violated Texas’s public policy by eliminating the statutory right to attorney’s fees and other remedies under the Texas Deceptive Trade Practices Act (“DTPA”) and chapter 38 of the Texas Civil Practice and Remedies Code, (2) it did not contain a conspicuous waiver as required under the DTPA, (3) it did not contain an express waiver of a right to a jury trial, (4) it did not state whether rules under the AAA or other rules would apply in the arbitration, and (5) arbitration was too expensive and would not be an adequate and accessible substitute for litigation. Additionally, Glowka argued the Agreement to Arbitrate was procedurally unconscionable because he was not represented by counsel at the time he signed the agreement, and because he was in a “significantly disparate bargaining position” and “was in a take-it-or-leave-it position.” With regard to Glowka’s substantive unconscionability arguments, Earth Motorcars contends that those issues are delegated to the arbitrator under the agreement. As noted above, under the Agreement to Arbitrate, the parties agreed to have an arbitrator determine any “claims” “regarding the interpretation, scope, validity of the Agreement, or arbitrability of any issue.” As explained above, when faced with such a delegation provision, “courts have no discretion but to compel arbitration unless the clause’s validity is challenged on legal or public policy grounds.” Taylor, 650 S.W.3d at 674 (quoting RSL Funding, 569 S.W.3d at 121) (emphasis added). Here, Glowka did not challenge the delegation provision as being unconscionable. See id. at 678 (explaining party opposing arbitration specifically challenged delegation provision by arguing the delegation provision was “unconscionable as the ability or optics of an unbiased, third-party, compensated, arbitrator, to determine that a case or claims within a case can be arbitrated is circular in its logic and indefensible”). His substantive unconscionability arguments relate to other provisions of the arbitration agreement. See id. Thus, Glowka’s substantive unconscionability arguments should not be decided by the trial court but are instead delegated to the arbitrator to decide. See Lennar, 2024 WL 1470909, at *2 (explaining that unless the party opposing arbitration specifically challenges the delegation clause, courts have no discretion but to compel arbitration so that the arbitrator can decide the unconscionability issue); Cardinal Senior Care, 2022 WL 17660268, at *5 (holding that because the party opposing arbitration had not specifically challenged the validity of the delegation clause, the issue of arbitrability is delegated to the arbitrator and not the trial court). As the substantive unconscionability issues are delegated to the arbitrator under the agreement, the trial court had no discretion in this case to deny Earth Motorcars’s motion to compel based on substantive unconscionability. See Cardinal Senior Care, 2022 WL 17660268, at *5 (holding that the trial court abused its discretion in denying the motion to compel on a gateway issue that should be determined by arbitrator under the delegation clause). With regard to Glowka’s procedural unconscionability arguments (i.e., that he was not represented by counsel at the time he signed the agreement and that he “was in a take-it-or-leave- it position”), the trial court had no discretion to determine whether the Vehicle Purchase Agreement or the Agreement to Arbitrate was procedurally unconscionable. See Taylor, 650 S.W.3d at 683 (“Similarly, the trial court had no discretion to determine whether the purchase agreement or arbitration agreement was procedurally unconscionable on the basis that the [plaintiffs] had been fraudulently induced to sign them.”). “Instead, the trial court had no discretion but to compel arbitration as requested by [Earth Motorcars] to permit the arbitrator to decide the gateway issues of arbitrability, including enforceability and defenses to enforceability such as substance and procedural unconscionability.” Id. Further, even if the trial court could determine Glowka’s procedural unconscionability arguments, Glowka presented no evidence supporting his arguments. See TMI v. Brooks, 225 S.W.3d 783, 792 (Tex. App.—Houston [14th Dist.] 2007, pet. denied) (explaining that “[p]rocedural unconscionability relates to the actual making or inducement of the contract” and that the “party contesting the arbitration provision bears the burden to show unconscionability in how the parties arrived at their bargain”). Thus, the trial court could not rely on procedural unconscionability in denying Earth Motorcars’s motion to compel arbitration. See Pony Express Courier Corp. v. Morris, 921 S.W.2d 817, 822 (Tex. App.—San Antonio 1996, no writ) (holding trial court abused its discretion in denying arbitration where party opposing arbitration presented no evidence supporting procedural unconscionability). D. Texas Certificate of Title Act Glowka argues that the Vehicle Purchase Agreement and Agreement to Arbitrate are void because Earth Motorcars allegedly knew it did not have title to the truck at the time it entered into the sale and thus the sale was void pursuant to the Texas Certificate of Title Act. That Act provides that “[a] sale made in violation of this chapter is void and title may not pass until the requirements of this chapter are satisfied.” TEX. TRANSP. CODE § 501.073. The legislative intent of the Certificate of Title Act was to lessen and prevent theft of motor vehicles, traffic in stolen vehicles, and sale of encumbered vehicles without disclosure of existing liens, not to prevent sales and transfers of interest in motor vehicles. Non-compliance with the act does not override the clear showing of a valid and complete transfer of ownership of an automobile. Even in the face of non-compliance, the sale of a vehicle without the transfer of a title certificate is valid as between the parties, when the purposes of the Certificate of Title Act are not defeated, although the Act declares that the non-transfer of such certificates renders the sale void. Left Gate Prop. Holding, LLC v. Nelson, No. 14-19-00247-CV, 2021 WL 1183863, at *5–6 (Tex. App.