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ARBITRATION IN TEXAS: HISTORY AND ENFORCEABILITY

K. B. BATTAGLINISTRONG PIPKIN BISSELL & LEDYARD LLP

4900 WOODWAY DRIVE, SUITE 1200HOUSTON, TEXAS 77056

[email protected]

© 2016 K. B. Battaglini

mailto:[email protected]

Arbitration in Texas: History and Enforceability_______________________________________________________________________________________________________

Table of Contents

I. WHAT IS ARBITRATION?............................................................................................................1

II. TEXAS ARBITRATION HISTORY...............................................................................................1

III. TEXAS ARBITRATION ACT.........................................................................................................3

A. Agreements to Arbitrate.......................................................................................................3B. Scope....................................................................................................................................3C. Compelling Arbitration........................................................................................................4D. Fraud....................................................................................................................................5E. Unconscionability................................................................................................................5F. Waiver..................................................................................................................................6G. Illegality...............................................................................................................................6H. Stay Orders...........................................................................................................................7I. Appointment of Arbitrators..................................................................................................7J. Discovery.............................................................................................................................8K. Arbitration Hearing..............................................................................................................8L. Arbitrator’s Award...............................................................................................................8M. Confirmation of Award........................................................................................................9N. Vacating an Award............................................................................................................10O. Modifying or Correcting Award........................................................................................11P. Jurisdiction and Venue of Courts.......................................................................................12Q. Appeals..............................................................................................................................14

IV. FEDERAL ARBITRATION ACT..................................................................................................15

A. Agreements to Arbitrate.....................................................................................................15B. Stay Orders.........................................................................................................................16C. Compelling Arbitration......................................................................................................17D. Fraud..................................................................................................................................19E. Unconscionability..............................................................................................................19F. Waiver................................................................................................................................20G. Other Contract Defenses....................................................................................................21H. Appointment of Arbitrators................................................................................................22I. Arbitration Hearing............................................................................................................23J. Confirmation of Award......................................................................................................23K. Vacating Awards................................................................................................................24L. Modifying or Correcting Award........................................................................................24M. Appeals..............................................................................................................................25

V. RELATED STATUTES…………………………………………………………………………..26

VI. ENFORCEABILITY OF ARBITRATION IN ATTORNEY EMPLOYMENT CONTRACTS...27

VII. RELEVANT DECISIONS FROM THE TEXAS SUPREME COURT.........................................28

VIII. RELEVANT DECISIONS FROM THE FIFTH CIRCUIT COURT OF APPEALS....................37

IX. RELEVANT DECISIONS FROM THE UNITED STATES SUPREME COURT……………...41


ARBITRATION IN TEXAS:HISTORY AND ENFORCEABILITY

This paper is a concise and abridged digest of the history, development, procedure and interpretation of arbitration in Texas. Content and emphasis reflect the writer’s perspective.

Commemorative note: Co-author Milton C. Colia of El Paso passed away on December 1, 2015, at a much too-early age. His guidance, efforts and assistance in launching and maintaining this project are much appreciated and sorely missed.

I. WHAT IS ARBITRATION?

Arbitration is not uniformly defined. It is understood simply to mean the use of an arbitrator to settle a dispute, or more complexly to mean an extra-judicial process by which parties submit their grievances to an impartial neutral chosen by mutual consent or compelled by statute. Arbitration has been characterized thusly:

• method of trial: Texas Constitution of 1845.

• proceeding: Offeciers v. Dirks, 2 Tex. 468 (1847).

• mode of suit: Forshey v. The Galveston H. & H.

RR Co., 16 Tex. 516 (1856).

• contractual proceeding: Alderman v. Alderman, 296 S.W.2d 312, 315 (Tex.Civ.App.--San Antonio 1956, writ ref'd)(quoting 6 C.J.S. Arbitration and Award §1), and Jack B. Anglin Co. Inc. v. Tipps, 842 S.W.2d 266, 268 (Tex. 1992).

• method to adjudicate: BDO Seidman v. Miller, 949 S.W.2d 858, 861 (Tex. App.—Austin 1997, writ dism’d w.o.j.).

• procedural vehicle: In re Education Management Corp. Inc., 14 S.W.3d 418, 425 (Tex. App.—Houston [14th Dist.] 2000, orig. proceeding).

• forum: TEX. CIV. PRAC. & REM. CODE § 154.027 (pertaining to non-binding arbitration)

• arrangement: Black’s Law Dictionary

• time-tested, cost-effective alternative to litigation: American Arbitration Association.

Parties may agree to arbitrate for reasons other than speed or cost, such as flexibility, privacy and, in some instances, expertise. Peter F. Gazda, Comment, Arbitration: Making Court-Annexed Arbitration an Attractive Alternative in Texas, 16 St. Mary’s Law Journal 409, 426 (1985).

II. TEXAS ARBITRATION HISTORY

The Texas heritage of arbitration can be traced to the Spanish influence. Paul Carrington, The 1965 General Arbitration Statute of Texas, 20 Sw. L.J. 21, 22 (1966). For example, Title III, Art. 178, of the Constitution of the Free State of Coahuila y Tejas (1827) stated:

“Every inhabitant of the state shall be perfectly free to terminate his controversies, whatever be the state of the trial, by means of arbitrators, or in any other extrajudicial manner. His agreements in this particular shall be strictly observed, and the decisions of the arbitrators executed, should the parties on making the mutual promise not reserve the right of appeal.”

Although the subsequent Constitution of the Republic of Texas (1836) made no reference to arbitration, it did declare that “all laws now in force in Texas and not inconsistent with this constitution shall remain in force…” thus leaving parties free to arbitrate disputes. Paul Carrington, The 1965 General Arbitration Statute of Texas, 20 SW L.J. 21, 22 (1966).

In 1845, the first Constitution of the State of Texas directed the Legislature to pass laws providing for arbitration of differences when the parties shall elect that method of trial. TEX. CONST. of 1845, art. VII, § 15 (repealed). Carpenter v. North River Insurance Co., 436 S.W.2d 549, 551 (Tex. Civ. App.—Houston [14th Dist] 1968, writ ref’d n.r.e.)(citing 2 H.P.N. Gammel, The Laws of Texas 1822-1897, at 1293). In 1846, in response to that mandate, the first Legislature of the State of Texas enacted a statute establishing a procedure for arbitration of existing disputes or accrued causes of action. Id. (citing 2 H.P.N. Gammel, The Laws of Texas 1822-1897, at 1433). It further provided that an award made in keeping with the statutory procedure, subject to the right of appeal if such right was reserved, be entered

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Arbitration in Texas: History and Enforceability_______________________________________________________________________________________________________as judgment of the court having appropriate jurisdiction. Id. An agreement made in accordance with that statute was not revocable, as was an agreement made at common law. Id.

Thus, from its earliest days, permissive arbitration was established as a constitutionally protected right in Texas. This right was acknowledged by the Texas Supreme Court in 1856, when it held that arbitration is a proceeding so favored by Texas law that both the Texas Constitution and statutes provide for the submission of differences to arbitration. County of Brazoria v. Knutson, 176 S.W.2d 740, 743, 142 Tex. 172 (1944) (citing Forshey v. The Galveston H. & H. R. Co., 16 Tex. 516 (1856)).

In 1960, the Texas Legislative Counsel recommended to the 57th Texas Legislature that the arbitration provision of the Texas Constitution be deleted, supported by the following commentary:

“Permissive, as distinguished from compulsory, arbitration has been long recognized in the common law as being a mode of settling disputes to which parties, in exercise of their general right of freedom of contract, may agree to submit. Statutes have been enacted in recognition and aid of voluntary arbitration in England, by the United States Congress, and many states. In no case has it been found that any specific constitutional enablement is a condition precedent to validity of such statutes.”

“It appears that this provision in the Texas Constitution, substantially carried forward from earlier provisions to like effect, with its qualifying phrase, ‘when the parties shall elect that method of trial,’ possibly was inserted not so much affirmatively to enable the ‘voluntary arbitration’ type of statute, which the Texas Legislature now has enacted, as impliedly to prohibit enactment of a so-called ‘compulsory arbitration’ type. Since such latter type of statute is today recognized to be unconstitutional as being violative of the constitutional guaranty of right to trial by jury and also works an unconstitutional deprivation of

property and liberty of contract if such type of statute purports to make the decision of the arbitrators the final determination of the rights of the parties, it now appears that any prohibition against such ‘compulsory arbitration’ type of statutes that is implicit in the last clause of this section is effectively secured by other provisions of both the Texas and Federal Constitutions and that this provision in the Texas Constitution is superfluous.”

Report of the Texas Legislative Council on Constitutional Revision, December 1960, Report 56-10, vol. 1, p. 122).

Nevertheless, until 1969, the Texas Constitution, Art. 16, § 13, expressly directed the Legislature “to enact such laws as may be necessary for arbitration.” Section 13 was then repealed because permissivearbitration had long been recognized at common law without the necessity of a constitutional provision authorizing arbitration statutes. L. H. Lacy Co. v. City of Lubbock, 559 S.W.2d 348, 351 n.4 (Tex. 1977).

Before the repeal of Section 13, the Texas Legislature in 1965 enacted the Texas Arbitration Act, sometimes called the Texas General Arbitration Act, which was codified in 1995 as Chapter 171 of the Texas Civil Practice & Remedies Code. [Note: the title of Chapter 171 is “General Arbitration” but the Act is abbreviated as “TAA.”] The bill analysis states that “arbitration is an alternative to litigation that is becoming increasingly popular, and the arbitration statutes would be more conveniently located in the Civil Practices and Remedies Code.” SENATE COMM. ON JURISPRUDENCE, BILL ANALYSIS, Tex. S.B. 1439, 74th Leg., R.S. (1995).

The codification of arbitration in Texas addressed and rejected the public policy argument against allowing private persons to oust the courts of their jurisdiction to determine the rights and liabilities of parties to a contract. L. H. Lacy Co. v. City of Lubbock, 559 S.W.2d 348, 352 (Tex. 1977) (common law arbitration continues to be a viable alternative to the statutory method).

Following the codification of arbitration in Texas, the Texas Supreme Court reiterated that arbitration has become a mainstay of the dispute resolution process. Rachal v. Reitz, 403 S.W.3d 840 (Tex. 2013) (citing

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Arbitration in Texas: History and Enforceability_______________________________________________________________________________________________________AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740, 1749 (U.S. 2011); Nafta Traders Inc. v. Quinn, 339 S.W.3d 84, 94 & n.48 (Tex. 2011); Ellis v. Schlimmer, 337 S.W.3d 860, 862 (Tex. 2011)).

The codification of binding arbitration under Chapter 171 is not to be confused with arbitration under Chapter 154 (the ADR Act), which expresses the general policy that peaceable resolution of disputes is to be encouraged through voluntary settlement procedures, and which provides a forum for non-binding arbitration. TEX. CIV. PRAC. & REM. CODE § 154.027. To advance this purpose, the ADR Act permits a court, either on its own motion or on agreement of the parties, to refer a dispute to a statutorily-established ADR procedure, an ADR organization, or a “nonjudicial and informally conducted forum for the voluntary settlement of citizens’ disputes through the intervention of an impartial third party.” § 154.021. A party may object to the referral within ten days of receiving notice of it. § 154.022. The court may not refer the dispute if it determines that there is a reasonable basis for the objection. In an arbitration proceeding under § 154.027, if the parties stipulate beforehand the arbitrator’s award will be binding, it “is enforceable in the same manner as any contract obligation.” § 154.027(b).

III. TEXAS ARBITRATION ACT

A. Agreements to Arbitrate

Under the Texas Arbitration Act (“TAA”), a written agreement to arbitrate is valid and enforceable if the agreement is to arbitrate a controversy that:

• exists at the time of the agreement, or

• arises between the parties after the date of the agreement.

TEX. CIV. PRAC. & REM. CODE § 171.001(a).

A party may revoke the agreement only on a ground that exists at law or in equity for the revocation of a contract.”

TEX. CIV. PRAC. & REM. CODE § 171.001(b).

Arbitration agreements can be enforced under either statutory provisions or the common law. L.H. Lacy Co. v. City of Lubbock, 559 S.W.2d 348, 351 (Tex. 1977).

The purpose of the TAA is to facilitate arbitration

agreements. In re AIU Ins. Co., 148 S.W.3d 109, 122 (Tex. 2004).

The authority of arbitrators is derived from the arbitration agreement. City of Pasadena v. Smith, 292 S.W.3d 14, 20 (Tex. 2009) (citing Gulf Oil Corp. v. Guidry, 160 Tex. 139, 327 S.W.2d 406, 408 (1959).

B. Scope

The TAA does not apply to:

• a collective bargaining agreement between an employer and a labor union;

• an agreement for the acquisition by one or more individuals of property, services, money or credit in which the total consideration to be furnished by the individual is not more than $50,000, unless the parties agree in writing to arbitrate and the agreement is signed by each party and each party’s attorney;

• a claim for personal injury, unless each party to the claim, on the advice of counsel, agrees in writing to arbitrate and the agreement is signed by each party and each party’s attorney;

• a claim for workers compensation benefits; or

• an agreement made before January 1, 1966.

TEX. CIV. PRAC. & REM. CODE § 171.002.

Courts interpreting the FAA have held that the FAA preempts state statutes to the extent they are inconsistent with the FAA. In re D. Wilson Construction Co., 196 S.W.3d 774 (Tex. 2006); Volt Information Sciences Inc. v. Board of Trustees, 489 U.S. 468, 478, 109 S.Ct. 1248, 1253, 103 L.Ed.2d 488 (1989).

Section 2 of the FAA preempts state law that would otherwise render arbitration agreements unenforceable in a contract involving interstate commerce. 9 U.S. C. § 2; Southland Corp. v. Keating, 465 U.S. 1, 10-11, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984).

The FAA preempts parts of the TAA, including section 171.002(a)(2). See Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 271 (Tex. 1992) (discussing FAA preemption of non-waiver provision of DTPA); In re Nexion Health at Humble Inc., 173 S.W.3d 67,

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Arbitration in Texas: History and Enforceability_______________________________________________________________________________________________________69 (Tex. 2005) (discussing FAA preemption of TAA section 171.002(a)(3)(personal injury cases).

C. Compelling Arbitration

A court shall order the parties to arbitrate on application of a party showing:

• an agreement to arbitrate, and

• the opposing party’s refusal to arbitrate.


If a party opposing an application denies the existence of the arbitration agreement, the court shall summarily determine that issue.


If there is a substantial bona fide dispute as to whether an agreement to arbitrate exists, the court shall try the issue promptly and summarily.


A court may not refuse to order arbitration because the claim lacks merit or bona fides, or the fault or ground for the claim is not shown.


Because the main benefits of arbitration lie in expedited and less expensive disposition of a dispute, and the legislature has mandated that a motion to compel arbitration be decided summarily, we think it unlikely that the legislature intended the issue to be resolved following a full evidentiary hearing in all cases. The trial court may summarily decide whether to compel arbitration on the basis of affidavits, pleadings, discovery, and stipulations. However, if the material facts necessary to determine the issue are controverted, by an opposing affidavit or otherwise admissible evidence, the trial court must conduct an evidentiary hearing to determine the disputed material facts. Jack B. Anglin Co. Inc. v. Tipps, 842 S.W.2d 266, 269 (Tex. 1992).

When there is a broad arbitration clause, arbitration of a particular claim should not be denied unless it can be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Kline v. O'Quinn, 874 S.W.2d 776, 782 (Tex. App.—Houston [14th Dist.] 1994, writ denied).

Historically, Texas courts did not compel arbitration unless a party clearly agreed to arbitrate and be bound by the arbitrator's decision. See, for example, Phillips v. ACS Municipal Brokers Inc., 888 S.W.2d 872, 875 (Tex. App.–Dallas 1994, no writ). However, recent decisions by Texas courts do not adhere to the historical tradition. There are at least six theories in contract and agency law that may bind non-signatories to arbitration agreements:

(1) Incorporation by reference,

(2) Assumption,

(3) Agency,

(4) Alter ego,

(5) Equitable estoppel, and

(6) Third-party beneficiary.

In re Kellogg Brown & Root Inc., 166 S.W.3d 732, 739 (Tex. 2005); In re Weekley Homes L.P., 180 S.W.3d 127, 131 (Tex. 2005) (arbitration clause was found to be binding on a non-signatory under direct-benefits estoppel theory); Meyer v. WMCO-GP LLC, 211 S.W.3d 302, 305 (Tex. 2007) (person who seeks “to derive a direct benefit from the contract containing the arbitration provision” may be equitably estopped from refusing arbitration).

Although we have repeatedly expressed a strong presumption favoring arbitration, the presumption arises only after the party seeking to compel arbitration proves that a valid arbitration agreement exists. Prudential Securities Inc. v. Marshall, 909 S.W.2d 896, 898 (Tex. 1995).

A party attempting to compel arbitration must first establish that the dispute in question falls within the scope of a valid arbitration agreement. If the trial court finds a valid agreement, the burden shifts to the party opposing arbitration to raise an affirmative defense to enforcing arbitration. In re Oakwood Mobile Homes Inc., 987 S.W.2d 571, 573 (Tex. 1999).

Delaying a decision on the merits of arbitrability until after discovery substantially defeats the policy behind Section 171.021’s abbreviated procedure and violates Section 171.021’s mandate to decide issues summarily. A trial judge has no discretion to defer his ruling until after discovery has been completed. In re MHI Partnership Ltd., 7 S.W.3d 918 (Tex. App.—Houston [1st Dist.] 1999, orig. proceeding).

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The trial court's determination of the arbitration agreement’s validity is a legal question subject to de novo review. J.M. Davidson Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003).

The strong presumption favoring arbitration generally requires that we resolve doubts as to the scope of the agreements in favor of coverage. In re Kellogg Brown & Root Inc., 166 S.W.3d 732, 737 (Tex. 2005).

The mere fact that a contract affects interstate commerce, thus triggering the FAA, does not preclude enforcement under the TAA as well. In re D. Wilson Construction Co., 196 S.W.3d 774, 780 (Tex. 2006).

Arbitration of a claim cannot be compelled unless it falls within the scope of a valid arbitration agreement. But sometimes a person who is not a party to the agreement can compel arbitration with one who is, and vice versa. We have held that a person who seeks by his claim “to derive a direct benefit from the contract containing the arbitration provision” may be equitably estopped from refusing arbitration. Meyer v. WMCO-GP LLC, 211 S.W.3d 302, 305 (Tex. 2006).

Pre-arbitration discovery is expressly authorized under the TAA when a trial court cannot fairly and properly make its decision on the motion to compel because it lacks sufficient information regarding the scope of an arbitration provision or other issues of arbitrability. In re Houston Pipe Line Co., 311 S.W.3d 449, 451 (Tex. 2009).

A party seeking to compel arbitration under the TAA must: (1) establish the existence of a valid, enforceable arbitration agreement; and (2) show that the claims asserted fall within the scope of that agreement. Rachal v. Reitz, 403 S.W.3d 840, 843 (Tex. 2013).

D. Fraud

While an arbitration agreement procured by fraud is unenforceable, the party opposing arbitration must show that the fraud relates to the arbitration provision specifically, not to the broader contract in which it appears. Forest Oil Corp. v. McAllen, 268 S.W.3d 51, 56 (Tex. 2008).

Texas appellate courts have affirmed trial courts’ judgments to stay arbitration or to refuse to compel arbitration based on findings of fraud in the inducement of arbitration agreements. EZ Pawn Corp. v. Gonzalez, 921 S.W.2d 320, 324-325 (Tex. App.–Corpus Christi 1996, writ denied); Gulf Interstate Engineering Co. v. Pecos Pipeline and Production Co., 680 S.W.2d 879,

881 (Tex. App.–Houston [1st Dist.] 1984, writ dism'd w.o.j.).

E. Unconscionability

A court may not enforce an agreement to arbitrate if the court finds that the agreement was unconscionable at the time the agreement was made.


Texas law renders unconscionable contracts unenforceable. Whether a contract is unconscionable at the time it is formed is a question of law. A clear failure to properly analyze or apply the law of unconscionability is an abuse of discretion. In re Poly–America L.P., 262 S.W.3d 337, 348 (2008) (orig. proceeding).

Arbitration agreements may be either substantively or procedurally unconscionable, or both. In re Halliburton Co., 80 S.W.3d 566, 572 (Tex. 2002).

Procedural unconscionability refers to the circumstances surrounding the adoption of the arbitration provision and relates to the making or inducement of the contract, focusing on the facts surrounding the bargaining process. In re Palm Harbor Homes Inc., 195 S.W.3d 672, 677 (Tex. 2006); TMI Inc. v. Brooks, 225 S.W.3d 783, 792 (Tex. App.—Houston [14th Dist.] 2007, pet. denied) (op. on reh'g).

Substantive unconscionability concerns the fairness of the arbitration provision itself. Palm Harbor Homes, 195 S.W.3d at 677; Halliburton Co., 80 S.W.3d at 571. A contract is substantively unconscionable if, “given the parties’ general commercial background and the commercial needs of the particular trade or case, the clause involved is so one-sided that it is unconscionable under the circumstances existing when the parties made the contract.” In re Poly–America L.P., 262 S.W.3d 337, 348 (2008) (orig. proceeding) (quoting In re First Merit Bank, 52 S.W.3d 749, 757 (Tex. 2001) (orig. proceeding)).

