ARBITRATION: CLIFF'S NOTES FOR THE GENERAL ...ARBITRATION: "CLIFF'S NOTES" FOR THE GENERAL PRACTITIONER SOFIA RAMON Atlas, Hall & Rodriguez, LLP 818 Pecan Blvd. Mcallen, Tx 78501 (956)

ARBITRATION: "CLIFF'S NOTES" FOR THE GENERAL PRACTITIONER

SOFIA RAMON Atlas, Hall & Rodriguez, LLP

818 Pecan Blvd. Mcallen, Tx 78501

(956) 682-5501 [email protected]

Based on Original Paper By: K. B. BATTAGLINI

Mcginnis Lochridge & Kilgore Llp 1111 Louisiana Street, Suite 4500

Houston, Texas 77002 713.615.8564

[email protected]

MILTON C. COLIA Kemp Smith, LLP

221 North Kansas, Suite 1700 El Paso, Texas 79901

915.533.4424 [email protected]

State Bar of Texas SOAKING UP SOME CLE

A South Texas Litigation Seminar May 16-17, 2013

South Padre Island

CHAPTER 14

SOFIA A. RAMONATLAS, HALL & RODRIGUEZ, LLP

818 W. Pecan Blvd., McAllen, Texas 78501(956) 682-5501

[email protected]

EDUCATION:* The University of Texas School of Law, Austin, Texas, 1992 J.D.* University of Texas/Pan American, 1988 (Bachelor of Arts)* Honors: Magna Cum Laude* Honors: Phi Kappa Phi* Honors: Alpha Psi Omega

HONORS AND AWARDS:* Named a Texas Rising Star as awarded by Thompson Reuters and published by Super Lawyers/Texas Monthly,2004, 2005 and 2006* Named a Texas Super Lawyer as awarded by Thompson Reuters and published by Super Lawyers/Texas Monthly,every year from 2006 to Present

PROFESSIONAL LICENSES:* State Bar of Texas, 1992* U.S. District Court, Southern and Western Districts of Texas* U.S. Court of Appeals (Fifth Circuit)

PROFESSIONAL EXPERIENCE:* Equity Partner, Atlas, Hall & Rodriguez, LLP (formerly Atlas & Hall, L.L.P.), 1997 to Present

Litigation of civil suits, including cases involving personal and catastrophic injury, transportation law, toxic torts,commercial litigation and insurance defense

* Associate, Law Offices of Israel Ramon, Jr., McAllen, Texas, 1995 - 1997* Associate, Small, Craig & Werkenthin, P.C., San Antonio, Texas, 1992 - 1995* Law Clerk, Small, Craig & Werkenthin, P.C., San Antonio, Texas, 1991* Fellowship Intern, Federal Public Defender's Office, McAllen, Texas, 1991* Intern, Texas Rural Legal Aid, Edinburg, Texas, 1990

PROFESSIONAL ASSOCIATIONS, MEMBERSHIPS AND ACTIVITIES:* State Bar of Texas, Standing Committee on Court Rules, 2007-Present* Southern District of Texas, Attorney Admissions Committee, 2004-Present* Texas Association of Defense Counsel

Area Vice President, 2011-2012 (Corpus Christi/Rio Grande Valley)TADC Director at Large, 2010-2011

* American Board of Trial Advocates, Rio Grande Valley ChapterElected to membership, June 2012

* Defense Research Institute, Member (Trucking Law Subcommittee)* International Association of Defense Counsel, Member* Litigation Counsel of America (Trial Lawyer Honorary Society), Fellow* Texas Bar Foundation, Fellow* College of the State Bar of Texas, Maintaining member* Hidalgo County Bar Association/Hidalgo County Bar Foundation, Member* Hidalgo County Women's Bar Association, Member* Texas Rural Legal Aid, Inc., Former Director (HCBA Representative)* San Antonio Bar Association, 1992-2001* Bexar County Women's Bar Association, 1992-1996* San Antonio Young Lawyers Association, 1992-1995

Arbitration Chapter 14

ii

Table of Contents

I. INTRODUCTION AND SCOPE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

II. HISTORY OF ARBITRATION IN TEXAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

III. POTENTIAL BASES FOR ENFORCEMENT OF ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1A. Federal Arbitration Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

1. Requirement for application: interstate commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12. Exclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23. Preemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24. Enforcement in state court; no independent federal jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

B. Texas Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31. Texas Arbitration Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32. Texas Common Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

C. Arbitration favored . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4D. Choice of law provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

IV. COURT PROCEDURES RELATING TO ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4A. Texas Arbitration Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

1. Motion to Compel Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4a. Burden of proof and persuasion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5b. Summary procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

2. Stay of litigation pending arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53. Proceedings to Stay Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54. Venue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55. Court Appointment of Arbitrators. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66. Further trial court action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

a. Other ancillary relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6b. Enforcement of award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6c. Stay of proceedings in another court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

7. Appellate review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7B. Federal Arbitration Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

1. Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72. Motion to Compel Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

a. Burden of proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7b. Federal court - procedural issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7c. State court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

3. Motion to Stay Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84. Court Appointment of Arbitrators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85. Appeals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

a. Federal court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8b. State court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

V. LEGAL CHALLENGES TO THE ENFORCEMENT OF ARBITRATION AGREEMENTS . . . . . . . . . . . . . 9A. Determination of arbitrability by court or by arbitrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9B. Absence of agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9C. Statutory limits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10D. Common law defenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

1. Requirement of specific relation to arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102. Fraud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113. Unconscionability and duress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125. Mental capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12


iii

6. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127. Impossibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138. Lack of Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149. Termination and Revocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

VI. ENFORCEABILITY OF ARBITRATION AGREEMENTS BY AND AGAINST NONSIGNATORIES . . . 14

VII. ENFORCEABILITY OF ARBITRATION AGREEMENTS IN LAWYER ENGAGEMENT CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

VIII. ARBITRATION PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16A. Arbitration Procedure under the Texas Arbitration Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