—Houston [14th Dist.] Mar. 30, 2021, no pet.) (quoting Gramercy Ins. Co. v. Arcadia Fin. Ltd., 32 S.W.3d 402, 408 (Tex. App.—Houston [14th Dist.] 2000, no pet.)) (internal citations and quotations omitted) (emphasis added). Thus, Glowka argues that no enforceable arbitration agreement exists because the entire agreement never came into existence or is not enforceable. In RSL Funding, LLC v. Newsome, 569 S.W.3d 116 (Tex. 2018), the supreme court considered a similar argument as the one brought by Glowka. In that case, the party opposing arbitration argued no enforceable agreement existed “because both of the district court’s approval orders were void” and relied “on two cases that h[e]ld structured-settlement-transfer agreements [were] not validly formed or enforceable without court approval.” Id. at 124. Thus, he argued he could not be compelled to arbitration “because the agreement never took effect without a valid court order or because the agreement [could] not be enforced for some other reason such as being contrary to public policy.” The supreme court first explained that pursuant to a delegation clause, “[c]lassic contract defenses such as unconscionability, illegality and fraudulent inducement” should be decided by an arbitrator. Id. In contrast, “[c]ontract formation defenses—such as whether a party ever signed a contract, whether a signor had authority to bind a principal, or whether the signor had capacity to assent—are . . . threshold issues to be decided by the court.” Id. “This is because the Federal Arbitration Act requires a court to be ‘satisfied that the making of the agreement for arbitration . . . is not in issue’ before compelling arbitration.” Id. (quoting 9 U.S.C. § 4) (alteration in original). The supreme court concluded that the voidness and public policy arguments brought by the party opposing arbitration were included in the first category. See id. at 124-25. The court explained that “[v]oidness on public policy grounds . . . may provide a basis for revoking an existing contract but does not mean the agreement never formed in the first place.” Id. at 125. “Because voidness on public policy grounds, like illegality, is a defense to the contract’s enforcement, it falls into the category . . . of cases [that] delegates to the arbitrator.” Id. “Consequently, when a party resisting arbitration argues the whole contract is void for violation of public policy, the arbitrator, not a court, decides the issue.” Id. The supreme court thus concluded it “cannot decide here whether a transfer agreement lacking court approval under section 141.004 is void on public policy grounds or enforceable for any other reason” because those decisions were reserved to the arbitrator. Id. Glowka’s argument that the entire contract, including the arbitration agreement, is void under the Texas Certificate of Title Act is similar to the argument brought in RSL Funding. See id. In applying the supreme court’s analysis in RSL Funding, we conclude the issue of whether the entire agreement is void under the Texas Certificate of Title Act must be decided by the arbitrator under the delegation clause. See id. Accordingly, the trial court could not have relied on this ground in denying Earth Motorcars’s motion to compel and to stay proceedings. E. Non-Signatory Defendants Glowka argues that the trial court had the discretion to deny Earth Motorcars’s motion to compel and to stay proceedings because two of the defendants in the case were not signatories to the Agreement to Arbitrate. In his second amended petition, Glowka sued nonsignatories Emilio Moreno and Adam Anthony Garcez for their actions in repossessing the vehicle from Glowka’s home. Glowka argues that the “subject matter” of his claims against Moreno and Garcez “is not within the scope of the Agreement to Arbitrate.” However, in his second amended petition, Glowka alleged that Moreno and Garcez were “[m]ost likely” “independent contractors responsible for their own action,” but “[a]lternatively . . . may have been agents of Earth Motorcars.” See Cardinal Senior Care, 2022 WL 17660268, at *2 (explaining that in determining whether a party’s claims fall within the scope of the agreement, courts focus on the factual allegations in the petition). Glowka’s petition then alleged that “both Moreno and Garcez as agents and Earth Motorcars as principle are liable for any damages that occurred.” (emphasis added). We first note that the Agreement to Arbitrate applies to Earth Motocars’s “assigns, officers, directors, managers, employees, and agents.” (emphasis added). See In re Merrill Lynch Tr. Co., 123 S.W.3d 549, 556 (Tex. App.