A challenge that arbitration is cost prohibitive is grounded in substantive unconscionability. In re Olshan Foundation Repair Co. LLC, 328 S.W.3d 883, 892 (Tex. 2010). Excessive costs imposed by an arbitration agreement render a contract unconscionable if the costs prevent a litigant from effectively vindicating his or her rights in the arbitral forum. Id. at 893. The party bears the burden of showing the

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Arbitration in Texas: History and Enforceability_______________________________________________________________________________________________________likelihood of incurring excessive costs. Id. Courts will consider the party's ability to pay the arbitration fee, the actual amount of the fee in relation to the amount of the underlying claim, and the cost differential between arbitration and litigation in court. Honrubia Properties Ltd. v. Gilliland, __ S.W.3d __ (Tex. App.—Corpus Christi-Edinburg 2007, no pet.) (mem. op.)

Arbitration agreements are not inherently unconscionable. In re Poly–America L.P., 262 S.W.3d 337, 348 (Tex. 2008) (orig. proceeding); In re Palm Harbor Homes Inc., 195 S.W.3d 672, 678 (Tex. 2006).

F. Waiver

There is a strong presumption against waiver of arbitration. Prudential Securities Inc. v. Marshall, 909 S.W.2dd 896, 899 (Tex. 1995) (waiver of an arbitration right must be intentional).

Waiver may be found when it is shown that a party acted inconsistently with its right to arbitrate and such actions prejudiced the other party. In re Oakwood Mobile Homes, 987 S.W.2d 571, 574 (Tex. 1999).

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, 192 S.W.3d 759, 764 (Tex. 2006).

The filing of a motion to set aside a default judgment and to set a new trial does not expressly waive arbitration rights. In re Bank One, 216 S.W.3d 825, 827 (Tex. 2007).

A party waives arbitration by substantially invoking the judicial process to the other party's detriment or prejudice. Perry Homes v. Cull, 258 S.W.3d 580, 589–90 (Tex. 2008), cert. denied, 555 U.S. 1103, 129 S.Ct.

952, 173 L.Ed.2d 116 (2009) (the hurdle is a high one, and the Texas Supreme Court has never found waiver in the following instances:

• filing suit,

• moving to dismiss a claim for lack of standing,

• moving to set aside a default judgment and requesting a new trial,

• opposing a trial setting and seeking to move the litigation to federal court,

• moving to strike an intervention and opposing discovery,

• sending 18 interrogatories and 19 requests for production,

• requesting an initial round of discovery, noticing but not taking a single deposition, and agreeing to a trial resetting, or

• seeking initial discovery, taking four depositions, and moving for dismissal based on standing.

Whether a party has substantially involved the judicial process depends upon the totality of the circumstances. Perry Homes v. Cull, 258 S.W.3d 580, 589-90 (Tex. 2008).

Waiver can be implied from a party’s unequivocal conduct, but not by inaction. In re ADM Investor Services Inc., 304 S.W.2d 371, 374 (Tex. 2010).

Agreement to entry of a scheduling order and to a new trial date does not expressly repudiate and relinquish the right to arbitration. G.T. Leach Builders LLC v. Sapphire V.P. LP, 458 S.W.3d 502, 511 (Tex. 2015).

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, 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, 512 (Tex. 2015).

Detriment or prejudice refers to an inherent unfairness caused by a party’s attempt to have it both ways by switching between litigation and arbitration to its own advantage. G.T. Leach Builders LLC v. Sapphire V.P. LP, 458 S.W.3d 502, 515 (Tex. 2015).

G. Illegality

Arbitration agreements under the TAA may be held unenforceable either for violating state law unrelated to arbitration issues or for failing to comply with the provisions of the TAA. In re Godt, 28 S.W.3d 732, 738-739 (Tex. App.–Corpus Christi 2000, no pet.).

In Texas, any illegality argument must address the specific arbitration provision, and not the contract as a whole. See In re FirstMerit Bank, N.A., 52 S.W.3d 749; see also generally Women’s Regional

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Arbitration in Texas: History and Enforceability_______________________________________________________________________________________________________Healthcare, P.A. v. FemPartners of North Texas, Inc., 175 S.W.3d 365 (Tex. App. –Houston [1st Dist.] 2005, no pet.). Any argument that the contract as a whole is illegal will be decided by the arbitrator. See In re First Merit Bank, N.A., 52 S.W.3d at 756-757; see also In re H.E. Butt Grocery Co., 17 S.W.3d 360, 367 (Tex. App.–Houston [14th Dist.] 2000, orig. proceeding).

H. Stay Orders

An order compelling arbitration must include a stay of any proceeding subject to § 171.025 (stay of related proceeding).

TEX. CIV. PRAC. & REM. CODE § 171.021(c)

A court may stay an arbitration commenced or threatened on application and a showing that there is not an agreement to arbitrate.


If there is a substantial bona fide dispute as to whether an agreement to arbitrate exists, the court shall try the issue promptly and summarily.


The court shall stay the arbitration if the court finds for the party moving for the stay. If the court finds for the party opposing the stay, the court shall order the parties to arbitrate.

TEX. CIV. PRAC. & REM. CODE § 171.023(c).

The court shall stay a proceeding that involves an issue subject to arbitration if an order for arbitration or an application for that order is made under Subchapter B (proceedings to compel or stay arbitration).


The stay applies only to the issue subject to arbitration is that issue is severable from the remainder of the proceeding.


A party may appeal an order granting an application to stay arbitration made under § 171.023.

TEX. CIV. PRAC. & REM. CODE § 171.098(a)(2).

Neither § 171.098, nor any other statute, provides for an interlocutory appeal of an order denying a motion

to stay or abate the trial court’s proceedings until the arbitration is complete unless the party first filed an application or motion to compel arbitration. Walker Sand Inc. v. Baytown Asphalt Materials Ltd., 95 S.W.3d 511, 516 (Tex. App.—Houston [1st Dist.] 2002, no pet.)

Interlocutory appeal may be taken from an order denying an application to compel arbitration made under § 171.021 or an order granting an application to stay arbitration made under § 171.023. Interlocutory appeal statutes are strictly construed. Atlas Gulf-Coast Inc. v. Stanford, 299 S.W.3d 356, 359 (Tex. App.—Houston [14th Dist.] 2009, no pet.).

Section 171.098(a)(1) requires, as a predicate to interlocutory appellate jurisdiction, the filing of an application to compel arbitration made under § 171.021 and an order denying that application. Schlumberger Technology Corporation v. Baker Hughes Inc., 355 S.W.3d 791, 797 (Tex. App.—Houston [1st Dist.] 2011, no pet.).

There must be an order denying a motion to compel arbitration before an interlocutory appeal is permitted, and it is insufficient for an order to merely have the effect of denying arbitration. Ground Force Construction LLC v. Coastline Homes LLC, __ S.W.3d __ (Tex. App.—Houston [14th Dist.] 2014, ___).

I. Appointment of Arbitrators

The method for appointing the arbitrators is as specified in the arbitration agreement. TEX. CIV. PRAC. & REM. CODE § 171.041(a).

A court shall appoint one or more qualified arbitrators if:

• the agreement to arbitrate does not specify a method of appointment,

• the agreed method fails or cannot be followed, or

• an appointed arbitrator fails or is unable to act and a successor has not been appointed.


Arbitrators must be selected pursuant to the method specified in the parties’ agreement. Americo Life Inc. v. Myer, 440 S.W.3d 18, 21 (Tex. 2014). An arbitration panel selected contrary to the contract-specified method lacks jurisdiction over the dispute,

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Arbitration in Texas: History and Enforceability_______________________________________________________________________________________________________and courts do not hesitate to vacate an award when an arbitrator is not selected according to the contract-specified method. Id. In the arbitration context, “independent” and “impartial” carry distinct meanings. Id. at 22. Unless the parties agree otherwise, an arbitrator selected unilaterally by one party is a party-appointed arbitrator and not subject to disqualification as being impartial or non-neutral. Id. at 23.

If the parties have agreed upon the qualifications of the arbitrators, it is not the function of the court to change them or prescribe other qualifications. Mewbourne Oil Co. v. Blackburn, 793 S.W.2d 735, 737 (Tex. App.—Amarillo 1990, orig. proceeding).

J. Discovery

The arbitrators may authorize a deposition for use as evidence to be taken of a witness who cannot be required by subpoena to appear before the arbitrators or who is unable to attend the hearing.


The arbitrators may issue a subpoena for attendance of a witness or production of books, records documents or other evidence.


Arbitrators are empowered by the TAA to authorize discovery, and such discovery can be enforced by orders of the court. Transwestern Pipeline Co. v. Blackburn, 831 S.W.2d 72, 78 (Tex. App.—Amarillo 1992, orig. proceeding).

Arbitration agreements are construed to incorporate the discovery rules, if any, of a sponsoring organization identified in the agreement.

K. Arbitration Hearing

Unless otherwise provided by the agreement, all arbitrators shall conduct the hearing, and a majority of the arbitrators may determine a question and render a final award.


Unless otherwise provided by the agreement, the arbitrators shall set a time and place for the hearing and notify each party.


The court on application may direct the arbitrators to proceed promptly with the hearing and determination of the controversy.


Unless otherwise provided by the agreement, the arbitrators may adjourn the hearing as necessary, and, on the request of a party and for good cause, may postpone the hearing.


Unless otherwise provided by the agreement, the arbitrators may hear and determine the controversy on the evidence produced without regard to whether a party who has been notified fails to appear.


Unless otherwise provided by the agreement, a party at a hearing is entitled to:

• be heard,

• present evidence material to the controversy, and

• cross-examine any witness.


A party is entitled to be represented by an attorney at an arbitration proceeding, and a waiver of the right—before the proceeding—is ineffective.


L. Arbitrator’s Award

The arbitrator’s award must be in writing and signed by each arbitrator joining in the award.


The arbitrators shall deliver a copy of the award to each party personally, by registered mail, or as provided in the agreement.


The arbitrators shall make the award:

(1) within the time established by the agreement to arbitrate, or

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(2) if a time is not established by the agreement, within the time established by the court on application of a party.


The parties may extend the time for making the award either before or after the time expires. The extension must be in writing.

TEX. CIV. PRAC. & REM. CODE § 171.053(d).

A party waives the objection that an award was not made within the time required unless the party notifies the arbitrators of the objection before delivery of the award to that party.

TEX. CIV. PRAC. & REM. CODE § 171.053(e).

The arbitrators shall award attorney’s fees as additional sums required to be paid under the award only if the fees are provided for:

• in the agreement to arbitrate, or

• by law for recovery in a civil action in the district court on a cause of action on which any party of the award is based.


The arbitrators' expenses and fees, including other expenses incurred in conducting the arbitration, shall be paid pursuant to the terms of the award unless otherwise provided in the arbitration agreement.


Arbitrators do not have to specify the basis for their award. Thomas v. Prudential Securities, Inc., 921 S.W.2d 847, 851 (Tex. App.–Austin 1996, no writ) (citing Babcock & Wilcox Co. v. PMAC, Ltd., 863 S.W.2d 225, 235 (Tex. App.–Houston [14th Dist.] 1993, writ denied)).

An award is not valid if one of the arbitrators is subsequently disqualified. Johnson v. Korn, 117 S.W.2d 514 (Tex. Civ. App.–El Paso 1938, writ ref'd).

An arbitration award has the effect of a judgment of a court of last resort and is entitled to great deference in a court of law. City of San Antonio v. McKenzie Constr. Co., 136 Tex. 315, 150 S.W.2d 989, 996 (1941); Bailey & Williams v. Westfall, 727 S.W.2d 86, 90 (Tex. App.-Dallas 1987, writ ref'd n.r.e.). Every

reasonable presumption is indulged to uphold an arbitrator's decision. City of San Antonio, 150 S.W.2d at 996; Johnson v. Korn, 117 S.W.2d 514, 519 (Tex. Civ. App.--El Paso 1938, writ ref'd).

The parties may provide by contract that the court shall award the prevailing party’s attorney's fees in a suit to enforce an arbitration agreement. Monday v. Cox, 881 S.W.2d 381 (Tex. App.–San Antonio 1994, writ denied).

Expert witness fees may also be awarded to the prevailing party in an arbitration award. Thomas v. Prudential Securities Inc., 921 S.W.2d 847 (Tex. App.–Austin 1996, no writ).

Under Texas law, an arbitration award bears interest in the same manner as judgment of a court of last resort. Executone Information Systems Inc. v. Davis, 26 F.3d 1314, 1329 (5th Cir. 1994).

M. Confirmation of Award

Unless grounds are offered for vacating, modifying or correcting an award, the court, upon application of a party, shall confirm the award.


An application for an order confirming an award invokes the jurisdiction of the court, and the clerk shall docket the proceeding as a civil action pending in that court.


On granting an order that confirms an award, the court shall enter a judgment or decree conforming to the order, which may be enforced in the same manner as any other judgment or decree.


The court may award costs of the application and of the proceedings subsequent to the application, and disbursements.


Review of a trial court’s decision as to confirmation of an arbitration award is de novo and an appellate court reviews the entire record. In re Chestnut Energy Partners Inc., 300 S.W.3d 386, 397 (Tex. App.––Dallas 2009, pet. denied).

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The statute authorizing recovery of costs does not cover attorney fees. Monday v. Cox, 881 S.W.2d 381, 386 (Tex. App.—San Antonio 1994, writ denied).

By providing that a trial court shall confirm an award, the TAA necessarily contemplates that the arbitration award will be binding, and the confirmed award has the same effect as a judgment of a court of last resort. Porter & Clements LLP v. Stone, 935 S.W.2d 217, 221 (Tex. App.—Houston [1st Dist.] 1996, orig. proceeding).

N. Vacating an Award

On application of a party, the court shall vacate an award if:

(1) the award was obtained by corruption, fraud, or other undue means;

(2) the rights of a party were prejudiced by (a) evident partiality by an arbitrator, (b) corruption in an arbitrator, or (c) misconduct or willful misbehavior of an arbitrator;

(3) the arbitrators (a) exceeded their powers, (b) refused to postpone the hearing after a showing of sufficient cause for the postponement, (c) refused to hear evidence material to the controversy, or (d) conducted the hearing in a manner that substantially prejudiced the rights of a party; or

(4) there was no agreement to arbitrate, the issue was not adversely determined, and the party did not participate in the arbitration hearing without raising an objection.


A party must make an application to vacate an award not later than the 90th day after the date of delivery of a copy of the award to the applicant.


If the application to vacate is denied and a motion to modify or correct the award is not pending, the court shall confirm the award.


Once an award is vacated, the court may order a rehearing before new arbitrators.


The fact that the relief granted by the arbitrators could not or would not be granted by a court of law or equity is not a ground for vacating or refusing to confirm an award.


The authority of arbitrators is derived from the arbitration agreement and is limited to a decision of the matters submitted therein either expressly or by necessary implication. Gulf Oil Corp. v. Guidry, 160 Tex. 139, 327 S.W.2d 406, 408 (1959).

A court shall vacate an arbitration award if there has been “evident partiality” by the arbitrator, meaning that the arbitrator failed to disclose facts which might, to an objective observer, create a reasonable impression of the arbitrator’s partiality, and that “evident partiality” is established from the nondisclosure itself. Burlington Northern R.R. Co. v. Tuco Inc., 960 S.W.2d 629, 636 (Tex. 1997).

An arbitration award alone cannot establish evident partiality. In re C.A.K., 155 S.W.3d 554, 564 (Tex. App.—San Antonio 2004, pet. denied). Bossley v. Mariner Financial Group, 11 S.W.3d 349 (Tex. App.–Houston [1st Dist.] 2000, pet. granted) aff’d by Mariner Financial Group Inc. v. Bossley, 79 S.W.3d 30 (Tex. 2002) (discussion of evident partiality).

A trial court may set aside an arbitration award only in limited circumstances. CVN Group Inc. v. Delgado, 95 S.W.3d 234, 245 (Tex. 2002).

An arbitration award cannot be set aside on public policy grounds except in extraordinary circumstances in which the award clearly violates carefully articulated fundamental policy. CVN Group Inc. v. Delgado, 95 S.W.3d 234, 239 (Tex. 2002).

An award can be vacated based upon arbitrator misconduct only if the conduct deprives a party of the right to a fair hearing. GJR Management Holdings LP v. Jack Raus Ltd., 126 S.W.3d 257, 263 (Tex. App.—San Antonio 2003, pet. denied).

Review of an arbitration award is so limited that even a mistake of fact or law by the arbitrator in the application of substantive law is not a proper ground for vacating an award. Crossmark, Inc. v. Hazar, 124 S.W.3d 422, 429 (Tex. App.-Dallas 2004, pet. denied).

10


Gross mistake is a Texas state common law standard that has been used to attack arbitration awards. Callahan & Assocs. v. Orangefield ISD, 92 S.W.3d 841, 844 (Tex. 2002). A “gross mistake” is a mistake by the arbitrator that implies bad faith or failure to exercise honest judgment. Anzilotti v. Gene D. Liggin, Inc., 899 S.W.2d 264, 266 (Tex. App.-Houston [14th Dist.] 1995, no writ) (quoting Carpenter v. N. River Ins. Co., 436 S.W.2d 549, 551 (Tex. App.-Houston [14th Dist.] 1968, writ ref’d n.r.e.)).

An arbitrator is not bound to hear all the evidence tendered by the parties as long as each party is given an adequate opportunity to present evidence and arguments. Kosty v. South Shore Harbour Community Association, 226 S.W.3d 459, 463 (Tex. App.—Houston [1st Dist.] 2006, pet. denied).

Arbitrators exceed their powers when they decide matters not properly before them. Allstyle Coil Co. L.P. v. Carreon, 295 S.W.3d 42, 44 (Tex. App.-Houston [1st Dist.] 2009, no pet.) (scope of authority depends on the agreement); Ancor Holdings LLC v. Peterson, Goldman & Villani Inc., 294 S.W.3d 818, 829 (Tex. App.-Dallas 2009, no pet.); Pettus v. Pettus, 237 S.W.3d 405, 419 (Tex. App.—Fort Worth 2007, pet. denied) (authority of arbitrators is derived from the arbitration agreement and is limited to the matters submitted therein either expressly or by necessary implication); Barsness v. Scott, 126 S.W.3d 232, 241 (Tex. App.-San Antonio 2003, pet. denied); Gulf Oil Corp. v. Guidry, 160 Tex. 139, 327 S.W.2d 406, 408 (1959).

Review of a trial court’s decision as to vacatur of an arbitration award is de novo and an appellate court reviews the entire record. In re Chestnut Energy Partners Inc., 300 S.W.3d 386, 397 (Tex. App.––Dallas 2009, pet. denied).

The TAA permits the parties to agree to expanded judicial review of arbitration awards and the FAA does not preempt state law allowing parties to agree to greater review of arbitration awards. Nafta Traders Inc. v. Quinn, 339 S.W.3d 84, 101 (Tex. 2011). The TAA presents no impediment to an agreement that limits the authority of an arbitrator in deciding a matter, and thus allows for judicial review of an arbitration award for reversible error. Id. at 97.

A mere mistake of law is insufficient to vacate an arbitration award on the basis of “undue means.” Las Palmas Medical Center v. Moore, 349 S.W.3d 57, 69 (Tex. App.—El Paso 2010, pet. denied). Instead, a party must show immoral, illegal or bad-faith conduct by the arbitrator. Id. at 71. Evident partiality can be

shown by actual bias. Id. at 73.

Absent the statutory grounds for vacating an award, a reviewing court lacks jurisdiction to review complaints regarding the sufficiency of the evidence supporting the award. Blue Cross Blue Shield v. Juneau, 114 S.W.3d 126, 135 (Tex. App.—Austin 2003, no pet.).

Because courts favor arbitration as a means of disposing of disputes, the courts indulge every reasonable presumption in favor of upholding arbitration awards. Nuno v. Pulido, 946 S.W.2d 448, 452 (Tex. App.–Corpus Christi 1997, no writ).

Under the TAA, review of an arbitration award is so limited that even a mistake of fact or law by the arbitrator in the application of substantive law is not a proper ground for vacating an award. Centex/Vestal v. Friendship W. Baptist Church, 314 S.W.3d 677, 683 (Tex. App.—Dallas 2010, pet. denied). We consider the parties' agreement and the matters submitted in arbitration to determine whether the arbitrator exceeded his power. Id. at 685.

O. Modifying or Correcting Award

On application, the court shall modify or correct an award if:

(1) the award contains (a) an evident miscalculation of numbers, or (b) an evident mistake in the description of a person, thing, or property referred to in the award;

(2) the arbitrators have made an award with respect to a matter not submitted to them and the award may be corrected without affecting the merits of the decision made with respect to the issues that were submitted; or

(3) the form of the award is imperfect, but only to the extent such imperfection does not affect the merits of the controversy.


A party must seek an order modifying or correcting an award not later than the 90th day after the date of delivery of a copy of the award to the applicant.


The TAA does not allow a reviewing court to

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Arbitration in Texas: History and Enforceability_______________________________________________________________________________________________________modify or correct an award based on an arbitrator’s “evident mistake” in failing to award damages. Rather, it only permits a court to modify or correct an award that contains an “evident miscalculation” of figures or an “evident mistake” in the description of a person, thing or property referred to in the award. A mere failure to award damages is not a ground under the TAA or the common law for modification or correction of an award. Callahan & Associates v. Orangefield ISD, 92 S.W.3d 841, 844 (Tex. 2002).

P. Jurisdiction and Venue of Courts

The making of an agreement that provides for or authorizes arbitration in Texas confers jurisdiction on the court to enforce the agreement and to render judgment on an award.


The filing with the clerk of the court of an application for an order, judgment or decree invokes the jurisdiction of the court.


On the filing of the initial application and the payment to the clerk of court fees, the clerk shall docket the proceeding as a civil action pending in that court.