1. Appointing the Arbitrators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162. Pre-hearing issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163. The Arbitration Hearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164. The Arbitration Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

B. Arbitration Procedure under the Federal Arbitration Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171. Appointment of Arbitrators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172. Other Procedural Guidelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

C. Discovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

IX. ENFORCEMENT AND APPEALS OF ARBITRATION AWARDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18A. Confirming an Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

1. Under the TAA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182. Under the FAA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

B. Modifying, Correcting, or Vacating an Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181. Under the TAA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182. Under the FAA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19


iv

Table of Authorities

CasesAlderman v. Alderman, 296 S.W.2d 312 (Tex. Civ. App.–San Antonio 1956, writ ref'd) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Alford v. Dean Witter Reynolds, Inc., 975 F.2d 1161 (5th Cir. 1992) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

American Heritage Life Ins. Co. v. Lang, 321 F.3d 533 (5th Cir. 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 129 S.Ct. 1896, 173 L.Ed.2d 832 (2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Bank One N.A. v. Shumake, 281 F.3d 507 (5th Cir.), cert. denied, 537 U.S. 818 (2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Behring Int'l Inc. v. Local 295 Int'l Brotherhood of Teamsters, Chauffers, Warehousemen & Helpers of America, 449 F.Supp. 513 (E.D. N.Y. 1978) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Bison Building Materials, Ltd. v. Aldridge, No. 06-1084, 2012 WL 3870493 (Tex. Aug. 17, 2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8, 9

Bridas S.A.P.I.C. v.. Gov't of Turkmenistan, 345 F.3d 347 (5th Cir. 2003)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9, 15

Brown v. Pacific Life Ins. Co., 462 F.3d 384 (5th Cir. 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-9

Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9, 12

Burlington N.R.R. Co. v. Tuco Inc., 960 S.W.2d 629 (Tex. 1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Capital Income Props.-LXXX v. Blackmon, 843 S.W.2d 22 (Tex.1992) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Carey v. 24 Hour Fitness, USA, Inc., 669 F.3d 202 (5th Cir. 2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Carpenter v. North River Ins. Co., 436 S.W.2d 549 (Tex. Civ. App.–Houston [14th Dist] 1968, writ ref'd n.r.e.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 121 S.Ct. 1302, 149 L.Ed.2d 234 (2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 10

CMH Homes v. Perez, 340 S.W.3d 444 (Tex. 2011) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

CVN Group, Inc. v. Delgado, 95 S.W.3d 234 (Tex. 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19


v

Dallas Cardiology Associates P.A. v. Mallick, 978 S.W.2d 209 (Tex. App.–Texarkana 1998, pet. denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Doctors Assoc., Inc. v. Casarotto, 517 U.S. 681, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10, 11

East Tex. Salt Water Disposal Co. Inc. v. Werline, 307 S.W.3d 267 (Tex. 2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Ellis v. Schlimmer, 337 S.W.3d 860 (Tex. 2011) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 2, 5

EZ Pawn Corp. v. Mancias, 934 S.W.2d 87 (Tex.1996) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Florasynth Inc. v. Pickholz, 750 F.2d 171 (2nd Cir. 1984) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Ford v. NYLCare Health Plans of the Gulf Coast, Inc., 141 F.3d 243 (5th Cir.1998) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Foreca, S.A. v. GRD Dev. Co., 758 S.W.2d 744 (Tex. 1988) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Forest Oil Corp. v. McAllen, 268 S.W.3d 51 (Tex. 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

General Motors Corp. v. Pamela Equities Corp., 146 F.3d 242 (5th Cir. 1998) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Great Earth Co. v. Simons, 288 F.3d 878 (6th Cir. 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8, 11, 12

Grigson v. Creative Artists Agency, L.L.C., 210 F.3d 524 (5th Cir.), cert. den., 531 U.S. 1013 (2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Hall Street Associates v. Mattel, 552 U.S. 576, 128 S.Ct. 1396, 170 L.Ed.2d 254 (2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Henry v. Gonzalez, 18 S.W.3d 684 (Tex. App.–San Antonio 2000, pet. dism'd by agr.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5, 14, 15

Hill v. G.E. Power Systems Inc., 282 F.3d 343 (5th Cir. 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Hill v. Rent-A-Center, Inc., 398 F.3d 1286 (11th Cir. 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 10

Hooters of America Inc. v. Phillips, 39 F. Supp. 2d 582 (D.S.C. 1998) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11


vi

Hoxworth v. Blinder Robinson & Co. Inc., 980 F.2d 912 (3rd Cir. 1992) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

In re 24R Inc., 324 S.W.3d 564 (Tex. 2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

In re AdvancePCS Health L.P., 172 S.W.3d 603 (Tex. 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 14

In re American Homestar of Lancaster, Inc., 50 S.W.3d 480 (Tex. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

In re Bank One, N.A., 216 S.W.3d 825 (Tex. 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

In re Citigroup Global Markets, Inc., 258 S.W.3d 623 (Tex. 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

In re D. Wilson Constr. Co., 196 S.W.3d 774 (Tex. 2006). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

In re Dillard Dep't Stores, Inc., 186 S.W.3d 514 (Tex. 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

In re Education Management Corp, Inc., 14 S.W.3d 418 (Tex. App.–Houston [14th Dist.] 2000, orig. proc.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

In re Firstmerit Bank, N.A., 52 S.W.3d 749 (Tex. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-12, 14

In re Godt, 28 S.W.3d 732 (Tex. App.–Corpus Christi 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

In re Golden Peanut Co., 298 S.W.3d 629 (Tex. 2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

In re Halliburton Co., 80 S.W.3d 566 (Tex. 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11, 14

In re Hartigan, 107 S.W.3d 684 (Tex. App.–San Antonio 2003) (orig. proc.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

In re Houston Pipe Line Co., 311 S.W.3d 449 (Tex. 2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 5

In re Jindal Saw Ltd., 289 S.W.3d 827 (Tex. 2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

In re Kellogg Brown & Root, 80 S.W.3d 611 (Tex. App.–Houston [1st Dist.] 2002, orig. proc.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 9, 15

