In Re Citigroup Global Markets, Inc. (Tex. May 16, 2008) (Brister)
(mandamus, arbitration compelled, no waiver found)
Defendant's removal of action to federal court and statements related to grounds for transfer to MDL
court did not waive right to enforce arbitration clause against customers / investors. Supreme Court
finds neither explicit or implicit waiver of right to arbitrate and compels arbitration by mandamus.
In Re CitiGroup Global Markets, Inc., No. 06-0886 (Tex. May 16, 200)(per curiam)(arbitration compelled,
no waiver by defendant found although Defendant invoked jurisdiction of federal court by removal and
litigation took place in several courts)
IN RE CITIGROUP GLOBAL MARKETS, INC. (F/K/A SALOMON SMITH BARNEY, INC.), CITIGROUP,
INC., AND STACY OELSEN; from Dallas County; 5th district (05-05-01430-CV, 200 S.W.3d 742, 06-28-
stay order issued November 21, 2006, lifted
Pursuant to Texas Rule of Appellate Procedure 52.8(c), without hearing oral argument, the Court
conditionally grants the petition for writ of mandamus.
Per Curiam Opinion
Other 2008 Texas Supreme Court Opinions | Other per curiam opinions
In Re Citigroup Global Markets, Inc. (Tex. May 16, 2008)
Parties that “conduct full discovery, file motions going to the merits, and seek arbitration only on the
eve of trial” waive any contractual right to arbitration. In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 764
(Tex. 2006). The relator here did none of those, but instead spent seven months removing the case to
various federal courts before finally filing an answer in state court with a contemporaneous motion to
compel arbitration. The courts below held the relator’s transfer efforts waived arbitration. 202 S.W.3d
477. We disagree, and thus conditionally grant mandamus relief. See In re Weekley, 180 S.W.3d 127,
130 (Tex. 2005) (“Mandamus relief is proper to enforce arbitration agreements governed by the FAA.”).
Robert and Natalie Nickell had investment accounts with Citigroup Global Markets, Inc. (formerly
known as Salomon Smith Barney, Inc.), and signed agreements to arbitrate any disputes “concerning or
arising from” their accounts. The Nickells allegedly lost more than $4 million after they invested in
WorldCom Inc. based on research reports by a Citigroup analyst.
The Nickells sued Citigroup, which immediately removed the case to federal court on the ground that
it related to WorldCom’s bankruptcy proceedings. In federal court, the Nickells moved to remand and
Citigroup moved to transfer the case to a federal multidistrict litigation (“MDL”) court in New York
managing similar WorldCom-related suits against Citigroup. Citigroup moved to stay proceedings in the
federal court pending the MDL panel’s decision, specifically reserving its defense “that Plaintiffs
arbitrate, not litigate, their claims.”
The MDL panel conditionally transferred the case to the MDL court. The Nickells asked the panel to
vacate the order, which the panel denied before transferring the case. Once in the MDL court, a stay
order excused Citigroup from filing an answer or pleading any defenses.
Undeterred by past failures, the Nickells filed another motion for remand in the MDL court.
Undeterred by past successes, Citigroup gave up the jurisdictional battle and agreed to a remand of the
case back to state court. In all, the parties spent about seven months shuttling between the federal
forums managing WorldCom cases.
Back in state court, Citigroup simultaneously filed an original answer and a motion to compel
arbitration. The trial court denied the motion, and the court of appeals denied mandamus relief on the
ground that Citigroup expressly waived arbitration by statements reflecting an intent to litigate the
dispute. 202 S.W.3d at 483–84. The parties agree the Federal Arbitration Act applies. See 9 U.S.C. § 1
“[A] party waives an arbitration clause by substantially invoking the judicial process to the other party’
s detriment.” Perry Homes v. Cull, ___ S.W.3d ___, ___ (Tex. 2007). Waiver is a legal question for the
court based on the totality of the circumstances, and asks whether a party has substantially invoked the
judicial process to an opponent’s detriment, the latter term meaning inherent unfairness caused by “a
party’s attempt to have it both ways by switching between litigation and arbitration to its own advantage.”
Id. at __.
The court of appeals held that Citigroup expressly waived arbitration — not by its conduct
transferring the case to the federal and MDL courts, but by statements in those motions suggesting it
was doing so for the purposes of litigation, not arbitration. 202 S.W.3d at 484 (holding that “removal
related conduct alone does not constitute waiver,” but placing reliance “primarily upon [Citigroup’s]
written explanations for the removal and transfer.”). We need not decide whether the Nickells are correct
that express waiver is governed by different rules than those that govern implied waiver, as we disagree
that these statements rise to the level of an express waiver.
Citigroup never opposed arbitration, nor did it expressly waive its arbitration rights. To the contrary,
it reserved the right to request arbitration early on and so informed the Nickells. Its statements in various
transfer pleadings about the case’s similarity to others already transferred, the potential savings in
consolidated discovery, and the potential convenience of parties and witnesses in consolidated
proceedings were required by statute to justify transfer to the MDL court. See 28 U.S.C. § 1407(a)
(providing for MDL transfer of “civil actions involving one or more common questions of fact” if the
transfer “will be for the convenience of parties and witnesses and will promote the just and efficient
conduct of such actions”). Moreover, its statements about how much discovery could be avoided by
transfer to the MDL court reflect an effort to avoid litigation activity rather than duplicate it. See In re
Serv. Corp. Int’l, 85 S.W.3d 171, 175 (Tex. 2002) (“Relators’ efforts in moving to dismiss and staying
discovery were to avoid litigation, not participate in it.”).
Additionally, we disagree with the Nickells that transfer to an MDL court is necessarily inconsistent
with seeking arbitration. Arbitration is possible for consolidated actions as well as individual ones. See
Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444, 452–53 (2003). Courts can issue inconsistent orders on
arbitration just as they can on discovery or other matters that MDL courts are designed to coordinate.
Thus, Citigroup’s transfer to the MDL court does not indicate it had abandoned arbitration.
Because Citigroup never expressly waived or objected to arbitration, the question here is whether it
impliedly waived arbitration. Citigroup’s actions and statements in requesting transfer to the MDL court
are certainly factors to be considered in the totality-of-the-circumstances test. See Perry Homes, ___ S.
W.3d at ___. But they cannot be taken out of the context in which they were made or the remainder of
Citigroup’s litigation conduct.
There is no dispute that Citigroup’s actual litigation conduct (as opposed to statements of its
intentions) was limited to jurisdictional transfers, not the merits. The Nickells concede Citigroup never
sent or responded to any written discovery, conducted no depositions, filed no motions (or even an
answer) relating to the merits before seeking arbitration, and engaged in no litigation conduct
whatsoever other than transferring the case to the federal and MDL courts. In these circumstances,
Citigroup’s statements about what discovery might be saved in the MDL court are simply not enough to
show substantial invocation of the judicial process.
Finally, the Nickells argue their contracts bind them to arbitration with Citigroup’s predecessors but
not Citigroup. But each contract here specifically stated that its provisions “shall inure to the benefit of
Smith Barney’s present organization, and any successor organization or assigns.” Citigroup established
(and the Nickells do not dispute) that it is a successor organization to Smith Barney, and thus fell heir to
the Nickells’ contracts and the arbitration clauses within them.
Because the Nickells failed to show Citigroup waived its contractual right to arbitration, we
conditionally grant Citigroup’s petition for writ of mandamus without hearing oral argument, see Tex. R.
App. P. 52.8(c), and direct the trial court to compel arbitration. We are confident that the trial court will
promptly comply, and our writ will issue only if it does not.
OPINION DELIVERED: May 16, 2008