An applicant for a court order may file the application:

(1) before the arbitration proceedings begin,

(2) during the period the arbitration is pending, or

(3) after the conclusion of the arbitration.


After an initial application is filed, the court may stay a proceeding:

(1) under a later filed application in another court to invoke the jurisdiction of that court or to obtain an order under § 171, or

(2) instituted after the initial application has been filed


A stay affects only an issue subject to arbitration.


A court may require that an application filed with the court:

(1) show the jurisdiction of the court,

(2) have attached a copy of the agreement to arbitrate,

(3) define the issue subject to arbitration,

(4) specify the status of the arbitration, and

(5) show the need for a court order.


Before arbitration proceedings begin, in support of arbitration, a party may file an application for a court order to:

(1) invoke the jurisdiction of the court over the adverse party and to effect jurisdiction by service of process on the adverse party before arbitration proceedings begin;

(2) invoke the jurisdiction of the court over an ancillary proceeding in rem, including by attachment, garnishment, or sequestration, in the manner and subject to the conditions under which the proceeding may be instituted and conducted ancillary to a civil action in a district court;

(3) restrain or enjoin the destruction of all or an essential part of the subject matter of the controversy; or the destruction or alteration of books, records, documents, or other evidence needed for the arbitration;

(4) obtain a deposition for discovery, perpetuation of testimony or evidence needed before the arbitration proceedings begin;

(5) appoint one or more arbitrators so that the arbitration under the agreement may proceed; or

(6) obtain other relief, which the court can grant in its discretion, needed to permit the arbitration to be conducted in an orderly manner and to prevent improper interference or delay of the

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arbitration.


A court’s authority to order discovery under the TAA extends only to activities prior to the commencement of the arbitration, which begins with the selection of the first arbitrator. After the arbitration begins, a court does not possess authority under the TAA to order discovery. Transwestern Pipeline Co. v. Blackburn, 831 S.W.2d 72, 78 (Tex. App.–Amarillo 1992, orig. proceeding).

During the pendency, or after the conclusion, of an arbitration proceeding, a party may file an application for a court order:

(1) that was referred to or that would serve a purpose under TEX. CIV. PRAC. & REM. CODE § 171.085(a);

(2) to require compliance by an adverse party or any witness with an order made by the arbitrator during the arbitration;

(3) to require the issuance and service under a court order, rather than under an arbitrator’s order, of a subpoena, notice or other court process in support of the arbitration or in an ancillary proceeding in rem, including by attachment, garnishment or sequestration, in the manner and subject to the conditions under which the proceeding may be conducted ancillary to a civil action in a district court;

(4) to require security for the satisfaction of a court judgment that may be later entered under an award;

(5) to support the enforcement of a court order, judgment or other decree made under the TAA; or

(6) to obtain relief under Sections 171.087, 171.088, 171.089 or 171.091 of the TAA.


Unless grounds are offered for vacating, modifying or correcting an award under Section 171.088 or 171.091, a court, on application of a party, shall confirm the arbitration award.


Venue for an initial application relating to an arbitration agreement, whether the application is to compel arbitration or stay arbitration, is set by statute. The initial application must be filed in:

(1) the county in which the adverse party resides or has a place of business;

(2) if the adverse party does not have a residence or place of business in Texas, in any county; or

(3) any county designated by the arbitration agreement.

TEX. CIV. PRAC. & REM. CODE § 171.096(a) and (b).

Further, if a hearing before the arbitrators has already been held, the initial application must be filed in the county where the arbitration hearing was held.


Finally, when a proceeding is already pending in court relating to an issue subject to arbitration under an agreement, the initial application and any subsequent application must be filed in that court.

TEX. CIV. PRAC. & REM. CODE § 171.096(d).

The responding party to an initial application may file a motion to transfer venue. If the initial application is not filed in one of the counties set forth in section 171.096, the court must transfer the action to one of the counties of venue under the statute.


The motion to transfer venue must be filed within twenty days of service of the initial application and before any other appearance, other than a challenge to the court's jurisdiction.


The procedure for transferring the case is the same as that for a motion to transfer venue in a civil case in district court.


Q. Appeals

A party may appeal a judgment or decree entered under this chapter or an order:

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(1) denying an application to compel arbitration made under Section 171.021;

(2) granting an application to stay arbitration made under Section 171.023;

(3) confirming or denying confirmation of an award;

(4) modifying or correcting an award; or

(5) vacating an award without directing a rehearing.


The appeal shall be taken in the manner and to the same extent as an appeal from an order or judgment in a civil action.


An arbitration award is to be given the same weight as a trial court's judgment, and the reviewing court may not substitute its judgment for the arbitrator's merely because it would have reached a different result. Riha v. Smulcer, 843 S.W.2d 289, 293-94 (Tex. App.–Houston [14th Dist.] 1992, writ denied). In reviewing an arbitration case, the court reviews the entire record. Id. at 294.

When there is no transcript of the arbitration hearing, the appellate court will presume the evidence was adequate to support the award. Jamison & Harris v. National Loan Investors, 939 S.W.2d 735, 737 (Tex. App.—Houston [14th Dist.] 1997, writ denied).

The TAA provides that an appeal from an order denying a motion to compel arbitration shall be taken in the manner and to the same extent as an appeal from an order or judgment in a civil action. However, the Texas Supreme Court does not have jurisdiction over appeals under the TAA from an interlocutory order denying arbitration in the absence of a dissent or conflict in the court of appeals. Certain Underwriters at Lloyds of London v. Celebrity Inc., 988 S.W.2d 731, 733 (Tex. 1998).

There is no statutory authority recognizing an interlocutory right to appeal from an order compelling arbitration under the TAA. Mohamed v. Auto Nation USA Corp., 89 S.W.3d 830, 833 (Tex. App.–Houston [1st Dist.] 2002, no pet.); In re Godt, 28 S.W.3d 732 (Tex. App.– Corpus Christi 2000, orig. proceeding); Materials Evolution Dev. USA Inc. v. Jablonowski, 949 S.W.2d 31, 33 (Tex. App.--San Antonio 1997, no writ).

An arbitration award has the same effect as a judgment of a court of last resort; accordingly, all reasonable presumptions are indulged in favor of the award and the award is conclusive on the parties as to all matters of fact and law. CVN Group Inc. v. Delgado, 95 S.W.3d 234, 238 (Tex. 2002).

Because Texas law favors arbitration, appellate review is “extremely narrow.” See Hisaw & Assocs. Gen. Contractors, Inc. v. Cornerstone Concrete Sys., Inc., 115 S.W.3d 16, 18 (Tex. App.––Fort Worth 2003, pet. denied); IPCO–G. & C. Joint Venture v. A.B. Chance Co., 65 S.W.3d 252, 256 (Tex. App.-Houston [1st Dist.] 2001, pet. denied).

Under the TAA, when an appeal from a denial of an application to compel arbitration turns on a legal question, courts will apply a de novo review standard. J.M. Davidson Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003).

Review of an arbitration award is so limited that even a mistake of fact or law by the arbitrator in the application of substantive law is not a proper ground for vacating an award. Crossmark Inc. v. Hazar, 124 S.W.3d 422, 429 (Tex. App.—Dallas 2004, pet. denied).

Under Texas law, review of an arbitration award is so limited that an award may not be vacated even if there is a mistake of fact or law. Universal Comp. Sys. Inc. v. Dealer Solutions LLC, 183 S.W.3d 741, 752 (Tex. App.—Houston [1st Dist.] 2005, pet. denied).

Under the TAA, review of a trial court’s decision as to vacatur or confirmation of an arbitration award is de novo and an appellate court reviews the entire record. In re Chestnut Energy Partners Inc., 300 S.W.3d 386, 397 (Tex. App.—Dallas 2009, pet. denied).

The TAA permits the parties to agree to expanded judicial review of arbitration awards and the FAA does not preempt state law allowing parties to agree to greater review of arbitration awards. Nafta Traders Inc. v. Quinn, 339 S.W.3d 84, 101 (Tex. 2011). The TAA presents no impediment to an agreement that limits the authority of an arbitrator in deciding a matter, and thus allows for judicial review of an arbitration award for reversible error. Id. at 97.

An appellate court has no jurisdiction over arbitration awards that are incomplete. Bison Bldg. Materials Ltd. v. Aldridge, No. 06–1084, 2012 WL 3870493, *4 (Tex. Aug. 17, 2012) (discussing East

14




Arbitration in Texas: History and Enforceability_______________________________________________________________________________________________________Texas Salt Water Disposal Co. v. Werline, 307 S.W.3d 267 (Tex. 2010) and Forsythe Int'l S.A. v. Gibbs Oil Co. of Tex., 915 F.2d 1017 (5th Cir. 1990)).

Appellate courts review a denial of a motion to compel arbitration for abuse of discretion, reviewing questions of law de novo and factual determinations under a no-evidence standard of review. U.S. Lawns Inc. v. Castillo, 347 S.W.3d 844, 846 (Tex. App.— Corpus Christi 2011, pet. denied).

A court may not substitute its judgment for that of the arbitrators merely because it would have reached a different decision. Humitech Dev. Corp. v. Perlman, 424 S.W.3d 782, 790 (Tex. App.—Dallas 2014, no pet.).

A court's decision to confirm or vacate an arbitration award is reviewed de novo, but, such review “is extraordinarily narrow” and “[e]very reasonable presumption must be indulged to uphold the arbitrator's decision. Forest Oil Corp. v. El Rucio Land & Cattle Co. Inc., 446 S.W.3d 58, 75 (Tex. App.—Houston [1st

Dist.] 2014).

IV. FEDERAL ARBITRATION ACT

A. Agreements to Arbitrate

Under the Federal Arbitration Act ("FAA"):

• a written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or

• an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal,

shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

9 U.S.C. § 2.

Under the FAA, an agreement to arbitrate is valid if it meets the requirements of the general contract law of the applicable state. First Options of Chicago Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995).

The FAA applies to all suits in state and federal

court when the dispute concerns “a contract evidencing a transaction involving commerce.” Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 269-70 (Tex. 1992) (citing 9 U.S.C. § 2).

The FAA will extend to “any contract affecting commerce, as far as the Commerce Clause of the United States Constitution will reach.” In re L&L Kempwood Associates LP, 9 S.W.3d 125, 127 (1999) (per curiam) (citing Allied-Bruce Terminix Co. v. Dobson, 513 U.S. 265, 277, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995)); In re Nexion Health at Humble Inc., 173 S.W.3d 67, 69 (Tex. 2005).

The FAA is broad in scope, and the amount of interstate commerce need not be substantial. Lost Creek Municipal Utilities Dist. v. Travis Industrial Painters Inc., 827 S.W.2d 103, 105 (Tex. App.–Austin 1992, writ denied).

Whether the parties contemplated that their transaction would substantially affect interstate commerce is irrelevant. If the transaction affects interstate commerce “in fact,” the arbitration provision is governed by the FAA. Palm Harbor Homes Inc. v. McCoy, 944 S.W.2d 716, 719 (Tex. App.—Fort Worth 1997, orig. proceeding) (Allied-Bruce Terminix Co. v. Dobson, 513 U.S. 265, 281, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995)).

The question of whether the transaction affects interstate commerce, and is thereby governed by the FAA, is a question of fact. In re Education Management Corp Inc., 14 S.W.3d 418, 423 (Tex. App.–Houston [14th Dist.] 2000, orig. proceeding).

Once it is determined that a dispute is covered by the FAA, federal law applies to all questions of interpretation, construction, validity, revocability and enforceability. Coenen v. R.W. Pressprich & Co., 453 F.2d 1209 (2nd Cir. 1972); see also Wydel Associates v. Thermasol Ltd., 452 F.Supp. 739, 742 (W.D. Tex. 1978).

Federal courts, like Texas courts, determine whether a written agreement to arbitrate exists and whether any of the issues raised are within the reach of that agreement. Pennzoil Exploration & Production Co. v. Ramco Energy, 139 F.3d 1061, 1065 (5th Cir. 1998).

Because federal law strongly favors arbitration, a presumption exists in favor of agreements to arbitrate under the FAA. Cantella & Co. v. Goodwin, 924 S.W.2d 943, 944 (Tex. 1996). However, a party

15














Arbitration in Texas: History and Enforceability_______________________________________________________________________________________________________seeking to compel arbitration must first establish its right to arbitrate under the FAA. Stewart Title Guar. Co. v. Mack, 945 S.W.2d 330, 333 (Tex. App.-Houston [1st Dist.] 1997, dism'd w.o.j. [leave denied]). If it does, and the opposing party does not defeat that right, the trial court is obliged to compel arbitration. Id.

While doubts will be decided in favor of arbitration, the strong federal presumption does not apply to the determination of whether there is a valid agreement to arbitrate between the parties or to the determination of who is bound by the arbitration agreement. See American Heritage Life Ins. Co. v. Lang, 321 F.3d 533, 537-538 (5th Cir. 2003).

Texas has long favored arbitration of disputes. Prudential Sec. Inc. v. Marshall, 909 S.W.2d 896, 898 (Tex. 1995) (an FAA case). Any doubts about whether claims fall within the scope of the arbitration agreement must be resolved in favor of arbitration. Prudential Sec. Inc. v. Marshall, 909 S.W.2d 896, 899 (Tex. 1995).

The policy in favor of enforcing arbitration agreements is so compelling that a court should not deny arbitration “unless it can be said with positive assurance that an arbitration clause is not susceptible of an interpretation which would cover the dispute at issue.” Neal v. Hardee's Food Systems Inc., 918 F.2d 34, 37 (5th Cir. 1990) (quoting Commerce Park at DFW Freeport v. Mardian Constr. Co., 729 F.2d 334, 338 (5th Cir. 1984)).

The legislative history of the FAA establishes that the purpose behind its passage was to ensure judicial enforcement or privately made agreements to arbitrate, and the suggestion that the overriding goal of the FAA was to promote the expeditious resolution of claims is rejected. Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 219, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985).

The FAA has been interpreted by federal courts to establish a federal policy favoring arbitration, requiring that courts rigorously enforce arbitration agreements, and the primary purpose of the FAA is to require the courts to compel arbitration when the parties have so provided in their contract, despite any state legislative attempts to limit the enforceability of arbitration agreements. Shearson/American Express Inc. v. McMahon, 482 U.S. 220, 225, 107 S.Ct. 2332, 2337, 96 L.Ed 2d 185 (1987).

The FAA preempts state statutes to the extent they are inconsistent with the FAA. Volt Information Sciences v. Board of Trustees, 489 U.S. 468, 478, 109

S.Ct. 1248, 1255, 103 L.Ed.2d 488 (1989).

FAA preemption is aimed at state law hindrances to enforcement of arbitration agreements not applicable to contracts generally. The FAA preempts the TAA if:

(1) the agreement is in writing;

(2) it involves interstate commerce;

(3) it can withstand scrutiny under traditional contract defenses under state law; and

(4) state law affects the enforceability of the agreement.

Nafta Traders Inc. v. Quinn, 339 S.W.3d 84, 98 (Tex. 2011).

The mere fact that a contract affects interstate commerce, thus triggering the FAA, does not preclude enforcement under the TAA as well. In re D. Wilson Construction Co., 196 S.W.3d 774, 780 (Tex. 2006).

For the FAA to preempt the TAA, state law must refuse to enforce an arbitration agreement that the FAA would enforce, either because the TAA has expressly exempted the agreement from coverage, or the TAA has imposed an enforceability requirement not found in the FAA. In re D. Wilson Construction Co., 196 S.W.3d 774, 780 (Tex. 2006).

B. Stay Orders

If any suit or proceeding is brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant is not in default in proceeding with such arbitration.

9 U.S.C. § 3.

To obtain a stay of litigation under § 3, a movant must show (1) that an agreement between the parties to arbitrate exists, and (2) that the issues raised are within the reach of that agreement. Complaint of Hornbeck Offshore Corp., 981 F.2d 752, 754 (5th Cir. 1993).

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The court has no discretion to deny the stay if the issues in litigation are within the reach of the arbitration agreement. Gutierrez v. Academy Corp., 967 F.Supp. 945 (S.D. Tex. 1997).

A motion to stay litigation under § 3 “requests the district court to refrain from further action in a suit pending arbitration.” Midwest Mech. Contractors Inc. v. Commonwealth Const. Co., 801 F.2d 748, 750 (5th

Cir. 1986).

The court may dismiss, rather than stay, a pending case when all of the claims in the pending case must be submitted to arbitration. Alford v. Dean Witter Reynolds Inc., 975 F.2d 1161, 1164 (5th Cir. 1992); see also Reynolds v. Halliburton Co., 217 F.Supp.2d 756 (S.D. Tex. 2002).

Claims against a non-signatory to an arbitration agreement may be stayed where the claims are inherently inseparable from other claims in the same action that must be arbitrated pursuant to an agreement. See Hill v. G.E. Power Systems Inc., 282 F.3d 343 (5th

Cir. 2002).

C. Compelling Arbitration

A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court which, save for such agreement, would have jurisdiction under Title 28 in a civil action or in admiralty of the subject matter of a suit arising out of the controversy between the parties, for an order directing that such arbitration proceed in the manner provided for in such agreement.

9 U.S.C. § 4.

The court shall hear the parties and, upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not an issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement.

9 U.S.C. § 4.

If the making of the arbitration agreement or the failure, neglect or refusal to perform the arbitration is an issue, the court shall proceed summarily to the trial thereof.

9 U.S.C. § 4.

If no jury trial is demanded by the party alleged to be in default, or if the matter in dispute is within admiralty jurisdiction, the court shall hear and determine such issue.

9 U.S.C. § 4.

The party alleged to be in default may, except in cases of admiralty, demand a jury trial of such issue, and upon such demand the court shall make an order referring the issue to a jury in the manner provided in the Federal Rules of Civil Procedure or may specially call a jury for that purpose.

9 U.S.C. § 4.

If the jury finds that no agreement in writing for arbitration was made or that there is no default in proceeding thereunder, the proceeding shall be dismissed.

9 U.S.C. § 4.

If the jury finds that an agreement for arbitration was made in writing and that there is a default in proceedings thereunder, the court shall make an order summarily directing the parties to proceed with the arbitration in accordance with the terms thereof.

9 U.S.C. § 4.

The FAA does not create independent subject matter jurisdiction. United Offshore Co. v. Southern Deepwater Pipeline Co., 899 F.2d 405, 407 (5th Cir. 1990).

When Texas courts are called on to decide if disputed claims fall within the scope of an arbitration clause under the FAA, Texas procedure controls that determination. Southland Corp. v. Keating, 465 U.S. 1, 16, n. 10, 104 S.Ct. 852, 861, n. 10, 79 L.Ed.2d 1 (1984) (citing “national policy favoring arbitration”); Jack B. Anglin Co. Inc. v. Tipps, 842 S.W.2d 266, 268 (Tex. 1992) (whether claims are arbitrable under FAA or TAA).

Arbitration is a matter of contract. AT&T Tech. Inc. v. Communications Workers of America, 475 U.S. 643, 648, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986).

In determining validity of agreements to arbitrate which are subject to the FAA, we generally apply state-law principles governing the formation of contracts. First Options of Chicago Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985

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Arbitration in Texas: History and Enforceability_______________________________________________________________________________________________________(1995).

The determination of whether parties agreed to arbitrate generally requires a court to summarily answer two questions: (1) is there a valid agreement to arbitrate between the parties, and (2) is the dispute before the court within the scope of the arbitration agreement. Webb v. Investacorp, Inc., 89 F.3d 252, 257-258 (5th Cir. 1996).

Generally, courts have considered the same types of challenges that are raised with respect to the enforcement of contracts in general such as fraud, unconscionability, illegality and waiver. Doctor’s Associates Inc. v. Casarotto, 517 U.S. 681, 687, 116 S. Ct. 1652, 134 L. Ed. 2d 902 (1996). Care must be used in addressing these defenses as they must relate directly to the arbitration provision itself and not to contract as a whole. See In re FirstMerit Bank, 52 S.W.3d 749,756 (Tex. 2001)(citing Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 403-04, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967)).

To determine whether a dispute falls within the scope of an arbitration agreement, courts look the language of the agreement and decide whether the clause is “narrow” or “broad.” Pennzoil Exploration and Prod. Co. v. Ramco Energy Ltd., 139 F.3d 1061, 1067 (5th Cir. 1998). A “narrow” arbitration clause contains language such as “arising out of the contract,” whereas a “broad” arbitration clause contains language such as “related to” or “connected with” the contract. If the language is “narrow,” arbitration must not be compelled unless the dispute “arises from the contract,” but if the clause is “broad,” it embraces all disputes between the parties regardless of the label attached to the dispute. Prima Paint Corp. v. Flood & Conklin Manufacturing Co., 388 U.S. 395, 397-98 (1967) (labeling as “broad” a clause requiring arbitration of “any controversy or claim arising out of or relating to” the agreement).

A party seeking to compel arbitration under the FAA must establish the existence of an arbitration agreement and show that the claims raised fall within the scope of the agreement. Once a party establishes a claim within the arbitration agreement, the trial court must compel arbitration and stay its own proceedings. In re Oakwood Mobile Homes Inc., 987 S.W.2d 571, 573 (Tex. 1999).

A party denied the right to arbitrate pursuant to an agreement subject to the FAA does not have an adequate remedy by appeal and is entitled to mandamus relief to correct a clear abuse of discretion. In re L & L

Kempwood Assocs. L.P., 9 S.W.3d 125, 128 (Tex. 1999).

To sue in federal court to enforce an arbitration claim, a petitioner must demonstrate the existence of federal subject matter jurisdiction on the underlying contract claim. Bank One N.A. v. Shumake, 281 F.3d 507, 513 (5th Cir. 2002).