In re Labatt Food Service L.P., 279 S.W.3d 640 (Tex. 2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15


vii

In re MHI Partnership, 7 S.W.3d 918 (Tex. App.–Houston [1st Dist.] 1999) (orig. proc.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

In re Morgan Stanley, 293 S.W.3d 182 (Tex. 2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9, 12

In re Nexion Health at Humble Inc., 173 S.W.3d 67 (Tex. 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

In re Next Financial Group Inc., 271 S.W.3d 263 (Tex. 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

In re Oakwood Mobile Homes, Inc., 987 S.W.2d 571 (Tex. 1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 11

In Re Odyssey Healthcare, Inc., 310 S.W.3d 419 (Tex. 2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10, 12, 14

In re Olshan Foundation Repair Co., 328 S.W.3d 883 (Tex. 2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 4, 9, 11, 12

In re Palm Harbor Homes, Inc., 195 S.W.3d 672 (Tex. 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

In re Pham, 314 S.W.3d 520 (Tex. App.–Houston [14 Dist.] 2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

In re Poly-America, L.P., 262 S.W.3d 337 (Tex. 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11, 12

In re RLS Legal Solutions, LLC, 221 S.W.3d 629 (Tex. 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

In re Rubiola, 334 S.W.3d 220 (Tex. 2011) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 14, 15

In re Serv. Corp. Int'l, 355 S.W.3d 655 (Tex. 2011) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

In re Weekley Homes, L.P., 180 S.W.3d 127 (Tex. 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9, 15

J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex. 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 14

Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266 (Tex. 1992) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 2, 4, 5, 8

L & L Kempwood Assocs., L.P. v. Omega Builders, Inc. (In re L & L Kempwood Assocs., L.P.), 9 S.W.3d 125 (Tex. 1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 2, 4

L.H. Lacy Co. v. City of Lubbock, 559 S.W.2d 348 (Tex. 1977) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3


viii

Lifecare Int'l, Inc. v. CD Med., Inc., 68 F.3d 429 (11th Cir.1995) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Lundgren v. Freeman, 307 F.2d 104 (9th Cir. 1962) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Marble Slab Creamery, Inc. v. Wesic, Inc., 823 S.W.2d 436 (Tex. App.–Houston [1st Dist.] 1992, no writ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Mariner Financial Group Inc. v. Bossley, 79 S.W.3d 30 (Tex. 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Mendoza v. Canizales, 695 S.W.2d 266 (Tex. App.–San Antonio 1985, no writ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Mesa Operating L.P. v. Louisiana Intrastate Gas Corp., 797 F.2d 238 (5th Cir. 1986) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Miller v. Brewer, 118 S.W.3d 896 (Tex. App.–Amarillo 2003, no pet.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Miller v. Public Storage Mgmt., 121 F.3d 215 (5th Cir. 1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Mississippi Ins. Managers Inc. v. Providence Washington Ins. Co., 72 F.Supp. 2d 689 (S.D. Miss. 1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Mohamed v. Auto Nation USA Corp., 89 S.W.3d 830 (Tex. App.–Houston [1st Dist.] 2002, no pet.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Monday v. Cox, 881 S.W.2d 381 (Tex. App.–San Antonio 1994, writ denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Morrison v. Amway Corp., 517 F.3d 248 (5th Cir. 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Nafta Traders Inc. v. Quinn, 339 S.W.3d 84 (Tex. 2011) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

National Iranian Oil Co. v. Ashland Oil Inc., 817 F.2d 326, 331 (5th Cir.), cert. denied, 484 U.S. 943 (1987) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Nationwide of Bryan Inc. v. Dyer, 969 S.W.2d 518 (Tex. App.–Austin 1998, no pet.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

New Concept Constr. Co. v. Kirbyville Consol. Indep. Sch. Dist., 119 S.W.3d 468 (Tex. App.–Beaumont 2003, pet. denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5


ix

Olshan Demolishing Co. v. Angleton Independent School Dist., 684 S.W.2d 179 (Tex. App.–Houston [14th Dist.] 1984, writ ref’d n.r.e.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Perry Homes v. Cull, 258 S.W.3d 580 (Tex. 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 9, 12, 13

Petrofac, Inc. v. DynMcDermott Petroleum Operations Co., 687 F.3d 671 (5th Cir. 2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Price v. Drexel Burnham Lambert Inc., 791 F.2d 1156 (5th Cir. 1986) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Prima Paint Corp. v. Flood & Conklin Manufacturing Co., 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 9-11

Qualcomm Inc. v. Nokia Corp., 466 F.3d 1366 (Fed. Cir. 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Republic Ins. Co. v. PAICO Receivables, LLC, 383 F.3d 341 (5th Cir. 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Riha v. Smulcer, 843 S.W.2d 289 (Tex. App.–Houston [14th Dist.] 1992, writ denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Russ Berrie & Co., Inc. v. Gantt, 998 S.W.2d 713 (Tex. App.–El Paso 1999, no pet.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Shearson/American Express Inc. v. McMahon, 482 U.S. 220, 107 S.Ct. 2332, 96 L.Ed 2d 185 (1987) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Southland Corp. v. Keating, 465 U.S. 1, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 7

Taylor v. Wilson, 180 S.W.3d 627 (Tex. App. –Houston [14th Dist.] 2005, pet. denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Texaco Exploration & Prod. Co. v. AmClyde Engineered Prod. Co., 243 F.3d 906 (5th Cir. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Thomas v. Prudential Securities, Inc., 921 S.W.2d 847 (Tex. App.–Austin 1996, no writ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Tittle v. Enron Corp., 463 F.3d 410 (5th Cir. 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 9

United Offshore Co. v. Southern Deepwater Pipeline Co., 899 F.2d 405 (5th Cir. 1990) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Vernon E. Faulconer, Inc. v. HFI, L.P., 970 S.W.2d 36 (Tex. App.–Tyler 1998, no pet.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 10


x

Washington Mutual Finance Group, LLC v. Bailey, 364 F.3d 260 (5th Cir. 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Wetzel v. Sullivan, King & Sabom, P.C., 745 S.W.2d 78 (Tex. App.–Houston [1st Dist.] 1988, no writ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Williams v. CIGNA Financial Advisors Inc., 56 F.3d 656 (5th Cir. 1995) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12, 13