—San Antonio 2003, orig. proceeding) (“The scope of an arbitration agreement may be extended to claims against agents of the principal when all the agents’ allegedly wrongful acts relate to their behavior as agents of the principal signatory company, and those acts were within the scope of the claims covered by the arbitration provisions for which the principal would be liable.”). Further, even if Glowka’s claims involving Moreno and Garcez were not subject to the Agreement to Arbitrate, Glowka’s claims against Earth Motorcars should have still been sent to arbitration, and the trial court should have stayed the remaining claims in the trial court until the arbitration proceedings had concluded. See In re Merrill Lynch Tr. Co., 235 S.W.3d 185, 195 (Tex. 2007) (holding that pursuant to the FAA, any non-arbitrable claim should be stayed while the arbitration proceeds). Thus, the trial court could not have relied on this basis in denying Earth Motorcars’s motion to compel and to stay proceedings. F. Waiver Finally, we note that the trial court could not have relied on waiver by Earth Motorcars in denying its motion to compel arbitration. At the motion to compel hearing, for the first time, Glowka argued that Earth Motorcars “substantially invoked the jurisdiction of [the trial] court” and thus waived any right to enforce the Agreement to Arbitrate by participating at the temporary injunction hearing and by filing a motion to transfer venue. Glowka has not briefed this issue on appeal. “We review de novo the question whether a party has waived an arbitration clause,” and the “standard for determining waiver is the same under federal and state law.” Phytel, Inc. v. Smiley, No. 05-12-00607-CV, 2013 WL 1397085, at *4 (Tex. App.—Dallas 2013, no pet.). “A party asserting implied waiver as a defense to arbitration has the burden to prove that (1) the other party has ‘substantially invoked the judicial process,’ which is conduct inconsistent with a claimed right to compel arbitration, and (2) the inconsistent conduct has caused it to suffer detriment or prejudice.” G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502, 511-12 (Tex. 2015). “Because the law favors and encourages arbitration, this hurdle is a high one.” Id. at 512 (citations omitted). “Whether a party has substantially invoked the judicial process depends on the totality of the circumstances.” Id. Courts consider a “wide variety” of factors, including: (1) “how long the party moving to compel arbitration waited to do so”; (2) “the reasons for the movant’s delay”; (3) “whether and when the movant knew of the arbitration agreement during the period of delay”; (4) “how much discovery the movant conducted before moving to compel arbitration, and whether that discovery related to the merits”; (5) “whether the movant requested the court to dispose of claims on the merits”; (6) “whether the movant asserted affirmative claims for relief in court”; (7) “the extent of the movant’s engagement in pretrial matters related to the merits (as opposed to matters related to arbitrability or jurisdiction)”; (8) “the amount of time and expense the parties have committed to the litigation”; (9) “whether the discovery conducted would be unavailable or useful in arbitration”; (10) “whether activity in court would be duplicated in arbitration”; and (11) “when the case was to be tried.” Id. As the party asserting waiver, Glowka had “the heavy burden of establishing that [Earth Motorcars] substantially invoked the judicial process and that [Glowka] was prejudiced.” Phytel, 2013 WL 1397085, at *4. The clerk’s record reflects that Glowka filed his original petition on November 22, 2022. Ten days later, on December 2, 2022, Earth Motorcars filed its motion to compel arbitration. That same day, Earth Motorcars filed its motion to transfer venue. Also on December 2, 2022, Glowka filed his application for temporary restraining order and temporary injunction. The temporary injunction hearing was then held on December 9, 2022. Thus, the record shows that within ten days of suit being filed by Glowka, Earth Motorcars filed its motion to compel arbitration and was then faced with seven days later of defending itself in a temporary injunction hearing. First, we note the supreme court has “rejected arguments relying on venue challenges to establish waiver because such challenges do not relate to the merits of the case.” G.T. Leach Builders, 458 S.W.3d at 513. Further, we do not find persuasive Glowka’s argument that Earth Motorcars waived its right to arbitration merely by defending itself at a temporary injunction hearing, especially given it had already filed its motion to compel arbitration. See id. (explaining that “[a] party’s litigation conduct aimed at defending itself and minimizing its litigation expenses, rather than at taking advantage of the judicial forum, does not amount to substantial invocation of the judicial process”). Moreover, Glowka made no showing that he suffered prejudice from Earth Motorcars allegedly substantially invoking the judicial process. See Phytel, 2013 WL 1397085, at *5 (holding waiver of right to compel arbitration not shown when party opposing arbitration “did not present evidence that he suffered prejudice”). Therefore, we hold that the record does not support any decision by the trial court to find Earth Motorcars waived its right to compel arbitration. See G.T. Leach Builders, 458 S.W.3d at 513; Phytel, 2013 WL 1397085, at *5. CONCLUSION Because none of the arguments brought by Glowka support the trial court’s denial of Earth Motorcars’s motion to compel, we conclude the trial court erred in failing to compel the parties to arbitration and stay proceedings. We therefore reverse the trial court’s February 14, 2023 order denying the motion to compel arbitration and remand this cause to the trial court for entry of an order (1) compelling Glowka to arbitrate his claims against Earth Motorcars and (2) staying all proceedings in the underlying case pending the outcome of the arbitration. Liza A. Rodriguez, Justice