Under the FAA, whether an arbitration agreement binds a non-signatory is a gateway matter to be determined by courts rather than arbitrators unless the parties clearly and unmistakably provide otherwise. In re Weekley Homes L.P., 180 S.W.3d 127, 130 (Tex.2005).

Although arbitration is a matter of contract that generally binds only signatories, non-signatories can compel arbitration. Brown v. Pacific Life Ins. Co., 462 F.3d 384, 398 (5th Cir. 2006).

When a party disputes the scope of an arbitration provision or raises a defense to the provision, the trial court, not the arbitrator, must decide the issues. Buckeye Check Cashing Inc. v. Cardegna, 546 U.S. 440, 444, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006).

Under the FAA, we have applied estoppel when non-signatories seek a direct benefit from a contract with an arbitration clause, but we have never compelled arbitration based solely on substantially interdependent and concerted misconduct, and for several reasons we decline to do so here. In re Merrill Lynch Trust Co. FSB, 235 S.W.3d 185 (Tex. 2007).

The FAA bestows no federal question jurisdiction, but rather requires an “independent jurisdictional basis” over the parties’ dispute. Vaden v. Discover Bank, 556 U.S. 49, 59, 129 S.Ct. 1262, 173 L.Ed.2d 206 (2009).

Traditional principles of state law allow a contract to be enforced by or against nonparties to the contract through assumption, piercing the corporate veil, alter ego, incorporation by reference, third-party beneficiary theories, waiver and estoppel. Arthur Anderson LLP v. Carlisle, 556 U.S. 624, 631 (2009).

A party seeking to compel arbitration under the FAA must establish that the dispute falls within the scope of an existing agreement to arbitrate. In re Rubiola, 334 S.W.3d 220, 223 (Tex. 2011).

The Fifth Circuit has yet to determine the appropriate standard for reviewing a magistrate judge's

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Arbitration in Texas: History and Enforceability_______________________________________________________________________________________________________ruling on motions to compel arbitration. Lee v. Plantation of Louisiana LLC, 454 F. App'x 358, 360 (5th Cir. 2011) ("[W]e need not reach the question of whether a motion to compel arbitration is a dispositive or non-dispositive motion for purposes of the standard of review by the district judge of the magistrate judge's order.")

The FAA requires a court to make at least a threshold determination of arbitrability—that the dispute is subject to an enforceable agreement to arbitrate—before enforcing the arbitration agreement by compelling arbitration or staying litigation. Venture Cotton Co-op v. Freeman, 435 S.W.3d 222, 227 (Tex. 2014).

The U.S. Supreme Court has recognized a distinction between questions of “substantive arbitrability,” which courts decide, and “procedural arbitrability,” which courts must defer to the arbitrators to decide. Substantive arbitrability addresses the existence, enforceability and scope of an arbitration agreement, whereas procedural arbitrability addresses the construction and application of limits on that agreement. G.T. Leach Builders LLC v. Sapphire VP LP, 458 S.W.3d 502 (Tex. 2015).

D. Fraud

If the fraud claim relates to the making of the arbitration agreement itself, the court should address the fraud claim before enforcing the arbitration agreement. If, however, the fraud claim relates to the entire contract, the court should compel the parties to arbitrate leaving the fraud claim to be decided by the arbitrator. Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 403-404, 18 L. Ed. 2d 1270, 87 S. Ct. 1801 (1967); Miller v. Public Storage Mgmt., 121 F.3d 215, 219 (5th Cir. 1997)(citing R.M. Perez & Associates, Inc., v. Welch, 960 F.2d 534, 538 (5th Cir. 1992).

E. Unconscionability

Arbitration agreements which are unconscionable are not enforceable under the FAA. Doctor’s Associates, Inc. v. Casarotto, 517 U.S. 681, 687-688, 116 S. Ct. 1652, 134 L. Ed. 2d 902 (1996). Whether a contract is unconscionable is a question to be decided under applicable state law. Id. Unconscionability is a question of law for the court to decide. American Employers’ Ins. Co. v. Aiken, 942 S.W.2d 156, 160 (Tex. App.–Fort Worth 1997, no writ).

Adhesion contracts are not automatically unconscionable, and there is nothing per se

unconscionable about arbitration agreements. In re Oakwood Mobile Homes Inc., 987 S.W.2d 571, 574 (Tex.1999). Parties claiming unconscionability bear the burden of demonstrating it. Id.

Under the FAA, unequal bargaining power does not establish grounds for defeating an agreement to arbitrate absent a well-supported claim that the clause resulted from the sort of fraud or overwhelming economic power that would provide grounds for revocation of any contract. Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 33, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991); EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 90-91 (Tex. 1996) (per curiam).

Unconscionability of arbitration clauses includes two aspects: procedural and substantive. Procedural unconscionability refers to the circumstances surrounding adoption of arbitration provision, and substantive refers to the fairness of the arbitration provision itself. In re Halliburton Co., 80 S.W.3d 566, 571 (Tex. 2002). In evaluating the validity of an arbitration provision, courts may consider both procedural and substantive unconscionability. Id. at 571-572.

This determination involves looking at all the circumstances surrounding the making of the agreement, including the relative bargaining strengths of the parties, whether the contract was illegal or against public policy and whether the contract was oppressive or unreasonable. Unconscionability must be determined on a case-by-case basis. In re Turner Brothers Trucking Co. Inc. 8 S.W.3d 370, 376 (Tex. App.–Texarkana 1999, no pet.); American Employers’ Ins. Co. v. Aiken, 942 S.W.2d 156, 160 (Tex. App.–Fort Worth 1997, no writ).

Only claims of unconscionability relating to how the agreement was made should be considered by a court. Claims that the terms of the arbitration agreement are unconscionable should be decided in arbitration and should not keep a court from compelling arbitration. In re Oakwood Mobile Homes, Inc., 987 S.W.2d 571, 573 n.3 (Tex. 1999); Smith v. H.E. Butt Grocery Co., 18 S.W.3d 910, 912 (Tex. App.–Beaumont 2000, pet. denied); In re Foster Mold Inc., 979 S.W.2d 665, 667 (Tex. App.–El Paso 1998, no pet.).

In Texas, mere inequality of bargaining power alone does not make an agreement unconscionable. Smith v. H.E. Butt Grocery Co., 18 S.W.3d 910 (Tex. App.–Beaumont 2000, pet. denied)(unequal bargaining

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Arbitration in Texas: History and Enforceability_______________________________________________________________________________________________________power of employer employee relationship cannot defeat arbitration agreement under FAA). Nor is it unconscionable for the fact there is no bargaining, that the contract is a contract of adhesion, or that the contract is presented as a take-it-or-leave-it proposition. In re Turner Brothers Trucking Co. Inc., 8 S.W.3d 370, 376 (Tex. App.–Texarkana 1999, no pet.). Employers may make a “take it or leave it” offer to at-will employees premising continued employment on acceptance of a new or different arbitration provision. Without more, such an arbitration agreement is not unconscionable. See In re Halliburton Co., 80 S.W.3d 566 (Tex. 2002).

The existence of large arbitration costs could support a finding of an unconscionable arbitration agreement. Green Tree Financial Corp. v. Randolph, 531 U.S. 79 (2000). An arbitration agreement that is silent as to costs and fees is a “plainly insufficient” basis for invalidating the same. Id. Any party opposing arbitration must prove the likelihood of incurring such costs. Id. Following the reasoning in Green Tree Financial Corp v. Randolph, the Texas Supreme Court held that the possibility of an arbitration subjecting a party to substantial costs and fees does not make an arbitration agreement unconscionable. The objecting party must present specific evidence they would be charged excessive fees (specific evidence of the future costs) and the likelihood of incurring such costs. See In re FirstMerit Bank, N.A., 52 S.W.3d at 756-757.

The following are examples of decisions under the FAA finding arbitration agreements unenforceable because they are unconscionable or against public policy:

a. Terms of arbitration agreement failed to preserve the plaintiff’s statutory rights as a result of steep filing fees and other high costs of arbitration. Paladino v. Avnet Computer Technologies Inc., 134 F.3d 1054, 1062 (11th

Cir. 1998); but see, Green Tree Financial Corp. v. Randolph, 531 U.S. 79, 89-92, 121 S. Ct. 513, 148 L. Ed. 2d 373 (2000).

b. Hooters’ arbitration agreement with its employees violated public policy, and contained multiple one-sided, unconscionable provisions. Hooters of America Inc. v. Phillips, 39 F. Supp. 2d 582 (D.S.C. 1998).

c. Arbitration agreement required arbitration in New York City. Miller v. AAACon Auto

Transport Inc., 434 F. Supp. 40 (S.D. Fla. 1977).

d. Arbitration agreement was presented but not explained to a functionally illiterate person. In re Turner Brothers Trucking Co. Inc., 8 S.W.3d 370, 376 (Tex. App.–Texarkana 1999, no pet.).

F. Waiver

Arbitration of disputes is strongly favored under federal law. Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 941-42, 74 L.Ed.2d 765 (1983). Accordingly, a presumption exists against the waiver of a contractual right to arbitration. Moses H. Cone, 460 U.S. at 24-25, 103 S.Ct. at 941-42.

Whether a party’s conduct waives its arbitration rights under the FAA is a question of law. In re Bruce Terminix Co., 988 S.W.2d 702, 704 (Tex. 1998) (courts will not find that a party has waived its right to enforce an arbitration clause by merely taking part in litigation unless it has substantially invoked the judicial process to its opponent’s detriment).

The decision to arbitrate is one best made at the onset of the case. Walker v. J.C. Bradford, 938 F.2d 575, 577 (5th Cir. 1991).

A party waives its right to arbitration when it “substantially invokes the judicial process to the detriment or prejudice of the other party.” Miller Brewing Co. v. Fort Worth Distributing Co., 781 F.2d 494, 497 (5th Cir. 1986) (plaintiff’s decision to file suit without mentioning its desire to arbitrate was an indication of disinclination to arbitrate).

In order to substantially invoke the judicial process, a party must have litigated the claim that the party now proposes to arbitrate by engaging in some overt act in court that demonstrates a desire to resolve the arbitrable dispute through litigation rather than arbitration. Subway Equipment Leasing Corp. v. Forte, 169 F.3d 324, 328-29 (5th Cir. 1999).

However, waiver of arbitration is not to be lightly inferred considering the overriding federal policy favoring arbitration. See Id., Valero Refining Inc. v. MIT Lauberhorn, 813 F.2d 60, 66 (5th Cir. 1987). Because waiver is typically defined as the knowing and voluntary relinquishment of a known right, “the invocation of the judicial process that affects a waiver requires the waiving party to demonstrate a desire to

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Arbitration in Texas: History and Enforceability_______________________________________________________________________________________________________resolve the arbitrable dispute through litigation rather than arbitration.” See In re Enron, 391 F.Supp.2d at 566-567. Actions constituting waiver of the right to arbitrate may include the movant's engaging in some combination of filing an answer, setting up a counterclaim, pursuing discovery and moving for a continuance prior to moving for a stay pending arbitration. Parcel Tankers Inc. v. Formosa Plastics Corp., 569 F.Supp. 1459 (S.D. Tex. 1983).

An agreement to arbitrate can be waived just like any other contractual right. Generally, courts find waiver when a party has substantially invoked the judicial process to the detriment or prejudice of the other party. Williams v. CIGNA Financial Advisors Inc., 56 F.3d 656, 661 (5th Cir. 1995). Factors to be considered include how long the litigation has been proceeding, the activity in and status of the litigation, the advantage gained by activity in litigation such as conducting discovery not available in arbitration, the delay and expense involved and the rulings obtained from the court. In re Certain Underwriters at Lloyd’s, 18 S.W.3d 867, 872 (Tex. App.–Beaumont 2000, no pet.). The determination of whether there has been a waiver can be left to the arbitrator to decide but often the determination is made by the court. In re Certain Underwriters at Lloyd’s, 18 S.W.3d 867, 871 (Tex. App.–Beaumont 2000, no pet.). The following are examples of courts finding waiver:

a. A party engaged in substantial pre-trial litigation for almost fifteen months, failed to assert right to arbitrate as affirmative defense, asserted a counterclaim, and actively participated in pre-trial discovery. S & R Co. v. Latona Trucking Inc., 984 F. Supp. 95, 103 (N.D. N.Y. 1997).

b. A party participated in pretrial proceedings for eleven months, filed a motion to dismiss and a motion to disqualify opposing counsel, participated in discovery including depositions, participated in discovery disputes, and opposed class certification. Hoxworth v. Blinder Robinson & Co. Inc., 980 F.2d 912, 925 (3rd Cir. 1992).

c. A party participated in litigation for seventeen months, initiated extensive discovery, filed two answers, filed motions to dismiss and a motion for summary judgment. Price v. Drexel Burnham Lambert Inc., 791 F.2d 1156 (5th Cir. 1986).

d. A party did not seek arbitration until one month

before trial. Marble Slab Creamery Inc., v. Wesic Inc., 823 S.W.2d 436, 438 (Tex. App.–Houston [1st Dist.] 1992, no writ).

e. A party delayed seeking arbitration and participated in the judicial process for almost one year, resulting prejudice to the other party. EZ Pawn Corp. v. Gonzalez, 921 S.W.2d 320, 324 (Tex. App.–Corpus Christi 1996, writ denied).

Waiver was not found when party removed case to federal court, filed motion to dismiss, motion to stay, an answer, asserted a counterclaim and participated in discovery and filed a motion to compel arbitration about four months after the removal of the suit which was when the arbitration agreement was discovered. Williams v. CIGNA Financial Advisors Inc., 56 F.3d 656, 661 (5th Cir. 1995).

G. Other Contract Defenses

An arbitration agreement in a contract may be unenforceable if the contract is void for illegality. Eastern Marine Corp. v. Fukaya Trading Co., 364 F.2d 80, 83 (5th Cir. 1966). However, courts will often enforce arbitration clauses upon finding the illegal clause in the contract was not so central to the contract as to require the entire contract to be held void. This can be true regardless of whether the contract contains a savings or severability clause. Chattanooga Mailers Union Local No. 92 v. Chattanooga News-Free Press Co., 524 F.2d 1305, 1313 (6th Cir. 1975). In addition, when the illegality is not a part of the arbitration agreement, courts have held the arbitration agreement is to be enforced even if the contract might be declared illegal and the determination of whether the contract is illegal is to be resolved by the arbitrator and not the court. Hydrick v. Management Recruiters International, Inc., 738 F. Supp. 1434, 1435- 1436 (N.D. Ga. 1990). Even illegal provisions in the arbitration agreement itself, such as requirements illegally imposing arbitration fees on a party, have been stricken in order to allow the remainder of the arbitration agreement to be enforced. Fuller v. Pep-Boys - Manny, Moe & Jack of Delaware, Inc., 88 F. Supp. 2d 1158, 1162 (D. Colo. 2000).

If the arbitration agreement is governed by the FAA, courts may not invalidate arbitration agreements under state laws applicable only to arbitration agreements. Arbitration agreements under the FAA are only subject to state laws generally applicable to all contracts. Doctor’s Associates

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Arbitration in Texas: History and Enforceability_______________________________________________________________________________________________________Inc. v. Casarotto, 517 U.S. 681, 687, 116 S. Ct.1652, 134 L. Ed. 2d 902 (1996).

An allegation by a party that the arbitration agreement was entered into under duress must specifically concern the arbitration agreement itself, and not the contract as a whole. Service Corp. Intern. v. Lopez, 162 S.W.3d 801, 809 (Tex. App.—Corpus Christi 2005, no pet.). Economic duress is sufficient to set aside arbitration agreement and avoid arbitration. See In re RLS Legal Solutions LLC, 156 S.W.3d 160 (Tex. App.–Beaumont 2005, no pet. h.)(court found economic duress sufficient to avoid arbitration where employer withheld payment to employee for worker already performed until employee signed employment agreement with arbitration clause where employee was sole income provider for her household and needed pay). Cases addressing the issue of duress include In re First Merit, 52 S.W.3d 749 (Tex. 2001) and In re Oakwood Mobile Homes, 987 S.W.2d 571, 573 (Tex. 1999).

If the allegation is that duress caused a party to enter into the arbitration agreement, that allegation is to be decided by the court prior to compelling arbitration. However, if the allegation is that duress caused a party to enter into the entire contract, the court should compel arbitration and let the arbitrator determine claims of duress. Acquaire v. Canada Dry Bottling, 906 F. Supp. 819, 826 (E.D. N.Y. 1995). Proving a claim of duress is both difficult and rare. Id.; S + L + H S.p.A. v. Miller - St. Nazianz Inc., 988 F.2d 1518, 1528 (7th Cir. 1993); Hellenic Lines Ltd. v. Louis Dreyfus Corp., 372 F.2d 753, 758 (2nd Cir. 1967).

If the allegation is that the entire contract fails for lack of consideration, the arbitration agreement will still be enforced because the mutual agreement to arbitrate a claim is sufficient consideration for the arbitration agreement alone. Lacheney v. Profitkey International Inc., 818 F. Supp. 922, 925 (E.D. Va. 1993). However, if the arbitration agreement is not mutual, but applies only to one party, the arbitration agreement may be unenforceable for lack of consideration even when there is other and adequate consideration for the entire contract. Hull v. Norcom Inc., 750 F.2d 1547 (11th Cir. 1985).

A statute of limitations defense can relate to the specific cause of action involved, or can relate to temporal limitations within the contract or arbitration agreement, such as the time within which an arbitration claim must be brought. Ultimately, who decides a limitations defense begins with a determination of the intent of the parties as expressed

in their agreement. More often than not, the courts decide this issue is one to be determined by the arbitrator, however, there are numerous decisions placing the decision in the court’s hands. The issues involved in determining whether a limitations defense is to be decided by the court or by the arbitrator are complex, but a good introduction to the issues involved can be found in the following opinions: Porter Hayden Co. v. Century Indemnity Co., 136 F.3d 380 (4th Cir. 1998), Painwebber Inc., v. Elahi, 87 F.3d 589 (1st Cir. 1996) and FSC Securities Corp. v. Freel, 14 F.3d 1310 (8th Cir. 1994).

Arbitration agreements in Texas may modify existing statutory limitations. See generally EZ Pawn Corp. v. Mancias, 934 S.W.2d 87 (Tex. 1996).

An arbitration agreement contained within a contract survives the termination or repudiation of the contract as a whole. See Henry v. Gonzalez, 18 S.W.3d 684, (Tex. App.–San Antonio, 2000, pet. dism’d by agr.). This is so unless the parties have expressly stated or clearly implied their intention that their arbitration obligations cease with the contract. Mississippi Ins. Managers Inc. v. Providence Washington Ins. Co., 72 F. Supp. 2d 689, 695 (S.D. Miss. 1999).

Res judicata is a defense that a court could leave to an arbitrator to decide. However, most courts will determine a claim of res judicata, and, if appropriate, order a stay or injunction of, or bar to arbitration. Kelly v. Merrill Lynch Pierce Fenner & Smith Inc., 985 F.2d 1067, 1070 (11th Cir. 1993); and Miller Brewing Co. v. Fort Worth Distributing Co. Inc., 781 F.2d 494 (5th Cir. 1986).

H. Appointment of Arbitrators

If in the agreement provision be made for a method of naming or appointing an arbitrator, arbitrators or an umpire, such method shall be followed.

9 U.S.C. § 5.

If no method be provided therein, or if a method be provided and any party thereto shall fail to avail himself of such method, or if for any other reason there shall be a lapse in the naming of an arbitrator or arbitrators or umpire, or in filling a vacancy, then upon the application of either party to the controversy the court shall designate and appoint an arbitrator or arbitrators or umpire, as the case may require, who shall act under the agreement with the same force and

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Arbitration in Texas: History and Enforceability_______________________________________________________________________________________________________effect as if he or they had been specifically named therein.

9 U.S.C. § 5.

The arbitrator's authority is ultimately governed by the arbitration agreement. See generally, General Motors Corp. v. Pamela Equities Corp., 146 F.3d 242 (5th Cir. 1998); see also Lundgren v. Freeman, 307 F.2d 104 (9th Cir. 1962). Accordingly, it may be well worthwhile to include in arbitration agreement provisions concerning the number and appointment of arbitrators, disqualification and/or objection to arbitrators, filling of vacancies of arbitrators, and authority and recusal of arbitrators in contracts involving interstate commerce. Once a dispute actually arises, the parties should supplement the contract with an agreement defining the issue to be submitted to the arbitrator and by explicitly giving the arbitrator(s) authority to act. Pamela Equities Corp., 146 F.3d at 244.

I. Arbitration Hearing

The arbitrators may summon in writing any person to attend before them or any of them as a witness and in a proper case to bring with him or them any book, record, document or paper which may be deemed material as evidence in the case.

9 U.S.C. § 7.

If any person so summoned to testify shall refuse or neglect to obey the summons, upon petition the United States district court for the district in which such arbitrators are sitting may compel the attendance of such person before the arbitrators or punish the person for contempt in the same manner provided by law for securing the attendance of a witness or their punishment for neglect or refusal to attend in the courts of the United States.

9 U.S.C. § 7.

J. Confirmation of Award

If the parties in their agreement have agreed that a judgment of the court shall be entered upon the award made pursuant to the arbitration, and shall specify the court, then at any time within one year after the award is made any party to the arbitration may apply to the court so specified for an order confirming the award, and thereupon the court must grant such an order unless the award is vacated, modified, or corrected.

9 U.S.C. § 9.

If no court is specified in the agreement of the parties, then such application may be made to the United States court in and for the district within which such award was made.