Wylie Indep. School Dist. v. TMC Foundations, Inc., 770 S.W.2d 19 (Tex. App.–Dallas 1989, writ dism’d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Statutes9 U.S.C. § 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 2, 109 U.S.C. § 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 29 U.S.C. § 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 U.S.C. § 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 89 U.S.C. § 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8, 179 U.S.C. § 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 U.S.C. § 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179 U.S.C. § 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189 U.S.C. § 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199 U.S.C. § 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199 U.S.C. § 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199 U.S.C. § 16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8, 99 U.S.C. § 201, et seq. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 U.S.C. § 301, et seq. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

10 U.S.C. § 987 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

12 U.S.C. § 5518 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

15 U.S.C. § 1639c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

24 C.F.R. 203.204 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

32 C.F.R. § 232.3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

TEX. BUS. & COM. CODE § 2.302 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

TEX. CIV. PRAC. & REM. CODE

§ 51.016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 § 171.001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 § 171.002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 § 171.021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 5 § 171.022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 § 171.023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 § 171.024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 § 171.026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 § 171.041 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6, 16 § 171.042 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 § 171.043 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 § 171.044 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 § 171.045 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16


xi

§ 171.046 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 § 171.047 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 § 171.048 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16, 17 § 171.049 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 § 171.050 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16, 17 § 171.051 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 § 171.053 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 § 171.081 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 § 171.082 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6, 18 § 171.083 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 § 171.084 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 § 171.085 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 18 § 171.086 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 § 171.087 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6, 18 § 171.088 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 § 171.091 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 § 171.092 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 § 171.093 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 § 171.096 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 § 171.097 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 § 171.098 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5, 7 § 172.001, et seq. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 3

TEX. CONST. of 1845, art. VII, § 15 (repealed) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

TEX. LABOR CODE § 406.033 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

OtherD. Uloth & H. Rial, Enforcing Arbitration Against Nonsignatories, 65 TEX. BAR. J. 802 (2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

P. Carrington, The 1965 General Arbitration Statute of Texas, 20 SW. L.J. 21 (1966) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Tx. Ethics Op 586 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15


1

ARBITRATION AGREEMENTS IN TEXAS:HISTORY AND ENFORCEABILITY

I. INTRODUCTION AND SCOPE

Arbitration is a method of resolving a disputeoutside of the ordinary processes of law. It has beendescribed as:

[A] contractual proceeding by whichthe parties to a controversy or dispute,in order to obtain a speedy andinexpensive final disposition of mattersinvolved voluntarily select arbitratorsor judges of their own choice, and byconsent submit the controversy to suchtribunal for determination in substi-tution for the tribunals provided by theordinary processes of the law. . . .

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). See also Jack B. AnglinCo. v. Tipps, 842 S.W.2d 266, 268 (Tex. 1992) (quotingAlderman).

This paper addresses arbitration with United Statesparties. The arbitration of international disputes isgoverned, at least in part, by separate statutes. See TEX.CIV. PRAC. & REM. CODE § 172.001, et seq. (Arbitrationand Conciliation of International Commercial Disputes);9 U.S.C. § 201, et seq. (Convention on the Recognitionand Enforcement of Foreign Arbitral Awards), § 301, etseq. (Inter-American Convention on InternationalCommercial Arbitration).

II. HISTORY OF ARBITRATION IN TEXAS

Arbitration has a long history in Texas. PerryHomes v. Cull, 258 S.W.3d 580, 584 (Tex. 2008)("Since 1846, Texas law has provided that parties to adispute may choose to arbitrate rather than litigate"). Itcan be traced to the Spanish influence rather than to thecommon law influence. Paul Carrington, The 1965General Arbitration Statute of Texas, 20 SW. L.J. 21, 22(1966) (hereinafter "Carrington"). Even the firstConstitution of the State of Texas directed theLegislature to pass laws providing for arbitration ofdifferences when the parties elected to use that methodof trial. TEX. CONST. of 1845, art. VII, § 15 (repealed)("It shall be the duty of the Legislature to pass such lawsas may be necessary and proper, to decide differences byarbitration, when the parties shall elect that method oftrial"); see Carpenter v. North River Ins. Co., 436

S.W.2d 549, 551 (Tex. Civ. App.–Houston [14th Dist]1968, writ ref'd n.r.e.). III. POTENTIAL BASES FOR ENFORCEMENT OF

ARBITRATION

Arbitration may be enforced under federal or statelaw. Indeed, enforcement under both statutes may beavailable, so long as the TAA is not preempted. Ellis v.Schlimmer, 337 S.W.3d 860, 861 (Tex. 2011).

A. Federal Arbitration Act

The Federal Arbitration Act (hereinafter "FAA"),found at 9 U.S.C. § 1, et seq., provides in part:

A written provision in any maritimetransaction or a contract evidencing atransaction involving commerce tosettle by arbitration a controversythereafter arising out of such contractor transaction, or the refusal to performthe whole or any part thereof, or anagreement in writing to submit toarbitration an existing controversyarising out of such a contract,transaction, or refusal, shall be valid,irrevocable, and enforceable, save uponsuch grounds as exist at law or inequity for the revocation of anycontract.

9 U.S.C. § 2. The FAA is broad in scope, and applies toall claims involving interstate commerce and maritimetransactions, except those pertaining to contracts ofemployment of seamen, railroad employees, or anyother class of workers engaged in foreign or interstatecommerce. 9 U.S.C. § 1.

1. Requirement for application: interstate commerce

The FAA applies to contracts "evidencing atransaction involving commerce." 9 U.S.C. § 2."Commerce" as used in the act "is not limited tointerstate shipment of goods . . . but includes allcontracts 'relating to interstate commerce.'" MesaOperating L.P. v. Louisiana Intrastate Gas Corp., 797F.2d 238, 243 (5th Cir. 1986), quoting Prima PaintCorp. v. Flood & Conklin Manufacturing Co., 388 U.S.395, 401 n.7, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967).