9 U.S.C. § 9.

Notice of the application shall be served upon the adverse party, and thereupon the court shall have jurisdiction of such party as though he had appeared generally in the proceeding.

9 U.S.C. § 9.

If the adverse party is a resident of the district within which the award was made, such service shall be made upon the adverse party or his attorney as prescribed by law for service of notice of motion in an action in the same court. If the adverse party shall be a nonresident, then the notice of the application shall be served by the marshal of any district within which the adverse party may be found in like manner as other process of the court.

9 U.S.C. § 9.

Federal procedure applies in federal courts applying the FAA, but federal procedure does not apply in Texas courts, even when Texas courts apply the FAA. Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 272 (Tex. 1992); see also Roehrs v. FSI Holdings Inc., 246 S.W.3d 796, 804 (Tex. App.-Dallas 2008, pet. denied) (procedural matters relating to the confirmation of arbitration awards in Texas courts are governed by Texas law even if the FAA supplies the substantive rules of decision); Holcim (Tex.) Ltd. P'ship v. Humboldt Wedag Inc., 211 S.W.3d 796, 800-01 (Tex. App.-Waco 2006, no pet.) (when Texas courts confront procedural issues involving case subject to FAA, Texas procedural rules apply instead of federal rules); J.D. Edwards World Solutions Co. v. Estes Inc., 91 S.W.3d 836, 839 (Tex. App.-Fort Worth 2002, pet. denied) (citing Jack B. Anglin Co., 842 S.W.2d at 272).

K. Vacating Awards

In any of the following cases the United States court in and for the district wherein the award was made may make an order vacating the award upon the application of any party to the arbitration:

(1) where the award was procured by corruption,

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fraud, or undue means;

(2) where there was evident partiality or corruption in the arbitrators, or either of them;

(3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing...or refusing to hear evidence pertinent to and material to the controversy; or any other behavior by which the rights of any party had been prejudiced;

(4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter was not made.

9 U.S.C. § 10(a).

If an award is vacated, and the time within which the agreement required the award to be made has not expired, the court may, in its discretion, direct a rehearing by the arbitrators.

9 U.S.C. § 10(b).

In light of the strong federal policy favoring arbitration, judicial review of an arbitration award is extraordinarily narrow. Gulf Coast Indus. Worker's Union v. Exxon Co., 70 F.3d 847, 850 (5th Cir. 1995).

An appellate court reviews an order vacating an arbitration award de novo, a standard that is "intended to reinforce the strong deference due an arbitrative tribunal." Mcllroy v. PaineWebber Inc., 989 F.2d 817, 820 (5th Cir. 1993); In re Chestnut Energy Partners Inc., 300 S.W.3d 386, 397 (Tex. App.-Dallas 2009, pet. denied).

A party may vacate an arbitration award when "there was evident partiality or corruption in the arbitrators, or either of them." 9 U.S.C. § 10(b). "Evident partiality" means more than a mere appearance of bias. International Produce v. A/S Rosshavet, 638 F.2d 548, 552 (2d Cir.), cert. denied, 451 U.S. 1017, 101 S.Ct. 3006, 69 L.Ed.2d 389 (1981). As arbitrators are usually knowledgeable individuals in a given field, often they have interests and relationships that overlap with the matter they are considering as arbitrators. The mere appearance of bias that might disqualify a judge will not disqualify an arbitrator. Id.

A reviewing court examining whether arbitrators exceeded their powers must resolve all doubts in favor of arbitration. Executone Information Systems Inc. v.

Davis, 26 F.3d 1314, 1320-21 (5th Cir. 1994).

Appellate courts indulge all reasonable presumptions in favor of the award and none against it. CVN Group Inc. v. Delgado, 95 S.W.3d 234, 238 (Tex. 2002).

An arbitration award has the same effect as a judgment of a court of last resort, and a court reviewing the award may not substitute its judgment for the arbitrator's merely because the court would have reached a different decision. CVN Group Inc. v. Delgado, 95 S.W.3d 234, 238 (Tex. 2002); Statewide Remodeling, Inc. v. Williams, 244 S.W.3d 564, 568 (Tex. App.-Dallas 2008, no pet.).

The FAA’s grounds for vacatur are exclusive and cannot be supplemented by contract. Hall Street Associates LLC v. Mattel Inc., 552 U.S. 576, 578, 128 S.Ct. 1396, 170 L.Ed.2d 254 (2008).

Vacatur or enforcement proceedings are exceptional, occurring in only 11% of all arbitrations. PriceWaterhouseCoopers, International Arbitration: Corporate Attitudes and Practices (2008).

Manifest disregard of the law is no longer an independent ground for vacating an arbitration award under the FAA. Citigroup Global Markets Inc. v. Bacon, 562 F.3d 349, 350 (5th Cir. 2009).

Texas follows Hall Street when applying the FAA. Nafta Traders Inc. v. Quinn, 339 S.W.3d 84, 91 (Tex. 2011).

In confirming an arbitration award, appellate courts review the district court’s factual findings for clear error, and review the district court’s conclusions of law de novo. Tricon Energy Ltd. v. Vinmar International Ltd., 718 F.3d 448, 452-53 (5th Cir. 2013).

L. Modifying or Correcting Award

In either of the following cases the United States court in and for the district wherein the award was made may make an order modifying or correcting the award upon the application of any party to the arbitration:

(a) Where there was an evident material miscalculation of figures or an evident material mistake in the description of any person, thing or property referred to in the award.

24


















(b) Where the arbitrators have awarded upon a matter not submitted to them, unless it is a matter not affecting the merits of the decision upon the matter submitted.

(c) Where the award is imperfect in matter of form not affecting the merits of the controversy.

The order may modify and correct the award so as to affect the intent thereof and promote justice between the parties.

9 U.S.C. § 11.

Notice of a motion to vacate, modify, or correct an award must be served upon the adverse party or his attorney within three months after the award is filed or delivered.

9 U.S.C. § 12.

Arbitrators derive their authority from the arbitration agreement, and that authority is limited to a decision of the matters submitted therein, either expressly or by necessary implication. Gulf Oil Corp. v. Guidry, 327 S.W.2d 406, 408 (Tex. 1959); Allstyle Coil Co. L.P. v. Carreon, 295 S.W.3d 42, 44 (Tex. App.—Houston [1st Dist.] 2009, no pet.) (scope of authority depends on the agreement).

Arbitrators exceed their powers when they decide matters not properly before them. Ancor Holdings LLC v. Peterson, Goldman & Villani Inc., 294 S.W.3d 818, 829 (Tex. App.—Dallas 2009, no pet.); Barsness v. Scott, 126 S.W.3d 232, 241 (Tex. App.—San Antonio 2003, pet. denied).

When determining whether an arbitrator has exceeded his powers, any doubts concerning the scope of what is arbitrable should be resolved in favor of arbitration. See Myer v. Americo Life Inc., 232 S.W.3d 401, 408 (Tex. App.—Dallas 2007, no pet.).

It is only when the arbitrator departs from the agreement, and, in effect, dispenses his own idea of justice that the award may be unenforceable. Major League Baseball Players Assn v. Garvey, 532 U.S. 504, 509 (2001).

An arbitrator has broad discretion in fashioning an appropriate remedy. Roe v. Ladymon, 318 S.W.3d 502, 523 (Tex. App.—Dallas 2010, no pet.).

An arbitrator's award is “legitimate only so long as it draws its essence” from the parties' agreement.

United Steelworkers of Am. v. Enter. Wheel & Car. Corp., 363 U.S. 593, 597 (1960); Ancor Holdings, 294 S.W.3d at 830. To draw its essence from the agreement, the arbitrator's award “must have a basis that is at least rationally inferable, if not obviously drawn, from the letter or purpose of the ... agreement.... [T]he award must, in some logical way, be derived from the wording or purpose of the contract.” Executone Info. Sys. Inc. v. Davis, 26 F.3d 1314, 1325 (5th Cir. 1994); see Ancor Holdings, 294 S.W.3d at 830 (quoting Executone). “The arbitrator's selection of a particular remedy is given even more deference than his reading of the underlying contract, ... [and] the remedy lies beyond the arbitrator's jurisdiction only if ‘there is no rational way to explain the remedy handed down by the arbitrator as a logical means of furthering the aims of the contract.’” Executone, 26 F.3d at 1325 (quoting Brotherhood of R.R. Trainmen v. Cent. of Ga. Ry. Co., 415 F.2d 403, 412 (5th Cir. 1969)). However, “[w]here an arbitrator exceeds his contractual authority, vacation or modification of the award is an appropriate remedy.” Am. Eagle Airlines, Inc. v. Air Line Pilots Ass'n Int'l, 343 F.3d 401, 406 (5th Cir. 2001) (quoting Delta Queen Steamboat Co. v. Dist. 2 Marine Eng'rs Beneficial Ass'n, AFL–CIO, 889 F.2d 599, 602 (5th Cir. 1989)).

To determine whether an award is beyond the scope of the arbitrator's powers, courts look only at the result. “The single question is whether the award, however arrived at, is rationally inferable from the contract.” Anderman/Smith Operating Co. v. Tenn. Gas Pipeline Co., 918 F.2d 1215, 1219 n. 3 (5th Cir. 1990); see Ancor Holdings, 294 S.W.3d at 829 (“The award must be derived in some way from the wording and purpose of the agreement, and we look to the result reached to determine whether the award is rationally inferable from the contract.”).

M. Appeals

Under the FAA, an appeal may be taken from

(1) an order

(a) refusing a stay of any action under 9 U.S.C § 3,

(b) denying a petition under 9 U.S.C. § 4 to order arbitration to proceed,

(c) denying an application under 9 U.S.C. § 206 to compel arbitration,

25








































(d) confirming or denying confirmation of an award or partial award, or

(e) modifying, correcting or vacating an award.

(2) an interlocutory order granting, continuing, or modifying an injunction against an arbitration that is subject to 9 U.S.C., or

(3) a final decision with respect to an arbitration that is subject to 9 U.S.C.

9 U.S.C. § 16(a).Except as otherwise provided in 28 U.S.C. §

1292(b), an appeal may not be taken from an interlocutory order

(1) granting a stay of any action under 9 U.S.C. § 3,

(2) directing arbitration to proceed under 9 U.S.C. § 4,

(3) compelling arbitration under 9 U.S.C. § 206, or

(4) refusing to enjoin an arbitration that is subject to 9 U.S.C.

9 U.S.C. § 16(b).

Fifth Circuit precedent firmly establishes that in pending, non-independent suits, an order compelling arbitration accompanied by a stay of the proceedings pending arbitration is not a final decision for purposes of § 16(a)(3). McDermott Int’l v. Underwriters at Lloyds, 981 F.2d 744, 748 (5th Cir. 1993).

The FAA prohibits appeals from interlocutory orders compelling arbitration, but permits appeals from final orders compelling arbitration. An order is final if it ends the litigation on the merits and leaves nothing for the court to do but execute the judgment. In determining whether an order affecting arbitration is final or interlocutory, most courts distinguish between arbitration actions that are “independent” and those that are “embedded” among other claims. If the only issue before the court is the dispute’s arbitrability, the action is considered independent and a court’s decision on that issue constitutes a final decision. If, however, the case includes other claims for relief, an arbitrability ruling does not end the litigation on the merits, and is considered interlocutory only. Sphere Drake Ins. PLC v. Marine Towing Inc., 16 F.3d 666, 668 (5th Cir. 1994).

First Options does not specifically displace or allude to the jurisprudence that has developed under § 16 limiting appeals of orders to arbitrate, and does not answer the question of whether the finality of an arbitration order should be judged by considering as a threshold matter whether the proceeding is “embedded” or “independent.” Rather, First Options places the burden on the district court to look closely at the agreement between the parties to determine whether the parties agreed to arbitrate the issue of arbitrability. F.C. Schaffer & Associates Inc. v. Demech Contractors Ltd., 101 F.3d 40, 42 (5th Cir. 1996).

A party denied the right to arbitrate under the FAA by a state court has no adequate remedy by appeal and is entitled to mandamus relief to correct a clear abuse of discretion. L&L Kempwood Associates v. Omega Builders Inc., 9 S.W.3d 125, 128 (Tex. 1999).

A party denied the right to arbitrate under the FAA is entitled to mandamus relief. In re Wood, 140 S.W.3d 367, 370 (Tex. 2004) (per curiam).

The FAA does not bestow federal jurisdiction, but requires an independent jurisdictional basis. Hall Street Associates LLC v. Mattel Inc., 552 U.S. 576, 581-82 (2008).

V. RELATED STATUTES

In a matter subject to the FAA, a person may take an appeal to the court of appeals from the judgment or interlocutory order of a district court, county court at law, or county court under the same circumstances that an appeal form a federal district court’s order or decision would be permitted by 9 U.S.C. § 16.


TCPRC now provides for the interlocutory appeal of a trial court’s denial of a motion to compel arbitration under the FAA. Cotton Commercial USA Inc. v. Clear Creek ISD, 387 S.W.3d 99, 103 n.3 (Tex. App.—Houston [14th Dist.] 2012, no pet.).

The Texas Legislature did not enact TEX. CIV. PRAC. & REM. CODE § 74.451 (Medical Liability Act arbitration) for the purpose of “regulating the business of insurance” as that phrase has been interpreted under the McCarran-Ferguson Act, such that § 74.451 is preempted by the FAA. Fredericksburg Care Co. v. Perez, 461 S.W.3d 513 (Tex. 2015).

It is the policy of the State of Texas to encourage

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Arbitration in Texas: History and Enforceability_______________________________________________________________________________________________________the peaceful resolution of disputes, and the early settlement of pending litigation through voluntary settlement procedures.


Section 154.002 expresses the general policy that peaceable resolution of disputes is to be encouraged through voluntary settlement procedures. However, a court cannot force the disputants to peaceably resolve or negotiate their differences. Hanson v. Sullivan, 886 S.W.2d 467, 469 (Tex. App.—Houston [1st Dist.] 1994, orig. proceeding.

It is the responsibility of all trial and appellate courts and their court administrators to carry out the policy under § 154.002.


The Texas legislature has expressly declared the state’s policy of encouraging the peaceable settlement of citizens’ disputes, and has placed on the courts the responsibility for carrying out that policy. Adams v. Petrade International, 754 S.W.2d 696, 715 (Tex. App.—Houston [1st Dist.] 1988, writ denied).

The ADR Act establishes a definite state policy to encourage the early settlement of pending litigation through voluntary settlement procedures and places the responsibility for carrying out this procedure on both the trial and appellate courts. Downey v. Gregory, 757 S.W.2d 524, 525 (Tex. App.—Houston [1st Dist.] 1988, orig. proceeding).

A court may, on its own motion or the motion of a party, refer a pending dispute for resolution by an alternative dispute resolution procedure, including an ADR system established by counties under Chapter 152, a dispute resolution organization, or a non-judicial and informally conducted forum for the voluntary settlement of citizens’ disputes through the intervention of an impartial third party, including those ADR procedures described in Chapter 154, Subchapter B. The court shall confer with the parties in the determination of the most appropriate ADR procedure.


Under Chapter 154, a trial judge on its own motion or on the motion of a party may refer a pending dispute for resolution by an ADR procedure. Gleason v. Lawson, 850 S.W.2d 714, 717 (Tex. App.—Corpus Christi 1993, no writ).

The parties may file, within the time for filing objections to the referral, a written proposal suggesting the most appropriate ADR procedure. Paul v. Paul, 870 S.W.2d 349, 350 (Tex. App.—Waco 1994, no writ).

With certain exceptions, a communication relating to the subject matter of any civil or criminal dispute made by a participant in an ADR procedure, whether before or after the institution of formal judicial proceedings, is confidential, is not subject to disclosure, and may not be used as evidence against the participant in any judicial or administrative proceeding.


Any record made at an ADR procedure is confidential, and the participants or the third party facilitating the procedure may not be required to testify in any proceedings relating to or arising out of the matter in dispute or be subject to process requiring disclosure of confidential information or data relating to or arising out of the matter in dispute.


An oral communication or written material used in or made a part of an ADR procedure is admissible or discoverable if it is admissible or discoverable independent of the procedure.


VI.ENFORCEABILITY OF ARBITRATION IN ATTORNEY EMPLOYMENT CONTRACTS

Arbitration clauses in attorney-client employment contracts are not presumptively unconscionable. Royston v. Lopez, 2015 Tex. LEXIS 622 (the mere fact that an arbitration clause is one-sided does not make it illusory).

A legal malpractice claim is not classified as a personal injury claim for purposes of TAA § 171.002(a)(3). In re Pham (Pham v. Letney), 314 S.W.3d 520, 526 (Tex. App.—Houston [14th Dist.] 2010, orig. proceeding); In re Hartigan, 107 S.W.3d 684, 692 (Tex. App.—San Antonio 2003, orig. proceeding); Porter & Clements LLP. v. Stone, 935 S.W.2d 217, 219-22 (Tex. App.—Houston [1st Dist.] 1996, no writ).

The Houston Courts of Appeals have issued

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Arbitration in Texas: History and Enforceability_______________________________________________________________________________________________________several opinions regarding attorney-client arbitration agreements and have taken a strong position in favor of such agreements. Pham, 314 S.W.3d at 526; Chambers v. O'Quinn, 305 S.W.3d 141, 149 (Tex. App.—Houston [1st Dist] 2009, pet. denied). Under this line of opinions, a fiduciary relationship between attorney and client does not exist before the client signs the employment contract containing the arbitration agreement, and therefore attorneys are not required to fully explain all implications of the arbitration clause. See, .e.g., Pham, 314 S.W.3d at 526. Further, courts should defer to the Legislature with regard to the imposition of any conditions on arbitration provisions between attorney and client. Id. at 528; Chambers v. O'Quinn, 305 S.W.3d 141, 149 (Tex. App.—Houston [1st Dist] 2009, pet. denied). Cases upholding attorney-client arbitration proceedings have engendered passionate and articulate dissenting opinions:

“Notwithstanding the application of settled contract law and public policy favoring alternate dispute resolution, many respected jurists and lawyers oppose arbitration because it is not cost effective, disgorges unwary consumers of the right to a jury trial, and eliminates appellate review for errors of law. I remain a proponent of arbitration. However, when the legislature and rule-making authority in the legal profession fail to protect consumers of legal services, I believe the courts have an obligation to act because public perception of the legal profession's ability to self-police is not favorable.”

Pham, 314 S.W.3d at 528-29 (Seymore, J., dissenting); see also Henry v. Gonzalez, 18 S.W.3d 684, 692 (Tex. App.—San Antonio 2000, pet. dism'd); (Hardberger, C.J., dissenting).

Under the TAA, there are enforceability issues which arise above and beyond the public policy concerns related to arbitration agreements between lawyers and their clients. In In re Godt, 28 S.W.3d 732, 738 (Tex. App.–Corpus Christi 2000, no pet.), the court determined that a legal malpractice claim is a personal injury action. Therefore, under the TAA, an arbitration agreement covering such a claim would have to be signed by each party and by each party’s counsel. As a result, the Corpus Christi Court of Appeals refused to enforce the arbitration agreement in Godt. The court in Godt expressly chose not to address the argument that the arbitration agreement was unenforceable on policy

grounds. In re Godt, 28 S.W.3d 732, 738-739 (Tex. App.–Corpus Christi 2000, no pet.). However, the court did note that Rule 1.08(g) of the Texas Disciplinary Rules of Professional Conduct provides in relevant part: “[A] lawyer shall not make an agreement prospectively limiting the lawyer’s liability to a client for malpractice unless permitted by law and the client is independently represented in making the agreement.” Id. at 739 n.7.

In contrast, Taylor v. Wilson, 180 S.W.3d 627 (Tex. App.–-Houston [14 Dist.] 2005)(pet. filed) held a legal malpractice claim against a law firm was not a claim for “personal injury” within the meaning of the personal injury exception of the TAA. The court, therefore, reversed the trial court’s denial of the motion to compel and remanded with instructions for the trial court to enter an order compelling arbitration. The San Antonio and Amarillo Courts of Appeals have used similar reasoning. See In re Hartigan, 107 S.W.3d 684, 690 (Tex. App.–-San Antonio 2003, no pet. h.); Miller v. Brewer, 118 S.W.3d 896, 898-899 (Tex. App.–Amarillo 2003, no pet.).

VII. RELEVANT DECISIONS FROM THE TEXAS SUPREME COURT

City of San Antonio v. McKenzie Construction Co., 150 S.W.2d 989 (Tex. 1941). When parties to a building contract agree to submit questions which may arise thereunder to the decision of the engineer, his decision is final and conclusive unless in making it he is guilty of fraud, misconduct, or such gross mistake as would imply bad faith or failure to exercise an honest judgment.

Brazoria County v. Knutson, 176 S.W.2d 740 (Tex. 1943). Arbitration is a proceeding so favored by Texas law that both our Constitution and statutes provide for the submission of differences to arbitration.

L. H. Lacy Co. v. City of Lubbock, 559 S.W.2d 348 (Tex. 1977). The settlement of disputes by arbitration has been favored in Texas law, and a policy encouraging agreements to arbitrate is preferable. Arbitration in Texas can be pursuant to statute or common law.

Jack B. Anglin Co. Inc. v. Tipps, 842 S.W.2d 266 (Tex. 1992). When Texas courts are called on to decide if disputed claims fall within the scope of an arbitration clause under the FAA, Texas procedure controls that determination. Federal law preempts application of the non-waiver provision of the DTPA

28

Arbitration in Texas: History and Enforceability_______________________________________________________________________________________________________to prevent or restrict enforcement of an arbitration agreement.

Capital Income Properties-LXXX v. Blackmon, 843 S.W.2d 22 (Tex. 1992). The FAA, which applies to transactions “involving commerce,” dictates enforcement of an arbitration agreement upon evidence that a written agreement to arbitrate exists and that the claims raised are within the scope of the agreement. The FAA is part of the substantive law of Texas. A party denied the benefit of an agreement to arbitrate is without an adequate remedy by appeal when pursuing application of the FAA in state court, and mandamus is therefore appropriate.

Penrod Drilling Corp. v. Williams, 868 S.W.2d 294, 296 (Tex. 1993). On issues of federal law, such as the proper interpretation of the FAA, courts must follow the decisions of the United States Supreme Court and the Texas Supreme Court. The decisions of other federal courts may be persuasive but are not binding.

Freis v. Canales, 877 S.W.2d 283 (Tex. 1994). A party who has not agreed to arbitration has a right to have disputes resolved by litigation. Arbitration cannot be ordered in the absence of an arbitration agreement.

Prudential Securities Inc. v. Marshall, 909 S.W.2d 896 (Tex. 1995). Arbitration of disputes is strongly favored under federal and state law. Under the FAA, doubts as to whether a claim falls within the scope of arbitration is determined under federal law and must be resolved in favor of arbitration. The policy in favor of enforcing arbitration agreements is so compelling that a court should not deny arbitration “unless it can be said with positive assurance that an arbitration clause is not susceptible of an interpretation which would cover the dispute at issue.” A presumption exists against the waiver of a contractual right to arbitration. A party does not waive a right to arbitration merely by delay. A party urging waiver must establish that any delay resulted in prejudice.

Cantella & Co. Inc. v. Goodwin, 924 S.W.2d 943 (Tex. 1996). A presumption exists in favor of agreements to arbitrate under the FAA, and courts must resolve any doubts about an agreement to arbitrate in favor of arbitration. Once a party seeking to compel arbitration establishes that an agreement exists under the FAA and that claims raised are within the agreement’s scope, the trial court has no discretion but to compel arbitration and stay its proceedings pending arbitration.

EZ Pawn Corp. v. Mancias, 934 S.W.2d 87 (Tex.

1996). The FAA disfavors waiver. There is a strong presumption against waiver, and the burden to prove waiver is a heavy one. Waiver of arbitration must be intentional, and in cases where litigation has begun will be found only when the party seeking to enforce the agreement substantially invokes the judicial process to the other party’s detriment. Propounding interrogatories and requests for production of documents, noticing a single deposition, and agreeing to a trial resetting did not amount to a waiver of arbitration, nor is there waiver where party waited ten months before moving to arbitrate because the party did not learn of the agreement’s existence until litigation had already begun.

Morgan Stanley & Co. v. Texas Oil Co., 958 S.W.2d 178 (Tex. 1997). A person must be a stranger to a contract to tortiously interfere with it. Thus, a signatory generally is not requited to arbitrate a tortious interference claim against a complete stranger to his contract and its arbitration clause.

Burlington Northern Railroad Company v. TUCO Inc., 960 S.W.2d 629 (Tex. 1997). Under the TAA, a neutral arbitrator selected by the parties or their representatives exhibits evident partiality if the arbitrator does not disclose facts which might, to an objective observer, create a reasonable impression of the arbitrator's partiality. Applying this standard, a neutral arbitrator's failure to disclose his acceptance, during the course of the arbitration proceedings, of a substantial referral from the law firm of a non-neutral co-arbitrator established evident partiality as a matter of law.

In re Valero Energy Corporation, 968 S.W.2d 916 (Tex. 1998). By statute, a denial of a motion to compel arbitration under the TAA is appealable. There is no similar provision for an appeal based on the FAA when proceeding in the state courts. However, mandamus is appropriate when a state court erroneously denies a motion to compel arbitration under the federal scheme. The better course of action for a court of appeals confronted with an interlocutory appeal and a mandamus proceeding seeking to compel arbitration would be to consolidate the two proceedings and render a decision disposing of both simultaneously, thereby conserving judicial resources and the resources of the parties.

In re Oakwood Mobile Homes Inc., 987 S.W.2d 571 (Tex. 1999). A party attempting to compel arbitration must first establish that the dispute in question falls within the scope of a valid arbitration

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Arbitration in Texas: History and Enforceability_______________________________________________________________________________________________________agreement. If the other party resists arbitration, the trial court must determine whether a valid agreement to arbitrate exists. If the trial court finds a valid agreement, the burden shifts to the party opposing arbitration to raise an affirmative defense to enforcing arbitration. To establish fraud in the formation of an arbitration agreement, a party must prove that a material misrepresentation was made, and that it was false. Adhesion contracts are not automatically unconscionable or void, and there is nothing per se unconscionable about arbitration agreements.

In re Bruce Terminix Co., 988 S.W.2d 702 (Tex. 1998). Because public policy favors arbitration, there is a strong presumption against waiver of the right to arbitrate.

Certain Underwriters at Lloyds of London v. Celebrity Inc., 988 S.W.2d 731, 733 (Tex. 1998). The TAA provides that an appeal from an order denying a motion to compel arbitration shall be taken in the manner and to the same extent as an appeal from an order or judgment in a civil action. However, the Texas Supreme Court does not have jurisdiction over appeals under the TAA from an interlocutory order denying arbitration in the absence of a dissent or conflict in the court of appeals.

In re L&L Kempwood Associates LP, 9 S.W.3d 125 (Tex. 1999). The FAA makes enforceable a written arbitration provision in a contract evidencing a transaction involving commerce, and extends to any contract affecting commerce. Absent a choice-of-law provision specifically excluding the application of federal law, both the TAA and the FAA apply.

In re FirstMerit Bank, 52 S.W.3d 749 (Tex. 2001). Whether a case is governed by the FAA or the TAA, many of the underlying substantive principles are the same. Doubts regarding the scope of the arbitration agreement are resolved in favor of arbitration. Mandamus relief is proper to enforce arbitration agreements governed by the FAA. A litigant who sues based on a contract subjects himself to the contract’s terms. Defenses of unconscionability, duress, fraudulent inducement and revocation must specifically relate to the arbitration agreement itself, and not to the contract as a whole.

Perry v. Del Rio, 66 S.W.3d 239 (Tex. 2001). An appellate court’s review is confined to the record in the trial court when the trial court acted.

Mariner Financial Group v. Bossley, 79 S.W.3d 30

(Tex. 2002). An arbitrator is evidently partial by failing to disclose an adverse relationship with an expert witness.

In re Halliburton Co., 80 S.W.3d 566 (Tex. 2002). Under the FAA, an employee’s at-will status did not render an arbitration agreement illusory because the employer did not rely upon continued employment as consideration for the agreement. Instead, mutual promises to submit all employment disputes to arbitration constituted sufficient consideration. Procedural unconscionability refers to circumstances surrounding the adoption of the arbitration provision, and substantive unconscionability refers to fairness of the arbitration provision itself. Courts may consider both procedural and substantive unconscionability in evaluating the validity of an arbitration provision. A trial court abuses its discretion when it refuses to compel arbitration in the face of a valid arbitration agreement.

In re Service Corporation International, 85 S.W.3d 171 (Tex. 2002). Length of delay alone is not a basis for inferring waiver.

In re J. D. Edwards World Solutions Co., 87 S.W.3d 546 (Tex. 2002). An agreement to arbitrate all disputes “involving” the underlying contract encompasses a fraudulent inducement claim.

Callahan & Associates v. Orangefield Independent School District, 92 S.W.3d 841 (Tex. 2002). The TAA requires a court to confirm an arbitrator’s award upon a party’s application unless a party offers grounds for vacating, modifying, or correcting the award. The statutory grounds allowing a court to vacate, modify, or correct an award are limited to those identified in the TAA. Gross mistake, a common law ground for setting aside an arbitration award, is a mistake that implies bad faith or failure to exercise honest judgment. An arbitrator’s mere failure to award damages is not a ground under the TAA or the common law for modifying or correcting an award.

CVN Group Inc. v. Delgado, 95 S.W.3d 234 (Tex. 2002). An award of arbitrators upon matters submitted to them is given the same effect as the judgment of a court of last resort. All reasonable presumptions are indulged in favor of the award, and none against it. An arbitration award cannot be set aside on public policy grounds except in an extraordinary case in which the award clearly violates carefully articulated fundamental policy. The public policy must be carefully defined and fundamental, and is to be

30

Arbitration in Texas: History and Enforceability_______________________________________________________________________________________________________ascertained by reference to the laws and legal precedents and not from general considerations of supposed public interests. Here, the validity of a lien claim was within the scope of the arbitration agreement, and the award did not violate public policy.

In re First Texas Homes Inc., 120 S.W.3d 868 (Tex. 2003). Whether claims are arbitrable under the FAA must be determined under federal law. An agreement to arbitrate “all disputes” between the parties is broad, and is not limited to conduct occurring prior to execution of the contract.

J.M. Davidson Inc. v. Webster, 128 S.W.3d 223 (Tex. 2003). A party moving to compel arbitration must establish the existence of a valid arbitration agreement and that the claims asserted fall within the scope of that agreement. Whether an employer’s unrestricted right to unilaterally abolish or modify a personnel policy gave it the right to terminate an arbitration agreement without notice created an ambiguity requiring remand. In interpreting an agreement to arbitrate, courts apply ordinary contract principles. An ambiguity in the arbitration agreement must be resolved by an evidentiary hearing. Whether an arbitration agreement is enforceable is a question of law reviewed de novo.

In re Wood, 140 S.W.3d 367 (Tex. 2004). Where parties agreed to submit all disputes to an arbitrator under the FAA, and where a dispute over whether contract prohibited class arbitration was a contract construction issue (i.e. a dispute arising out of the contract), the parties committed the issue to the arbitrator to decide.

Van Independent School District v. McCarty, 165 S.W.3d 351 (Tex. 2005). To constitute waiver, a party’s conduct must be unequivocally inconsistent with claiming a known right to arbitration.

In re Kellogg Brown & Root Inc., 166 S.W.3d 732 (Tex. 2005). Whether there is an enforceable arbitration agreement is a question of law and is reviewed de novo. Courts will uphold choice of law provisions. Under the FAA, ordinary principles of state contract law determine whether there is a valid agreement to arbitrate. However, when there is no express agreement to arbitrate under the FAA, a party may establish the applicability of the FAA by showing the transaction affects or involves interstate commerce. A non-signatory should be compelled to arbitrate a claim only if it seeks, through the claim, to derive a benefit from the contract containing the arbitration

provision.

In re McKinney, 167 S.W.3d 833 (Tex. 2005). Absent fraud, misrepresentation, or deceit, a party is bound by the terms of the contract he signed, incorporating an agreement to arbitrate, regardless of whether he read it or thought it had different terms.

In re AdvancePCS Health LP, 172 S.W.3d 603 (Tex. 2005). Under the FAA, an agreement to arbitrate is valid if it meets the requirements of the general contract law of the applicable state. Neither the FAA nor Texas law requires that an arbitration clause be signed, so long as it is written and agreed to by the parties. Nor does an arbitration agreement have to be included in each of the contract documents it purports to cover. Unequal bargaining power does not establish grounds for defeating an arbitration agreement absent a well-supported claim that the agreement resulted from the sort of fraud or overwhelming economic power that would provide grounds for revocation of any contract.

In re Nexion Health at Humble Inc., 173 S.W.3d 67 (Tex. 2005). Medicare funds crossing state lines constitutes interstate commerce thereby bringing a contract within the FAA. Because the TAA interferes with the enforceability of the arbitration agreement by adding an additional requirement in personal injury cases—the signature of a party’s counsel—the FAA preempts Section 171.002(a)(3) of the TAA.

In re Weekley Homes L.P., 180 S.W.3d 127 (Tex. 2005). Under the FAA, a non-party to a contract containing an arbitration provision can be compelled to arbitrate a personal injury claim under the equitable doctrine of direct-benefits estoppel.

In re Dillard Department Stores Inc., 186 S.W.3d 514 (Tex. 2006). Mandamus relief is available when a trial court erroneously denies a motion to compel arbitration under the FAA. A court should not deny arbitration unless it can be said with positive assurance that an arbitration clause is not susceptible of an interpretation which would cover the dispute at issue. Any ambiguity as to whether “arising from” should mean intertwined, or occurring as a direct result from, is resolved in favor of arbitration.

In re Vesta Ins. Group Inc., 192 S.W.3d 759 (Tex. 2006). 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. A party to an arbitration agreement must arbitrate tortious interference claims against the other party’s

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Arbitration in Texas: History and Enforceability_______________________________________________________________________________________________________agents and affiliates.

In re Palm Harbor Homes Inc., 195 S.W.3d 672 (Tex. 2006). Contracts that are unconscionable will not be enforced. Unconscionability principles are applied to prevent unfair surprise or oppression. There are two types of unconscionability claims: substantive and procedural. Substantive unconscionability refers to the fairness of the arbitration provision itself, whereas procedural unconscionability refers to the circumstances surrounding adoption of the arbitration provision. Unconscionability is measured at the date the agreements are made. The test of substantive unconscionability is whether, given the parties’ general commercial background and the commercial needs of the particular trade or case, the clause involved is so one-sided that it is unconscionable under the circumstances existing when the parties made the contract. Under the FAA, a manufacturer “opt out” right did not render the arbitration agreement unenforceable, and it was abuse of discretion for trial court to fail to compel purchasers of a manufactured home to arbitrate their claims against both the retailer and the manufacturer. The court considered the purchasers’ claims to implicate “substantially interdependent and concerted misconduct.”

In re Dallas Peterbilt Ltd., 196 S.W.3d 161 (Tex. 2006). Under the FAA, an employer may enforce an arbitration agreement entered into during an at-will employment relationship if the employee received notice of the employer’s arbitration policy, signed an acknowledgement form, and commenced employment.

In re D. Wilson Construction Co., 196 S.W.3d 774 (Tex. 2006). The existence of a valid arbitration agreement is a legal question subject to de novo review. Once an agreement is established, a court should not deny arbitration unless it can be said with positive assurance that an arbitration clause is not susceptible of an interpretation which would cover the dispute at issue. The FAA and TAA are not mutually exclusive. The FAA only preempts contrary state law, but not consonant state law. The mere fact that a contract affects interstate commerce, thus triggering the FAA, does not preclude enforcement under the TAA as well.

In re Dillard Department Stores Inc., 198 S.W.3d 778 (Tex. 2006). The scope of an employment-related arbitration agreement included a claim for retaliatory discharge.

Meyer v. WMCO-GP LLC, 211 S.W.3d 302 (Tex. 2006). A person who has agreed to arbitrate disputes with one party may in some cases be required to

arbitrate related disputes with others. Equitable estoppel allows a non-signatory to a contract containing an arbitration clause to compel arbitration when the signatory to a written agreement containing an arbitration clause must rely on the terms of the written agreement in asserting its claims against the non-signatory. When the facts are not disputed, the application of estoppel is a question of law, not a matter committed to the trial court’s discretion.

In re Bank One, 216 S.W.3d 825 (Tex. 2007). When a trial court denies a motion to compel arbitration and the underlying contract is governed by the FAA, mandamus relief is appropriate. The arbitration agreement in this case was incorporated by reference on the account signature card. Signature cards are valid contracts under Texas law. Document incorporated by reference in the signature card are part of the contract. Texas law presumes that a party who signs a contract knows its contents. Therefore, an arbitration agreement incorporated by reference in a signature card is valid. There is a strong presumption against waiver. Waiver must be intentional. A party waives arbitration when it substantially invokes the judicial process to the other party’s detriment. Moving to set aside a default judgment and requesting a new trial does not substantially invoke the judicial process.

In re Palacios, 221 S.W.3d 564 (Tex. 2006). Texas courts applying the FAA follow Texas rather than federal procedure. Nevertheless, it is important for federal and state law to be as consistent as possible in this area, because federal and state courts have concurrent jurisdiction to enforce the FAA. There is some one-sidedness in reviewing only orders that deny arbitration, but not orders that compel it. Yet both the Federal and Texas acts leave little uncertainty that this is precisely what the respective legislatures intended.

In re RLS Legal Solutions LLC, 221 S.W.3d 629 (Tex. 2007). Unless the arbitration provision alone is singled out from the rest of the agreement, a claim of duress goes to the validity of the agreement generally and must be decided in arbitration.

In re Merrill Lynch Trust Co., 235 S.W.3d 185 (Tex. 2007). The purpose of the FAA is to make arbitration agreements as enforceable as other contracts, but not more so. When a plaintiff’s claims against a defendant are in substance claims against the defendant’s employer and the plaintiff has agreed to arbitrate claims against the employer, the plaintiff must arbitrate the claims against the employee. Based upon an estoppel theory of substantially interdependent and concerted misconduct, claims by

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Arbitration in Texas: History and Enforceability_______________________________________________________________________________________________________investors against Merrill Lynch employees relating to investments must be arbitrated even though the employees were non-signatories to the arbitration agreement.

In re Kaplan Higher Education Corp., 235 S.W.3d 206 (Tex. 2007). Under the FAA, arbitration agreements are enforced according to their terms and according to their intentions. Arbitrability turns on the substance of the claim, not artful pleading.

In re U. S. Home Corp., 236 S.W.3d 761 (Tex. 2007). Under the FAA, purchasers of home raised seven contract defenses to arbitration enforcement: (1) the arbitration clauses were contracts of adhesion, (2) the arbitration clauses were procured by fraud, (3) the arbitration clauses were not supported by mutual consideration, (4) a fee schedule from the American Arbitration Association is enough to establish excessive fees, (5) the builder failed to invoke mediation as a condition precedent to arbitration, (6) use of the words “may request arbitration” renders the arbitration clause ambiguous, and (7) purchasers cannot be compelled to arbitrate against non-signatories who benefitted from the contract. The trial court found for purchasers, but the Texas Supreme Court reversed and remanded to compel arbitration.

Chambers v. Quinn, 242 S.W.3d 30 (Tex. 2007). Under the TAA, a party can appeal an order or judgment that either: (1) denies an application to compel arbitration made under § 171.021, or (2) grants an application to stay arbitration under § 171.023. See TEX. CIV. PRAC. & REM. CODE § 171.098(a)(1), (2). The Act is one-sided, allowing interlocutory appeals solely from orders that deny arbitration. Similarly, the FAA makes no provision for an interlocutory appeal from an order compelling arbitration.

In re Fleetwood Homes of Texas L.P., 257 S.W.3d 692 (Tex. 2008). A party substantially invokes the judicial process when it participates in full discovery, files motions going to the merits, and waits until the eve of trial to seek arbitration.

Perry Homes v. Cull, 258 S.W.3d 580 (Tex. 2008). The rule that one cannot wait until the eve of trial to request arbitration is not limited to the evening before trial. It is a rule of proportion. Waiver may be express or implied. Whether waiver of arbitration has occurred is a question of law for the court that is reviewed de novo. After conducting about a year of discovery in litigation, the Culls moved to compel arbitration. Four days before trial, the trial court granted the motion to

compel arbitration. Perry Homes sought mandamus relief, but was denied by both the court of appeals and the Texas Supreme Court. The arbitration commenced and was concluded and an award was rendered in favor of the Culls. Perry Homes moved to vacate the award, contending that the Culls had waived their right to arbitration. Prejudice refers to the inherent unfairness in terms of delay, expense, or damage to a party’s legal position that occurs when the party’s opponent forces it to litigate an issue and later seeks to arbitrate that same issue. The Texas Supreme Court vacated the arbitration award and held that the Culls manipulated the litigation to its advantage and to their opponents’ detriment which is precisely the kind of inherent unfairness that constitutes prejudice under federal and state law.

In re Citigroup Global, 258 S.W.3d 623 (Tex. 2008). Litigation conduct limited to jurisdictional transfers, and not to merits, does not constitute waiver of contractual right to arbitration.

In re Poly-America L.P., 262 S.W.3d 337 (Tex. 2008). Arbitration is intended to provide a lower-cost, expedited means to resolve disputes. Neither the strong presumption favoring arbitration nor federal preemption applies in a state court’s assessment of whether parties have entered into a valid and enforceable arbitration agreement under state law. An agreement to arbitrate is valid under the FAA if it meets the requirements of the general contract law of the applicable state. In determining the validity of an agreement to arbitrate under the FAA, courts must first apply state law governing contract formation. Courts may not invalidate arbitration agreements under state laws applicable only to arbitration provisions. Once an enforceable contract to arbitrate is found, there is a strong federal presumption in favor of arbitration such that myriad doubts—as to waiver, scope and other issues not relating to enforceability—must be resolved in favor of arbitration. Agreements to arbitrate disputes between employers and employees are generally enforceable under Texas law, and there is nothing per se unconscionable about an agreement to arbitrate employment disputes.

Forest Oil Corp. v. McAllen, 268 S.W.3d 51 (Tex. 2008). Whether a case is governed by the FAA or the TAA, many of the underlying substantive principles are the same. The trial court’s determination of an arbitration agreement’s validity is a legal question subject to de novo review. While an arbitration agreement procured by fraud is unenforceable, the party opposing arbitration must show that the fraud

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Arbitration in Texas: History and Enforceability_______________________________________________________________________________________________________relates to the arbitration provision specifically and not to the broader contract in which it appears. If a fraudulent inducement claim attacks the broader contract, then the arbitrator, not the court, considers the matter. If a valid arbitration agreement empowers the arbitrator to determine what issues are arbitrable, the “scope determination” is removed from the trial court and placed with the arbitrator.