The FAA does not require a substantial effect oninterstate commerce; rather, it merely requirescommerce to be involved or affected. L & L KempwoodAssocs., L.P. v. Omega Builders, Inc. (In re L & LKempwood Assocs., L.P.), 9 S.W.3d 125, 127 (Tex.


2

1999). The FAA will extend to "any contract affectingcommerce, as far as the Commerce Clause of the UnitedStates Constitution will reach." In re Nexion Health atHumble Inc., 173 S.W.3d 67, 69 (Tex. 2005). Thequestion of whether the transaction affects interstatecommerce, and is thereby governed by the FAA, is aquestion of fact. In re Education Management Corp,Inc., 14 S.W.3d 418, 423 (Tex. App.–Houston [14thDist.] 2000, orig. proc.). However, undisputed factsmay establish applicability as a matter of law. E.g., L &L Kempwood, 9 S.W.3d at 127 & n. 14 (noting parties tocontract were from different states).

2. Exclusions

The FAA is not applicable to claims pertaining tocontracts of employment of seamen, railroad employees,or any other class of workers engaged in foreign orinterstate commerce. 9 U.S.C. § 1. This exclusion "islimited to transportation workers, defined, . . . as thoseworkers 'actually engaged in the movement of goods ininterstate commerce.'" Circuit City Stores, Inc. v.Adams, 532 U.S. 105, 111, 121 S.Ct. 1302, 149 L.Ed.2d234 (2001). The exclusion has a limited scope, id. at111-15, and relates to "a class of workers in thetransportation industry, rather than . . . workers whoincidentally transported goods interstate as part of theirjob in an industry that would otherwise be unregulated."Hill v. Rent-A-Center, Inc., 398 F.3d 1286, 1289 (11thCir. 2005). See also Circuit City, 532 U.S. at 114(noting that maxim of ejusdem generis should beapplied). In addition, certain other statutes affectarbitration, as discussed in section V.C. below.

3. Preemption

Section 2 of the FAA preempts state law that wouldotherwise render arbitration agreements unenforceablein a contract involving interstate commerce. 9 U.S. C. §2; Southland Corp. v. Keating, 465 U.S. 1, 10-11, 104S.Ct. 852, 79 L.Ed.2d 1 (1984); In re OlshanFoundation Repair Co., 328 S.W.3d 883, 888 (Tex.2010). The FAA was designed to overrule thejudiciary's longstanding refusal to enforce agreements toarbitrate, and place such agreements upon the samefooting as other contracts. Volt Information Sciences,Inc. v. Board of Trustees of Leland Stanford JuniorUniv., 489 U.S. 468, 474, 109 S.Ct. 1248, 103 L.Ed.2d488 (1989) (internal quotations omitted); Olshan, 328S.W.3d at 888. However, by enacting the FAA,Congress did not occupy the entire field of arbitrationregulation. The FAA therefore preempts state arbitrationlaw only to the extent that the state law actually conflictswith the FAA. See Volt Information Sciences, Inc. v.Board of Trustees of Leland Stanford Junior Univ., 489

U.S. 468, 477, 109 S.Ct. 1248, 1255, 103 L.Ed.2d 488(1989); Ellis v. Schlimmer, 337 S.W.3d 860, 861-82(Tex. 2011) ("The TAA is preempted only when it orother state law would not allow enforcement of anarbitration agreement that the FAA would enforce"); Inre D. Wilson Constr. Co., 196 S.W.3d 774, 779-80 (Tex.2006). Therefore, an agreement may be enforceableunder both the FAA and the TAA.

The Texas Supreme Court has recognized that theFAA preempts parts of the TAA, including section171.002(a)(2) of the Civil Practice and Remedies Code.Olshan, 328 S.W.3d at 888. See Jack B. Anglin Co. v.Tipps, 842 S.W.2d 266, 271 (Tex. 1992) (discussingFAA's preemption of non-waiver provision of DTPA);In re Nexion Health at Humble Inc., 173 S.W.3d 67, 69(Tex. 2005) (discussing FAA's preemption of TAAsection 171.002(a)(3)).

The factors that determine whether the FAApreempts the TAA are:

(1) whether the agreement is in writing;(2) whether it involves interstate commerce;(3) whether it can withstand scrutiny undertraditional contract defenses; and(4) whether state law affects the enforceability ofthe agreement.

Nexion, 173 S.W.3d at 69. In Ellis v. Schlimmer, 337 S.W.3d 860 (Tex. 2011),

the plaintiffs filed suit, initiated discovery, andproceeded with the lawsuit until five months before thetrial setting, when their lawyers purportedly discovereda mandatory arbitration clause in the parties' real estatecontract. At that point, a motion to abate and compelarbitration was filed. The appellate court dismissed,concluding that the agreement did not specificallyinvoke either the TAA or the FAA and that jurisdictionfor the interlocutory appeal was not established. (At thattime, review under the FAA would have been bymandamus). The Texas Supreme Court noted that aparty attempting to compel arbitration must firstestablish the existence of a valid arbitration agreement.However, once the party seeking arbitration does so, astrong presumption favoring arbitration arises, and theburden shifts to the party opposing arbitration to raise anaffirmative defense to the agreements' enforcement.Here, the burden was on the party opposing arbitrationto show that some Texas state law or statutoryrequirement would prevent enforcement of thearbitration agreement under the TAA so that the FAAwould preempt the Texas act.

4. Enforcement in state court; no independent federaljurisdiction


3

No independent federal jurisdiction exists to issuean order compelling arbitration under the FAA. Hence,federal jurisdiction exists only through an independentbasis for jurisdiction, i.e., diversity or federal questionjurisdiction. Moses H. Cone Memorial Hospital v.Mercury Construction Corp., 460 U.S. 1, 24 n. 32, 103S.Ct. 927, 942 n. 32, 74 L.Ed.2d 765 (1983). Manydisputes involving arbitration agreements governed bythe FAA therefore are brought in state court.