In re Next Financial Group Inc., 271 S.W.3d 263 (Tex. 2008). Under the FAA, tort claims and other extra-contractual claims can arise from a commercial transaction and thus may be subject to arbitration agreements.

In re Labatt Food Service L.P., 279 S.W.3d 640 (Tex. 2009). Whether an arbitration agreement is enforceable is subject to de novo review. Under the FAA, whether an arbitration agreement binds a non-signatory is a gateway matter to be determined by courts rather than arbitrators unless the parties clearly and unmistakably provide otherwise. State law generally governs whether a litigant agreed to arbitrate, and federal law governs the scope of an arbitration clause. Wrongful death beneficiaries are generally bound by a decedent’s pre-death contractual agreement and must arbitrate wrongful death claims.

In re Jindal Saw Limited, 289 S.W.3d 827 (Tex. 2009). An arbitration agreement between a decedent and his employer requires the employee’s wrongful death beneficiaries to arbitrate their wrongful death claims against the employer.

In re Gulf Exploration LLC, 289 S.W.3d 836 (Tex. 2009). Most states (including Texas) have adopted the Uniform Arbitration Act, which, like the FAA, authorizes immediate appeal only from orders denying arbitration. In Texas, courts may also review an order compelling arbitration if the order also dismisses the underlying litigation so it is final rather than interlocutory. Even when an order is not reviewable by interlocutory appeal, it does not always preclude review by mandamus. To be entitled to mandamus, a petitioner must show that the trial court clearly abused its discretion and that the relator has no adequate remedy by appeal. If appeal is an adequate remedy for an order compelling arbitration, mandamus must be denied. Under the FAA, where the Joint Operating Agreement between the parties contained an arbitration agreement, a claim by oil and gas working interest owners against the operator was compelled to arbitration.

In re Macy’s Texas Inc., 291 S.W.3d 418 (Tex.

2009). The FAA contains no requirements for the form or specificity of arbitration agreements except that they be in writing. They need not be signed.

In re Morgan Stanley, 293 S.W.3d 182 (Tex. 2009). Courts have distinguished between issues of a contract's very “formation” from other issues impacting a contract's “validity.” With respect to contract “formation,” where the very existence of a contract containing the relevant arbitration agreement is called into question, courts have authority and responsibility to decide the matter. Under the FAA, when the issue of mental capacity is raised as a defense to arbitration, the very existence of the contract is at issue. Courts are the proper forum to decide the issue of mental capacity to assent to a contract containing an arbitration clause.

In re Golden Peanut Co. LLC, 298 S.W.3d 629 (Tex. 2009). Wrongful death beneficiaries are bound to decedent’s agreement to arbitrate any personal injury or wrongful death claims under the decedent’s employee benefit plan.

In re ADM Investor Services Inc., 304 S.W.3d 371 (Tex. 2010). Waiver can be implied from a party’s unequivocal conduct, but not by inaction.

East Texas Salt Water Disposal Co. Inc. v. Werline, 307 S.W.3d 267 (Tex. 2010). A party may seek immediate appellate review of a trial court’s order denying confirmation of an arbitration award, vacating the award, and directing arbitration to be undertaken again, and that an appellate court has jurisdiction under section 171.098(a) of the TAA.

In Re Odyssey Healthcare Inc., 310 S.W.3d 419 (Tex. 2010). The FAA does not violate the 10 th

Amendment by encroaching on a state power to enact and regulate its own workers' compensation system. Statutory claims under the Texas Workers’ Compensation Act are arbitrable so long as the arbitration agreement does not waive substantive rights and remedies of the statute.

In re Houston Pipe Line Company, 311 S.W.3d 449 (Tex. 2009). When deciding a motion to compel arbitration under the FAA, a Texas trial court applies Texas procedure, which permits discovery to be taken when it is needed before the arbitration or to permit the arbitration to be conducted in an orderly manner. When a party disputes the scope of an arbitration provision or raises a defense to the provision, the trial court, not the arbitrator, must decide the issues. When

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Arbitration in Texas: History and Enforceability_______________________________________________________________________________________________________Texas courts are called on to decide if disputed claims fall within the scope of an arbitration clause under the FAA, Texas procedure controls that determination. Pre-arbitration discovery is expressly authorized under the TAA when a trial court cannot fairly and properly make its decision on a motion to compel arbitration because it lacks sufficient information regarding the scope of an arbitration provision or other issues of arbitrability. Motions to compel arbitration and any reasonably needed discovery should be resolved without delay.

In re 24R Inc., 324 S.W.3d 564 (Tex. 2010). A party seeking to compel arbitration must establish that a valid arbitration agreement exists between the parties. The party seeking to avoid arbitration then bears the burden of proving its defenses against enforcing an otherwise valid arbitration provision. A trial court that refuses to compel arbitration under a valid and enforceable arbitration agreement has clearly abused its discretion. The enforceability of an arbitration agreement is a question of law. Mutual agreement to arbitrate claims provides sufficient consideration to support an arbitration agreement. A promise is illusory if it does not bind the promisor, such as when the promisor retains the option to discontinue performance. When illusory promises are all that support a purported bilateral contract, there is no mutuality of obligation and therefore no contract.

In re Olshan Foundation Repair Co., 328 S.W.3d 883 (Tex. 2010). The FAA preempts state laws which require a judicial forum for the resolution of claims which the contracting parties agreed to resolve by arbitration. The FAA preempts TAA § 171.002(a)(2) (an agreement for the acquisition by one or more individuals of property, services, money or credit in which the total consideration to be furnished by the individual is not more than $50,000) and TAA § 171.002(a)(3) (a claim for personal injury). Contractual language stipulating that arbitration will be conducted pursuant to “the arbitration laws of your state” includes the FAA. Courts apply the FAA unless language in the arbitration agreement indicates its exclusion. However, an agreement specifying that arbitration occur “pursuant to the TAA” excludes preemption of TAA § 171.002(a)(2). Excessive costs imposed by an arbitration agreement render a contract unconscionable if the costs prevent a litigant from effectively vindicating rights in the arbitral forum.

In re Rubiola, 334 S.W.3d 220 (Tex. 2011). When considering a motion to compel arbitration, the court must determine first whether a valid arbitration agreement exists and, if so, whether the claims in

dispute fall within that agreement's scope. Generally, parties must sign arbitration agreements before being bound by them. However, an obligation to arbitrate not only attaches to one who signed a written arbitration agreement but may also bind a non-signatory under principles of contract law and agency. Parties to an arbitration agreement may grant non-signatories the right to compel arbitration. Whether a non-signatory can compel arbitration is a gateway matter for the court to decide.

Ellis v. Schlimmer, 337 S.W.3d 860 (Tex. 2011). A party attempting to compel arbitration must first establish the existence of a valid arbitration agreement. The party must also establish that the subject of the sought arbitration falls within the scope of the agreement. Once the party seeking arbitration does so, a strong presumption favoring arbitration arises, and the burden shifts to the party opposing arbitration to raise an affirmative defense to the agreement’s enforcement. Courts should resolve any doubts as to the agreement’s scope, waiver, and other issues unrelated to its validity in favor of arbitration. If a trial court denies a motion to compel arbitration, appellate review may be available under both the TAA and the FAA so long as the TAA is not preempted.

Nafta Traders Inc. v. Quinn, 339 S.W.3d 84 (Tex. 2011). The TAA does not preclude parties from modifying the scope of judicial review of arbitration awards, and the U.S. Supreme Court’s Hall Street decision, requiring strict adherence to FAA Sections 10 and 11, does not control.

CMH Homes v. Perez, 340 S.W.3d 444 (Tex. 2011). TEX. CIV. PRAC. & REM. CODE § 51.016 expressly incorporates federal law, permitting the interlocutory appeal of an order refusing to compel arbitration under the same circumstances that an appeal from a federal district court’s order or decision would be permitted under 9 U.S.C. 16. However, that code section does not allow an interlocutory appeal of an order appointing an arbitrator.

Italian Cowboy Partners Ltd. v. Prudential Ins. Co of Am., 341 S.W.3d 323 (Tex. 2011). To determine the parties’ intent, courts examine the express language of the arbitration agreement. A disclaimer of reliance clause must be clear and unequivocal.

Richmont Holdings Inc. v. Superior Recharge Systems LLC, 392 S.W.3d 633 (Tex. 2013). The existence of an arbitration agreement mandates enforcement absent proof of a defense. The Texas Supreme Court has jurisdiction to hear an appeal from

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Arbitration in Texas: History and Enforceability_______________________________________________________________________________________________________an interlocutory order denying arbitration when the court of appeals decision conflicts with prior precedent.

Rachal v. Reitz, 403 S.W.3d 840 (Tex. 2013). A party seeking to compel arbitration under the TAA must: (1) establish the existence of a valid, enforceable arbitration agreement; and (2) show that the claims asserted fall within the scope of that agreement. An arbitration provision contained within a trust is enforceable against a beneficiary.

Kennedy Hodges LLP v. Gobellan, 433 S.W.3d 542 (Tex. 2014). A question of law material to the disposition of the case confers jurisdiction on the Texas Supreme Court to consider an interlocutory appeal of the denial of a motion to compel arbitration. Whether a party waived its right to arbitrate is a question of law reviewed de novo. A party waives the right to arbitrate “by substantially invoking the judicial process to the other party’s detriment or prejudice.” The strong presumption against waiver of arbitration renders this hurdle a high bar.

Venture Cotton Cooperative v. Freeman, 435 S.W.3d 222 (Tex. 2014). Although the FAA preempts state law that conflicts with its objectives, state law remains relevant to declare an arbitration agreement itself unenforceable on “such grounds as exist in law or in equity for the revocation of any contract.” This savings clause permits arbitration agreements to be invalidated by generally applicable contract defenses, such as fraud, duress, or unconscionability, but not by defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue. In determining the arbitration agreement’s validity then, a court may not construe the agreement differently from how it would construe contracts generally under state law, nor may a court rely on the uniqueness of an arbitration agreement as a basis for a state-law holding that enforcement would be unconscionable. Special state rules for interpreting arbitration agreements cannot coexist with the FAA. But if the circumstances would render any contract unconscionable under Texas law, they are appropriate to invalidate the agreement to arbitrate as well.

Tenaska Energy Inc. v. Ponderosa Pine Energy LLC, 437 S.W.3d 518 (Tex. 2014). Evident partiality exists if an arbitrator fails to disclose facts which might, to an objective observer, create a reasonable impression of the arbitrator’s partiality.

Americo Life Inc. v. Myer, 440 S.W.3d 18 (Tex. 2014). An arbitration panel selected contrary to the

contract-specified method lacks jurisdiction over the dispute. Because the arbitration panel was formed contrary to the express terms of the arbitration agreement, the panel exceeded its authority when it resolved the dispute and the award must be vacated.

Richmont Holdings Inc. v. Superior Recharge Systems LLC, 455 S.W.3d 573 (Tex. 2014). Filing suit, moving to transfer venue, conducting minimal discovery, and delaying the filing of a motion to compel arbitration does not “substantially invoke the judicial process” and does not constitute waiver of arbitration.

G.T. Leach Builders LLC v. Sapphire V.P. LP, 458 S.W.3d 502 (Tex. 2015). The law favors and encourages arbitration. Whether the parties have agreed to submit a dispute to arbitration is a gateway matter. The court’s role, then, is first to decide whether the parties made a valid and presently enforceable agreement to arbitrate. If a party opposing an application for arbitration denies the existence of the agreement, the court shall summarily determine that issue. If they did, then the court must decide whether the present disputes fall within the scope of that agreement. These questions that courts must resolve are sometimes referred to as questions of arbitrability. If, by answering these questions, the court determines that the present disputes are in fact arbitrable under the parties’ agreement, the court must complete its role by ordering the parties to arbitration and leaving it to the arbitrators to resolve those disputes. Courts must decide questions of substantive arbitrability (existence, enforceability, scope of an agreement), but issues of procedural arbitrability (construction and application of limits on that agreement) are referred to the arbitrator for resolution. Procedural matters include claims of waiver, delay, or a like defense to arbitrability, and include the satisfaction of prerequisites such as time limits, notice, laches, estoppel, and other conditions precedent to an obligation to arbitrate. Procedural waiver concerns limitations periods or waiver of particular claims or defenses. In contrast, waiver by litigation conduct presents a question of substantive arbitrability that courts must decide.

Fredericksburg Care Co. v. Perez, 461 S.W.3d 513 (Tex. 2015). The Texas Legislature did not enact TEX. CIV. PRAC. & REM. CODE § 74.451 (Medical Liability Act arbitration) for the purpose of “regulating the business of insurance” as that phrase has been

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Arbitration in Texas: History and Enforceability_______________________________________________________________________________________________________interpreted under the McCarran-Ferguson Act, such that § 74.451 is preempted by the FAA.

Royston Rayzor Vickery & Williams LLP v. Lopez, 467 S.W.3d 494 (Tex. 2015). Arbitration provisions can be enforced under either statutory provisions or common law. A trial court’s ruling on a motion to compel arbitration may be challenged by interlocutory appeal (under the TAA) and by an original mandamus proceeding (under common law). Arbitration agreements may be substantively or procedurally unconscionable or both. Attorney-client arbitration agreements are the subject of ongoing debate because of competing public polices.

Cardwell v. Whataburger Restaurants LLC, 484 S.W.3d 426 (Tex. 2016). TEX. CIV. PRAC & REM. CODE § 171.098(a)(1) authorizes appeal of an order denying an application to compel arbitration. The Texas Supreme Court has jurisdiction over appeals of interlocutory orders denying arbitration when the court of appeals decision conflicts with prior precedent.

VIII. RELEVANT DECISIONS FROM THE FIFTH CIRCUIT COURT OF APPEALS

Mar-Len of Louisiana Inc. v. Parsons-Gilbane, 773 F.2d 633 (5th Cir. 1985). Whenever the scope of an arbitration clause is fairly debatable or reasonably in doubt, the court should decide the question of construction in favor of arbitration. The weight of this presumption is heavy. Consequently, a valid agreement to arbitrate applies unless it can be said with positive assurance that the arbitration clause is not susceptible of an interpretation which would cover the dispute at issue.

Bhatia v. Johnston, 818 F.2d 418 (5th Cir. 1987). As the party resisting arbitration, plaintiff has the burden of showing that he is entitled to a jury trial under FAA § 4.

Forsythe International S.A. v. Gibbs Oil Co. of Texas, 915 F.2d 1017 (5th Cir. 1990). The arbitrator has broad discretion to make evidentiary decisions. The evidentiary decision in question must have "so affected the party's rights that it may be said he was deprived of a fair hearing."

Dillard v. Merrill Lynch Pierce Fenner & Smith Inc., 961 F.2d 1148 (5th Cir. 1992). A party contesting the making of the arbitration agreement must make at least some showing that under prevailing law he would be relieved of his contractual obligations to arbitrate if his allegations proved to be true . . . and produce some evidence to substantiate his factual allegations.

In re Complaint of Hornbeck Offshore 1984 Corp., 981 F.2d 752 (5th Cir. 1993). Arbitration clauses containing “any dispute” language are construed broadly.

Webb v. Investacorp. Inc., 89 F.3d 252 (5th Cir. 1996) (per curiam). The Fifth Circuit follows a two-step procedure in determining whether to compel arbitration. First, the court must ascertain whether the parties agreed to arbitrate the dispute at issue, and is shown where (1) there exists between the parties a valid agreement to arbitrate, and (2) the dispute in question falls within the scope of the agreement. Once the Court is satisfied that the parties agreed to arbitrate the dispute, it must then determine whether any external legal constraints foreclose arbitration of the dispute. A court, in determining the contractual validity of an arbitration agreement, applies ordinary state-law principles that govern the formation of contracts.

Pennzoil Exploration & Production Co. v. Ramco Energy, 139 F.3d 1061 (5th Cir. 1998). Arbitration is a matter of contract between the parties, and a court cannot compel a party to arbitrate unless the court determines the parties agreed to arbitrate the dispute in question. Arbitration provisions containing the language “related to” are broad clauses that are not limited to claims that literally arise under the contract, but rather embrace all disputes having a significant relationship to the contract regardless of the label attached to the dispute.

Grigson v. Creative Artists Agency, 210 F.3d 524 (5th Cir. 2000). It is not abuse of discretion for a district court to utilize equitable estoppel to compel a non-signatory to arbitrate his claim of tortious interference with a contract containing an arbitration clause.

Texaco Exploration & Production Co. v. AmClyde Engineered Products Co., 243 F.3d 906 (5th Cir. 2001). There is a strong federal policy in favor of enforcing arbitration agreements.

OPE International LP v. Chet Morrison Contractors Inc., 258 F.3d 443 (5th Cir. 2001). A two-pronged inquiry is used to determine whether parties should be compelled to arbitrate their disputes. The first prong requires the court to determine whether the parties agreed to arbitrate their dispute. Two considerations guide the court in making this determination: whether a valid agreement to arbitrate

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Arbitration in Texas: History and Enforceability_______________________________________________________________________________________________________exists between the parties, and whether the dispute in question is within the scope of the arbitration agreement. Under the second prong, the court must ensure that no legal restraints external to the agreement have foreclosed arbitration.

Fleetwood Enterprises Inc. v. Gascamp, 280 F.3d 1069 (5th Cir. 2002). The federal policy favoring arbitration does not apply to the determination of whether there is a valid agreement to arbitrate.

Brook v. Peak International Ltd., 294 F.3d 668, 672 (5th Cir. 2002). Judicial review of an arbitration award is extraordinarily narrow.

Am. Heritage Life Ins. Co. v. Orr, 294 F.3d 702 (5th

Cir. 2002). If the making of the arbitration agreement be in issue, the court shall proceed summarily to the trial thereof. Although the FAA permits parties to demand a jury trial to resolve factual issues surrounding the making of an arbitration agreement, or the failure, neglect, or refusal to perform the agreement, it is well-established that a party to an arbitration agreement cannot obtain a jury trial merely by demanding one.

Pers. Sec. & Safety Sys. Inc. v. Motorola Inc., 297 F.3d 388 (5th Cir. 2002). A valid agreement to arbitrate applies unless it can be said with positive assurance that the arbitration clause is not susceptible of an interpretation which would cover the dispute at issue. Where the parties include a broad arbitration provision in an agreement that is essential to the overall transaction, courts presume that they intended the arbitration clause to reach all aspects of the transaction, including those aspects governed by other contemporaneously executed agreements that are part of the same transaction.

International Chemical Workers Union v. Columbian Chemicals Co., 331 F.3d 491 (5th Cir. 2003). The arbitrator has broad discretion to make evidentiary decisions.

Pedcor Management Company Inc. Welfare Benefit Plan v. Nations Personnel of Texas Inc., 343 F.3d 355 (5th Cir. 2003). Just as parties may select the arbitral rules governing arbitration, they may also specify the law governing interpretation of the scope of the arbitration clause.

Hadnot v. Bay Ltd., 344 F.3d 474 (5th Cir. 2003). A district court’s ruling on a motion to compel arbitration and to stay litigation is reviewed de novo.

Bridas S.A.P.I.C. v. Gov't of Turkmenistan, 345 F.3d 347 (5th Cir. 2003). The Texas Supreme Court has recognized six theories arising out of common principles of contract and agency law that may bind non-signatories to arbitration agreements: (1) incorporation by reference; (2) assumption; (3) agency; (4) alter ego; (5) equitable estoppel, and (6) third-party beneficiary. Being a third-party beneficiary is more than merely having an interest in, or receiving some benefit from, a contract. Under third-party beneficiary theory, a court must look to the intentions of the parties at the time the contract was executed. Under equitable estoppel theory, a court looks to the parties’ conduct after the contract was executed.

Smith v. Rush Retail Center Inc., 360 F.3d 504 (5th

Cir. 2004). Section 4 of the FAA does not create an independent basis for federal jurisdiction, and Section 10 does not create federal subject matter jurisdiction.

Carter v. Countrywide Credit Ind. Inc., 362 F.3d 294 (5th Cir. 2004). A party seeking to invalidate an arbitration agreement bears the burden of establishing its invalidity. Unconscionability is a matter of state contract law.

Washington Mutual Financial Group LLC v. Bailey, 364 F.3d 260 (5th Cir. 2004). In deciding whether the parties agreed to arbitrate the dispute, courts apply the contract law of the particular state that governs the agreement.

Brabham v. A.G. Edwards & Sons Inc., 376 F.3d 377 (5th Cir. 2004) Judicial review of an arbitration award is exceedingly deferential and vacatur is only available on very narrow grounds.

Iberia Credit Bureau Inc. v. Cingular Wireless LLC, 379 F.3d 159 (5th Cir. 2004). In making the second determination—whether legal constraints external to the parties’ agreement foreclosed the arbitration of those claims—the court applies the contract law of the particular state that governs the agreement.

Freudensprung v. Offshore Technical Services Inc., 379 F.3d 327 (5th Cir. 2004). Where an arbitration agreement contains a clause designating Texas law but does not exclude the FAA, the FAA and TAA apply concurrently because Texas law incorporates the FAA as part of the substantive law of that state.

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Republic Ins. Co. v. Paico Receivables LLC, 383 F.3d 341 (5th Cir. 2004). Waiver will be found when the party seeking arbitration substantially invokes the judicial process to the detriment or prejudice of the other party.

Brown v. Pacific Life Ins. Co., 462 F.3d 384 (5th

Cir. 2006). So long as a valid agreement to arbitrate is tendered, the relevant dispute falls within the agreement’s ambit, and none of the general contract defenses subsumed into the Savings Clause have been presented, arbitration must follow, and a federal case is either stayed or dismissed.