B. Texas Law

1. Texas Arbitration Act

The Texas Arbitration Act ("TAA"), sometimescalled the Texas General Arbitration Act, was codifiedin 1995 and effective in 1966. It is found as Chapter171 of the Texas Civil Practice & Remedies Code. TheTAA validates arbitration agreements:

A written agreement to arbitrate is validand enforceable if the agreement is toarbitrate a controversy that:(1) exists at the time of the agreement;or(2) arises between the parties after thedate of the agreement.

TEX. CIV. PRAC. & REM. CODE § 171.001(a). A partymay revoke the agreement only on a ground that existsat law or in equity for the revocation of a contract. Id. §171.001(b).

Unless the parties agree in writing to arbitrate andthe writing is signed by each party and each party'sattorney, the TAA does not apply to:

(1) a collective bargaining agreementbetween an employer and a laborunion;(2) an agreement for the acquisition byone or more individuals of property,services, money or credit in which thetotal consideration to be furnished bythe individual is not more than $50,000. . .;(3) a claim for personal injury;(4) a claim for workers compensationbenefits; or(5) an agreement made before January1, 1966.

TEX. CIV. PRAC. & REM. CODE § 171.002(a). Inaddition, certain other statutes affect arbitration, asdiscussed in section V.C. below.

2. Texas Common Law

Historically, Texas has allowed the creation ofarbitration agreements under common law as well asstatute. L.H. Lacy Co. v. City of Lubbock, 559 S.W.2d348, 351 (Tex. 1977) (noting the "historical co-existenceof statutory and common law arbitrations"); WylieIndep. School Dist. v. TMC Foundations, Inc., 770S.W.2d 19, 21 (Tex. App.–Dallas 1989, writ dism’d). An arbitration agreement need not be in any particularform; there must merely be an agreement to arbitrate.Wetzel v. Sullivan, King & Sabom, P.C., 745 S.W.2d 78,81 (Tex. App.–Houston [1st Dist.] 1988, no writ).

In the past, the common law was seldom used toenforce arbitration agreements because the agreementscould be repudiated, at least prior to actual arbitration.This rule has been expressly repealed as to nonprofitentities. See TEX. CIV. PRAC. & REM. CODE § 173.001,et seq. In L.H. Lacy Co. v. City of Lubbock, 559 S.W.2d348, 352 (Tex. 1977), the court noted that, under thetraditional common law rule, courts refused specificenforcement of agreements to arbitrate future disputes.However, the court stated that the policies underlyingsuch refusal had been abandoned in many jurisdictionsand that, while it was unnecessary to alter the oldcommon law rule in the case before it, "the policy ofrefusing specific enforcement to executory arbitrationagreements is not justifiable when the case fits withinthe common law mold." Id. Hence, subsequent to L.H.Lacy, the Dallas Court of Appeals specifically enforceda common law agreement to arbitrate in Wylie Indep.School Dist. v. TMC Foundations, Inc., 770 S.W.2d 19,21 (Tex. App.–Dallas 1989, writ dism’d) ("Based uponthe rationale expressed by the Texas Supreme Court inLacy and the legislative trend, we hold that anagreement to arbitrate future contractual disputes isspecifically enforceable even in the face of one party’sattempted revocation of that agreement prior to anarbitration award"; demand for arbitration had beenfiled). See also Olshan Demolishing Co. v. AngletonIndependent School Dist., 684 S.W.2d 179 (Tex.App.–Houston [14th Dist.] 1984, writ ref’d n.r.e.);Wetzel v. Sullivan, King & Sabom, P.C., 745 S.W.2d 78,81 (Tex. App.–Houston [1st Dist.] 1988, no writ)("Moreover, a party may specifically enforce a[ commonlaw] arbitration agreement despite the other party’sattempted revocation"). But cf. Mendoza v. Canizales,695 S.W.2d 266, 271 (Tex. App.–San Antonio 1985, nowrit) (citing old rule with approval).

Given the federal and state statutes specificallyaddressing arbitration, the common law has beenaccorded little discussion of late. However, if youragreement is unenforceable under the statutes, youmight consider the common law as a mechanism forenforcement.


4

C. Arbitration favored

Arbitration is favored under Texas law as well asfederal law. Jack B. Anglin Co. v. Tipps, 842 S.W.2d266, 268 (Tex. 1992) ("The public policy of both ourstate and federal governments favors agreements toresolve legal disputes through such voluntary settlementprocedures"). The FAA has been interpreted by federalcourts to establish a federal policy favoring arbitration,requiring that courts rigorously enforce arbitrationagreements. Shearson/American Express Inc. v.McMahon, 482 U.S. 220, 226, 107 S.Ct. 2332, 96 L.Ed2d 185 (1987). Federal policy requires that the courtrigorously enforce agreements to arbitrate. Id.

D. Choice of law provisions

An agreement containing a general choice-of-lawprovision stating that the entire contract will begoverned by "the law of the place where the Project islocated," does not preclude application of the FAA. Inre L & L Kempwood Assoc., L.P., 9 S.W.3d 125, 127-28(Tex.1999) (per curiam). See also In re OlshanFoundation Repair Co., 328 S.W.3d 883, 889-90 (Tex.2010). The court in Kempwood observed that the projectwas located in Houston, thus the FAA was part of "thelaw of the place where the Project is located." Id. Seealso Capital Income Props.-LXXX v. Blackmon, 843S.W.2d 22, 23 (Tex.1992) (per curiam) (stating that"[t]he Federal [Arbitration] Act is part of the substantivelaw of Texas"). Rather, a general choice-of-lawprovision "may reasonably be read as merely asubstitute for the conflict-of-laws analysis that otherwisewould determine what law to apply to disputes." L & LKempwood, 9 S.W.2d at 127 n. 16. However, when thecontract specifically excludes application of the FAA ,the TAA will be applied. L & L Kempwood, 9 S.W.3d at127-28.