Tittle v. Enron Corp., 463 F.3d 410 (5th Cir. 2006). In determining the scope of an arbitration clause, the court is to apply Texas rules of contract interpretation.

Positive Software Solutions Inc. v. New Century Mortgage Corp., 476 F.3d 278 (5th Cir. 2007) (en banc). The FAA does not mandate the extreme remedy of vacatur under § 10(a)(2) (evident partiality) for nondisclosure by an arbitrator of a trivial past association. Vacatur is only warranted upon nondisclosure if it creates a concrete non-speculative impression of bias or involves a significant compromising relationship.

Apache Bohai Corp. LDC v. Texaco China BV, 480 F.3d 397 (5th Cir. 2007). An appellate court reviews a district court’s confirmation of an award de novo, but the review is exceedingly deferential, and an award may not be set aside for a mere mistake of fact or law.

J.P. Morgan Chase v. Conegie, 492 F.3d 596 (5th

Cir. 2007). Ordinarily, whether a claim is subject to arbitration is a question for a court.

Sherer v. Green Tree Servicing LLC, 548 F.3d 379 (5th Cir. 2008). In determining whether a party should be compelled to arbitrate, this Court employs a two-step analysis. First, the Court decides if the party has agreed to arbitrate the dispute. The Court then determines whether there is any federal statute or policy that renders the claims non-arbitrable.

U.S. v. Ihsan Elashyi, 554 F.3d 480 (5th Cir. 2008). In the arbitration context, the Supreme Court has given the phrase “arising out of” a very broad interpretation.

Citigroup Global Markets Inc v. Bacon, 562 F.3d 349 (5th Cir. 2009). Grounds for vacatur of an arbitration award are restricted to those set forth FAA § 10. To the extent that manifest disregard of the law

constitutes a non-statutory ground for vacatur, it is no longer a basis for vacating awards under the FAA.Hall Street effectively overrules previous authority to the contrary. But see Stolt-Nielsen recasting manifest disregard as shorthand for FAA § 10(a)(4).

Graves v. BP America Inc., 568 F.3d 221 (5th Cir. 2009). To decide whether parties have agreed to arbitrate a dispute, the Court considers two issues: (1) whether there is a valid agreement to arbitrate the claims, and (2) whether the dispute in question falls within the scope of that arbitration agreement. These issues are controlled by "ordinary state-law principles that govern the formation of contracts."

Dealer Computer Services Inc. v. Old Colony Motors Inc., 588 F.3d 884 (5th Cir. 2009). Courts perform a two-step inquiry to determine whether to compel arbitration. First, a court must determine whether the parties agreed to arbitrate the particular dispute at issue. With respect to the first inquiry, there are two separate considerations: whether a valid agreement to arbitrate some claims exists (contract formation), and whether the dispute at hand falls within the terms of that valid agreement (contract interpretation). If so, the court must next determine whether any applicable federal statute or policy renders the claims non-arbitrable. Payment of arbitration fees is a procedural condition precedent that the trial court should not review. If the arbitration fee is not paid, the arbitrator may order the suspension or termination of the proceedings.

Paper, Allied-Industries Chemical & Energy Workers International Union Local 4-12 v. ExxonMobil Corp., 657 F.3d 272 (5th Cir. 2011). The Fifth Circuit reviews an order compelling arbitration de novo, and reviews the district court’s findings of fact under the clearly erroneous standard.

Lee v. Plantation of Louisiana LLC, 454 F. App'x 358, 360 (5th Cir. 2011). The Fifth Circuit has yet to determine the appropriate standard for reviewing a magistrate judge's ruling on motions to compel arbitration. "We need not reach the question of whether a motion to compel arbitration is a dispositive or non-dispositive motion for purposes of the standard of review by the district judge of the magistrate judge's order."

Rain CII Carbon LLC v. Conoco Phillips Co., 674 F.3d 469 (5th Cir. 2012). The FAA allows a court to vacate an award where the arbitrators exceeded their powers. Where arbitrators act contrary to express

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Arbitration in Texas: History and Enforceability_______________________________________________________________________________________________________contractual provisions, they have exceeded their powers.

Petrofac Inc. v. DynMcDermott Petroleum Operations Co., 687 F.3d 671 (5th Cir. 2012). Express incorporation of AAA Rules constitutes clear and unmistakable evidence that the parties agreed to arbitrate arbitrability.

Grant v. Houser, 469 Fed. Appx. 310 (5th Cir. 2012) (per curiam). The party seeking to compel arbitration need only prove the existence of an agreement to arbitrate by a preponderance of the evidence.

Hamstein Cumberland Music Group v. Williams, 532 Fed. Appx. 538 (5th Cir. 2013). The FAA is not an independent grant of federal jurisdiction.

Klein v. Nabors Drilling USA LP, 710 F.3d 234 (5th

Cir. 2013). Whether there is a valid agreement to arbitrate is governed by ordinary state law contract principles. It is only in step two of the analysis, determining the scope of a valid arbitration agreement, that courts apply the federal policy and resolve ambiguities in favor of arbitration.

21st Financial Services LLC v. Manchester Financial Bank, 747 F.3d 331 (5th Cir. 2014). Generally, parties may limit the scope of arbitration through contract. If the contract creates a plain limitation on the authority of an arbitrator, then the arbitrator exceeds his power by ignoring such limitation, and the court may therefore vacate the award.

Crawford Professional Drugs Inc. v. CVS Caremark Corp., 748 F.3d 249 (5th Cir. 2014). Ordinarily, whether a claim is subject to arbitration is a question for a court. However, if the parties have clearly and unmistakably agreed to arbitrate arbitrability, certain threshold questions—such as whether a particular claim is subject to arbitration—are for the arbitrator, and not a court, to decide. Express incorporation of AAA Rules constitutes clear and unmistakable evidence that the parties agreed to arbitrate arbitrability.

Douglas v. Regions Bank, 757 F.3d 460 (5th Cir. 2014). An arbitrator, not the court, must decide arbitrability if two factors are met: (1) the parties “clearly and unmistakably” intend to delegate this power to the arbitrator, and (2) the assertion of arbitrability is not wholly groundless. A delegation provision is an agreement to arbitrate gateway questions

of arbitrability, such as whether the parties' agreement covers a particular controversy. Dissent: The majority adopts the “wholly groundless” test put forth by the Federal Circuit, which has not be adopted by the Fifth Circuit and appears to be contrary to Supreme Court authority.

Houston Refining LP v. United Steel, Paper & Forestry, Rubber Mfg., 765 F.3d 396 (5th Cir. 2014). The law presumes that courts have plenary power to decide the gateway question of a dispute’s arbitrability (i.e. whether the parties agreed to arbitrate the merits).

Aviles v. Russell Stover Candies Inc., 559 F.App’x 413 (5th Cir. 2014). Courts find clear and unmistakable evidence of an agreement to arbitrate arbitrability when an agreement includes an express delegation provision.

BNSF R. Co. v. Alstom Transportation Inc., 777 F.3d 785 (5th Cir. 2015). In determining whether the arbitrator exceeded her authority, district courts should consult the arbitrator's award itself. Typically, "several pieces of relevant evidence can be gleaned from the award's text, including but not limited to: (1) whether the arbitrator identifies her task as interpreting the contract, (2) whether she cites and analyzes the text of the contract, and (3) whether her conclusions are framed in terms of the contract's meaning." As with every other ground, "a party seeking relief under FAA § 10(a)(4) bears a heavy burden," as "it is not enough...to show that the arbitrator committed an error—or even a serious error."

Poolre Insurance Corp. v. Organizational Strategies Inc., 783 F.3d 256 (5th Cir. 2015). Review of the district court's confirmation or vacatur of an arbitrator's award is de novo. Review of the arbitration award itself is very deferential. The Court must sustain an award as long as the arbitrator's decision draws its essence from the contract. Where the arbitrator exceeds the express limitations of his contractual mandate, judicial deference is at an end. A district court may vacate an award in limited circumstances, including where the arbitrators exceeded their powers. 9 U.S.C. § 10(a)(4). It is well-established that courts may set aside awards when the arbitrator exceeds his contractual mandate by acting contrary to express contractual provisions.

Rasheed Al Rushaid v. National Oilwell Varco, 814 F.3d 300 (5th Cir. 2016). FAA § 16 forbids appellate review of an order granting a motion to compel arbitration. Generally, an appellate court

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Arbitration in Texas: History and Enforceability_______________________________________________________________________________________________________reviews de novo the denial of a motion to compel arbitration, but reviews for abuse of discretion a district court’s determination of whether equitable estoppel may be invoked to compel arbitration. A decision by the district court based upon a mistake of law or a clearly erroneous assessment of the evidence constitutes an abuse of discretion.

Cooper v. West End Capital Management LLC, 832 F.3d 534 (5th Cir. 2016). The Fifth Circuit has held that the adoption of the AAA rules to govern arbitration proceedings presents clear and unmistakable evidence that the parties agreed to arbitrate arbitrability.

IX. RELEVANT DECISIONS FROM THE UNITED STATES SUPREME COURT

Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967). The FAA was enacted in 1925 in response to widespread judicial hostility to arbitration agreements. Its purpose is to make arbitration agreements as enforceable as other contracts, but not more so. Under the “separability principle” in contracts with arbitration clauses, challenges to the enforceability of contracts are first heard by the arbitrator unless the claim is that the arbitration clause itself is unenforceable. If the challenge is to the making of the agreement to arbitrate, the federal court may proceed to adjudicate it.

Commonwealth Coatings Corp. v. Continental Casualty Co., 393 U.S. 145 (1968). Arbitrators must disclose to the parties any dealings that might create an impression of possible bias, but arbitrators are not required to sever all ties with the business world. An arbitrator’s failure to disclose a material relationship with one of the parties can constitute evident partiality. An arbitrator’s award may be vacated when the arbitrator failed to disclose an ongoing financial relationship between the arbitrator and a party to the arbitration.

Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974). Arbitration provisions are a species of forum selection clauses.

Moses H. Cone Memorial Hospital v. Mercury Construction Corporation, 460 U.S. 1 (1983). The FAA is a congressional declaration of a liberal federal policy favoring arbitration, ensuring that private agreements to arbitrate are enforced according to their terms, notwithstanding any state substantive or procedural policies to the contrary, and creates a body of federal substantive law applicable to state and federal

courts. Doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.

Southland Corp. v. Keating, 465 U.S. 1 (1984). The FAA rests on the authority of Congress to enact substantive rules under the Commerce Clause, and is based upon the incontestable federal foundations of control over interstate commerce and admiralty. The FAA declares a national policy favoring arbitration, and withdraws the power of the states to require a judicial forum for the resolution of claims which the contracting parties agreed to resolve by arbitration. The FAA preempts any attempts by state legislatures to prevent the enforceability of arbitration agreements.

McDonald v. City of West Branch, 466 U.S. 284 (1984). A federal court should not afford res judicata or collateral estoppel effect to an arbitration award in a collective bargaining proceeding.

Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213 (1985). The FAA leaves no place for the exercise of discretion by a district court, but instead mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed, absent a ground for revocation of the contractual agreement.

Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., 473 U.S. 614 (1985). A primary objective of an agreement to arbitrate is to achieve streamlined proceedings and expeditious results. A court must first determine whether the parties agreed to arbitrate the particular dispute at issue, and must next determine whether any applicable federal statute or policy renders the claims non-arbitrable (i.e. whether legal constraints external to the agreement foreclose the arbitration of those claims).

Shearson/American Express Inc. v. McMahon, 482 U.S. 220 (1987). The FAA establishes a federal policy favoring arbitration requiring that courts rigorously enforce arbitration agreements.

Perry v. Thomas, 482 U.S. 483 (1987). In enacting FAA § 2, Congress declared a national policy favoring arbitration and withdrew the States’ power to require a judicial forum for the resolution of claims that contracting parties agreed to resolve by arbitration.

Paperworkers v. Misco Inc., 484 U.S. 29 (1987). Courts do not sit to hear claims of factual or legal error by an arbitrator as an appellate court does in reviewing decisions of lower courts.

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Volt Information Sciences Inc. v. Board of Trustees of Leland Stanford Junior University, 489 U.S. 468, 474 (1989). The FAA was designed to overrule the judiciary’s longstanding refusal to enforce arbitration agreements. The FAA simply requires courts to enforce privately negotiated agreements to arbitrate, like other contracts, in accordance with their terms. Arbitration under the FAA is a matter of consent, not coercion, and the parties are generally free to structure their arbitration agreements as they see fit. The FAA does not require parties to arbitrate when they have not agreed to do so, nor does it prevent parties who do agree to arbitrate from excluding certain claims from the scope of their arbitration agreement. Interpretation of a contract is ordinarily a matter of state law to which the Supreme Court defers.

Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991). Statutory claims may be the subject of an arbitration agreement, enforceable pursuant to the FAA. The mere involvement of an administrative agency in the enforcement of a statute does not limit private parties' obligation to comply with their arbitration agreements.

Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265 (1995). The FAA’s displacement of conflicting state law is now well-established.

Mastrobuono v. Shearson Lehman Hutton Inc., 514 U.S. 52 (1995). The FAA’s central purpose is to ensure that private agreements to arbitrate are enforced according to their terms. A court should construe ambiguous language against the interest of the party that drafted it.

First Options of Chicago Inc. v. Kaplan, 514 U.S. 938 (1995). Whether a valid and binding agreement to arbitrate exists is generally a question for the courts, without any deference owed to the arbitrator’s views, and parties are not assumed to have agreed to arbitrate arbitrability absent clear and unmistakable evidence that they did so. In determining validity of agreements to arbitrate which are subject to the FAA, courts generally apply state-law principles governing the formation of contracts.

Doctors Associates Inc. v. Casarotto, 517 U.S. 681 (1996). State law governing contracts may be applied to invalidate an arbitration provision if that law arose to govern issues concerning the validity, revocability, and enforceability of contracts generally. Arbitration agreements may be invalidated by generally accepted

contract defenses, such as fraud, duress or unconscionability.

Cortez Byrd Chips Inc. v. Bill Harbert Construction Company, 529 U.S. 193 (2000). The venue provisions of the FAA are permissive.

Circuit City Stores Inc. v. Saint Clair Adams, 532 U.S. 105 (2001). FAA § 1 defines the key terms “maritime transactions” and “commerce” and excludes certain employment contracts from the FAA’s scope. FAA § 2 covers interstate and foreign commerce.

Major League Baseball Players Association v. Garvey, 532 U.S. 504 (2001) (per curiam). An arbitration decision may be vacated under FAA § 10(a)(4) on the ground that the arbitrator exceeded his powers only when the arbitrator strays from interpretation and application of the agreement and effectively dispenses his own brand of industrial justice.

EEOC v. Waffle House Inc., 534 U.S. 279 (2002). To determine the scope of an arbitration agreement, we look first to whether the parties agreed to arbitrate a dispute, not to general policy goals. While ambiguities in the language of the agreement should be resolved in favor of arbitration, we do not override the clear intent of the parties, or reach a result inconsistent with the plain text of the contract, simply because the policy favoring arbitration is implicated.

Howsam v. Dean Witter Reynolds Inc., 537 U.S. 79 (2002). Although in most circumstances the Supreme Court has recognized a liberal policy in favor of arbitration, the Court has made clear that there is an exception to this policy: The question whether the parties have submitted a particular dispute to arbitration (i.e. the question of arbitrability) is an issue for judicial determination unless the parties clearly and unmistakably provide otherwise. Although the Court's definition of "question of arbitrability" is narrow, it includes a disagreement about whether an arbitration clause in a concededly binding contract applies to a particular type of controversy. Parties can agree to arbitrate gateway questions of arbitrability, such as whether the parties have agreed to arbitrate or whether their agreement covers a particular controversy.

Citizens Citizens Bank v. Alafabco Inc., 539 U.S. 52 (2003). The FAA provides inter alia that an arbitration provision in any contract evidencing a transaction involving commerce shall be valid and enforceable. The term “involving commerce” is

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Arbitration in Texas: History and Enforceability_______________________________________________________________________________________________________interpreted broadly. The FAA encompasses a wider range of transactions than those actually within the flow of interstate commerce. A debt restructuring agreement is a contract evidencing a transaction involving commerce within the meaning of the FAA.

Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (2003). An arbitrator must determine whether a contract forbids class arbitration.

Buckeye Check Cashing Inc. v. Cardegna, 546 U.S. 440 (2006). Questions concerning the validity of the entire contract are to be resolved by the arbitrator in the first instance, not by the federal or state court.

Preston v. Ferrer, 552 U.S. 346 (2008). When parties agree to arbitrate all questions arising under contract, the FAA supersedes state laws lodging primary jurisdiction in another forum, whether judicial or administrative.

Hall Street Associates LLC v. Mattel Inc., 552 U.S. 576 (2008). The FAA lets parties tailor some, even many, features of arbitration by contract, including procedure and choice of substantive law. The FAA’s statutory grounds for prompt vacatur and modification of awards are exclusive, and parties are not free to supplement or expand by contract the scope of review to include legal error or manifest disregard of the law.

Stolt-Nielsen S. A. v. AnimalFeeds International Corp., 559 U.S. 662 (2010). A foundational principle of the FAA is that arbitration is a matter of consent. A party may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so. Imposing class arbitration on parties who have not agreed to authorize class arbitration is inconsistent with the FAA. In certain contexts, it is appropriate to presume that parties that enter into an arbitration agreement implicitly authorize the arbitrator to adopt such procedures as are necessary to give effect to the parties' agreement. However, an implicit agreement to authorize class-action arbitration is not a term that the arbitrator may infer solely from an agreement to arbitrate. An arbitration decision may be vacated under FAA §10(a)(4) on the ground that the arbitrator exceeded his powers, only when an arbitrator strays from interpretation and application of the agreement and effectively dispenses his own brand of industrial justice. It is not enough to show that the arbitrator committed an error or even a serious error. An arbitrator’s task is to interpret and enforce a contract, not to make public policy. See footnote 3: “We do not

decide whether “manifest disregard” survives our decision in Hall Street as an independent ground for review or as a judicial gloss on the enumerated grounds for vacatur under FAA § 10.”

Rent-A-Center West Inc. v. Jackson, 561 U.S. 63, 130 S.Ct. 2772 (2010). The FAA reflects the fundamental principle that arbitration is a matter of contract. Like other contracts, arbitration agreements may be invalidated by generally applicable contract defenses, such as fraud, duress or unconscionability. Under the FAA, a party’s challenge to another provision of the contract, or to the contract as a whole, does not prevent a court from enforcing a specific agreement to arbitrate. As a matter of substantive federal law, an arbitration provision is severable from the remainder of the contract. Under the FAA, if a party challenges the validity of the precise agreement to arbitrate at issue, federal court must consider the challenge before ordering compliance with that agreement, but if a party challenges the enforceability as a whole, the challenge is for the arbitrator. Provision of employment agreement which delegated to an arbitrator exclusive authority to resolve any dispute relating to the agreement’s enforceability was a valid delegation under the FAA.

AT&T Mobility LLC v. Concepcion, 563 U.S.333 (2011). FAA § 2 reflects a liberal federal policy favoring arbitration, and the fundamental principle that arbitration is a matter of contract. Thus, courts must place arbitration agreements on an equal footing with other contracts and enforce them according to their terms. Section 2’s savings clause (“save upon such grounds as exist at law or in equity for the revocation of any contract”) permits agreements to be invalidated by generally applicable contract defenses, but not by

defenses that apply only to arbitration or derive their meaning from the fact that an agreement to arbitrate is at issue. Although Section 2’s savings clause preserves generally applicable contract defenses, it does not suggest an intent to preserve state-law rules that stand as an obstacle to the accomplishment of the FAA’s objectives. The FAA's overarching purpose is to ensure the enforcement of arbitration agreements according to their terms so as to facilitate informal, streamlined proceedings.

Parties may agree to limit the issues subject to arbitration, to arbitrate according to specific rules, and to limit with whom they will arbitrate.

Oxford Health Plans LLC v. Sutter, 569 U.S.__ (2013). Questions of arbitrability are presumptively

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{ "pageset": "S02

Arbitration in Texas: History and Enforceability_______________________________________________________________________________________________________for courts to decide. A court may therefore review an arbitrator’s determination of such a matter de novo absent “clear and unmistakable” evidence that the parties wanted an arbitrator to resolve the dispute. Under the FAA, courts may vacate arbitrator’s decision only in very unusual circumstances. A party seeking relief from an arbitral award on ground that the arbitrator exceeded his powers bears a heavy burden, and it is not enough to show that the arbitrator committed error or even serious error. The sole question on judicial review is whether the arbitrator interpreted the parties’ contract, not whether he construed it correctly.

American Express Co. v. Italian Colors Restaurant, 570 U.S.__ (2013). Courts must rigorously enforce arbitration agreements according to their terms. Judge-made exception to the overarching principle reflected in text of the FAA allows courts to invalidate arbitration agreements that prevent effective vindication of a federal statutory right, and finds its origin in the desire to prevent prospective waiver of a party’s right to pursue statutory remedies, and the exception covers a provision in an arbitration agreement forbidding the assertion of certain statutory rights, and perhaps covers filing and administrative fees that are so high as to make access to the forum impracticable.

DirectTV Inc. v. Imburgia, __ U.S. __ (2015). The Supremacy Clause forbids state courts to dissociate themselves from federal law because of disagreement with its content or a refusal to recognize the superior authority of its source. The FAA is a law of the United States, and Concepcion is an authoritative interpretation of the FAA. Consequently, the judges of every state must follow it. The FAA allows parties to an arbitration contract considerable latitude to choose what law governs some or all of its provisions, including the law governing enforceability of a class-arbitration waiver.

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