A number of Texas courts have held that anagreement to arbitrate under the FAA suffices forapplication of the FAA. See, e.g., In re Rubiola, 334S.W.3d 220, 223 (Tex. 2011) (orig. proc.) (stating thatparties may expressly agree to arbitrate under FAA); Inre Kellogg Brown & Root, 80 S.W.3d 611, 617 (Tex.App.–Houston [1st Dist.] 2002, orig. proc.) (whenparties agree to arbitrate under the FAA, they are notrequired to establish that the transaction at issueinvolves or affects interstate commerce). But see RussBerrie & Co., Inc. v. Gantt, 998 S.W.2d 713, 715 (Tex.App.–El Paso 1999, no pet.) (for purposes of subjectmatter jurisdiction, jurisdiction cannot be conferred bythe parties' agreement).

When the language of an arbitration provisionspecifically excludes application of the FAA, however,the courts must apply the TAA to the FAA's exclusion.

In In re Olshan Foundation Repair Co., 328 S.W.3d at890, one of the arbitration agreements at issue providedthat disputes "shall be resolved by mandatory andbinding arbitration . . . pursuant to the Texas GeneralArbitration Act. . . ." Because the TAA was applicableto one of the agreements in Olshan, the exclusionswithin the TAA precluded its enforcement. Id. See alsoFord v. NYLCare Health Plans of the Gulf Coast, Inc.,141 F.3d 243, 246 (5th Cir.1998).

IV. COURT PROCEDURES RELATING TOARBITRATION

Both the TAA and the FAA set forth procedures forcourt intervention and involvement in the enforcementof arbitration agreements. Texas procedure generallyapplies, regardless of whether the arbitration agreementsinvoked the FAA or TAA. In re Houston Pipe Line Co.,311 S.W.3d 449, 450 (Tex. 2009); Jack B. Anglin Co. v.Tipps, 842 S.W.2d 266, 268 (Tex. 1992).

A. Texas Arbitration Act

Texas courts, in an appropriate situation, have theauthority to compel arbitration, stay litigation, stayarbitration, appoint arbitrators, enforce arbitrator'ssubpoenas, confirm awards, vacate awards, modify andcorrect awards and hear appeals concerning arbitration.See TEX. CIV. PRAC. & REM. CODE § 171.021 et seq.

1. Motion to Compel Arbitration

A court shall order the parties to arbitrate onapplication of a party showing an agreement to arbitrate,and the opposing party's refusal to arbitrate. TEX. CIV.PRAC. & REM. CODE § 171.021(a). See also id. §171.021(b). A court must decide the issue, and may notsimply delay a decision until after merits discovery. Inre Houston Pipe Line Co., 311 S.W.3d 449, 451 (Tex.2009).

A court may require that an application show thejurisdiction of the court, have attached a copy of thearbitration agreement, define the issue subject toarbitration, specify the status of the arbitration, andshow the need for a court order. TEX. CIV. PRAC. &REM. CODE § 171.085(a). However, in the absence ofsuch requirements, the action may not be dismissedwithout at least a ten-day period for amendment. Id. §171.085(b).

In determining an application to compel arbitration,the court will look at two issues: whether there is avalid, enforceable arbitration agreement, and whetherthe agreement encompasses the claim. Nationwide ofBryan Inc. v. Dyer, 969 S.W.2d 518, 520 (Tex.


5

App.–Austin 1998, no pet.); Dallas CardiologyAssociates P.A. v. Mallick, 978 S.W.2d 209, 212 (Tex.App.–Texarkana 1998, pet. denied). The court has nodiscretion and must compel arbitration if the answer toboth issues is affirmative. Id.

a. Burden of proof and persuasion

A party attempting to compel arbitration must firstestablish the existence of a valid arbitration agreement.Ellis v. Schlimmer, 337 S.W.3d 860, 861 (Tex. 2011);Dallas Cardiology Associates P.A. v. Mallick, 978S.W.2d at 212. Once the existence of an arbitrationagreement has been established, a presumption attachesfavoring arbitration. Henry v. Gonzalez, 18 S.W.3d 684,689 (Tex. App.–San Antonio 2000, pet. dism'd by agr.).The burden then shifts to the opposing party to establishsome ground for the revocation of the arbitrationagreement. Id. Such grounds may include fraud,waiver, unconscionability, or that the dispute fallsoutside the scope of the agreement. Id.; see furtherdiscussion below. Doubts regarding the scope ofarbitration agreements are resolved in favor ofarbitration. Dallas Cardiology at 212.

A court may not refuse to order arbitration becausethe claim lacks merit or bona fides, or the fault orground for the claim is not shown. TEX. CIV. PRAC. &REM. CODE § 171.026. A court may not enforce anagreement to arbitrate if the court finds that theagreement was unconscionable at the time the agreementwas made. TEX. CIV. PRAC. & REM. CODE § 171.022.

b. Summary procedure

If a party opposing an application denies theexistence of the arbitration agreement, the court shallsummarily determine that issue. TEX. CIV. PRAC. &REM. CODE § 171.021(b). See also id. § 171.023(b)(providing that, if there is a substantial bona fide disputeas to whether an agreement to arbitrate exists, the courtshall try the issue promptly and summarily); Jack B.Anglin Co. v. Tipps, 842 S.W.2d 266, 268-69 (Tex.1992). As the court stated in Anglin:

We also envision that the hearing atwhich a motion to compel arbitration isdecided would ordinarily involveapplication of the terms of thearbitration agreement to undisputedfacts, amenable to proof by affidavit.With these considerations in mind, wehold that the trial court may summarilydecide whether to compel arbitration onthe basis of affidavits, pleadings,discovery, and stipulations. However, if

the material facts necessary todetermine the issue are controverted,by an opposing affidavit or otherwiseadmissible evidence, the trial courtmust conduct an evidentiary hearing todetermine the disputed material facts.

Jack B. Anglin, 842 S.W.2d at 269. Anglin thus leavesopen the potential for an evidentiary hearing if materialfacts are controverted. Id.

A court must decide the issue, and may not simplydelay a decision until after merits discovery. In reHouston Pipe Line Co., 311 S.W.3d 449, 451 (Tex.2009); In re MHI Partnership, 7 S.W.3d 918, 923 (Tex.App.–Houston [1st Dist.] 1999) (orig. proc.).

2. Stay of litigation pending arbitration

An order compelling arbitration must include a stayof any proceeding that involves an issue subject toarbitration. TEX. CIV. PRAC. & REM. CODE §171.021(c). Alternately, a court may stay an arbitrationcommenced or threatened on application and a showingthat there is no agreement to arbitrate. Id. § 171.023(a). 3. Proceedings to Stay Arbitration.

A party opposing arbitration may file a motion tostay a pending or threatened arbitration on the groundsthat there is no agreement to arbitrate. TEX. CIV. PRAC.& REM. CODE § 171.023(a). As with motions to compelarbitration, the court should proceed summarily. Id. §171.023(b).

The motion to stay arbitration must be filed in thecourt where the matter involving an issue referable toarbitration is pending. TEX. CIV. PRAC. & REM. CODE §171.024(a). If such a court proceeding is not pending,the party may file a petition in another county of propervenue under the act. See TEX. CIV. PRAC. & REM. CODE

§§ 171.024(b), 171.096.Similar to the proceeding for an application to

compel arbitration, the court must stay the arbitration ifthe court finds no agreement to arbitrate exists, and mustorder the parties to arbitration if it finds a validagreement. TEX. CIV. PRAC. & REM. CODE §171.023(c). The presumption in favor of arbitrationapplies. See New Concept Constr. Co. v. KirbyvilleConsol. Indep. Sch. Dist., 119 S.W.3d 468, 471 (Tex.App.–Beaumont 2003, pet. denied). An order grantingan application to stay arbitration is appealable. See TEX.CIV. PRAC. & REM. CODE § 171.098(a)(2).

4. Venue


6

Venue for an initial application relating to anarbitration agreement, whether the application is tocompel arbitration or stay arbitration, is set by statute.With some exceptions, the initial application must befiled in:

(1) the county in which the adverse party residesor has a place of business;(2) if the adverse party does not have a residence orplace of business in Texas, in any county; or(3) any county designated by the arbitrationagreement.

TEX. CIV. PRAC. & REM. CODE § 171.096(a), (b).Further, if a hearing before the arbitrators has alreadybeen held, the initial application must be filed in thecounty where the arbitration hearing was held. Id. §171.096(c). Finally, when a proceeding is alreadypending in court relating to an issue subject toarbitration under an agreement, the initial applicationand any subsequent application must be filed in thatcourt. Id. § 171.096(d).

The responding party may file a motion to transfervenue. If the initial application is not filed in one of thecounties set forth in section 171.096, the court musttransfer the action to one of the counties of venue underthe statute. TEX. CIV. PRAC. & REM. CODE § 171.097(a).The motion to transfer venue must be filed withintwenty days of service of the initial application andbefore any other appearance, other than a challenge tothe court's jurisdiction. Id. § 171.097(c). The procedurefor transferring the case is the same as that for a motionto transfer venue in a civil case in district court. Id. §171.097(b).

5. Court Appointment of Arbitrators.

The method of appointment of arbitrators is asspecified in the agreement to arbitrate. TEX. CIV. PRAC.& REM. CODE § 171.041(a). Typically, this occurs byreference to the rules and procedures of an arbitrationsponsoring organization. However, if the agreement toarbitrate does not specify a method of appointment, orif the agreed method fails or cannot be followed, or if anappointed arbitrator fails or is unable to act and asuccessor has not been appointed, the court, onapplication of a party stating the nature of the issues tobe arbitrated and the qualifications of the proposedarbitrators, shall appoint one or more qualifiedarbitrators. Id. § 171.041(b). An arbitrator appointed bythe court has the powers of an arbitrator named in theagreement to arbitrate. Id. § 171.041(c).

6. Further trial court action

a. Other ancillary relief

Before arbitration proceedings begin, a party mayfile an application for a court order to:

(1) invoke the jurisdiction of the court over theadverse party and to effect jurisdiction by serviceof process on the adverse party before arbitrationproceedings begin;(2) invoke the jurisdiction of the court over anancillary proceeding in rem, including byattachment, garnishment, or sequestration, in themanner and subject to the conditions under whichthe proceeding may be instituted and conductedancillary to a civil action in a district court;(3) restrain or enjoin the destruction of all or anessential part of the subject matter of thecontroversy; or the destruction or alteration ofbooks, records, documents, or other evidenceneeded for the arbitration;(4) obtain a deposition for discovery, perpetuationof testimony or evidence needed before thearbitration proceedings begin;(5) appoint one or more arbitrators so that thearbitration under the agreement may proceed; or(6) obtain other relief, which the court can grant inits discretion, needed to permit the arbitration to beconducted in an orderly manner and to preventimproper interference or delay of the arbitration.

TEX. CIV. PRAC. & REM. CODE § 171.086(a). Courtsmay make similar orders during arbitration, including anorder to enforce an order made by the arbitrator. Id. §171.086(b).

b. Enforcement of award

The making of an agreement that provides for orauthorizes arbitration in Texas confers jurisdiction onthe court to enforce the agreement and to renderjudgment on an award. TEX. CIV. PRAC. & REM. CODE

§ 171.081. The filing with the clerk of the court of anapplication for an order, judgment or decree invokes thejurisdiction of the court. Id. § 171.082(a). On the filingof the initial application and the payment to the clerk ofcourt fees, the clerk shall docket the proceeding as acivil action pending in that court. Id. § 171.082(b). Anapplicant for a court order may file the applicationbefore the arbitration proceedings begin, during theperiod the arbitration is pending, or after the conclusionof the arbitration. Id. § 171.083. Unless grounds areoffered for vacating, modifying or correcting an awardunder Section 171.088 or 171.091 (discussed below), acourt, on application of a party, shall confirm thearbitration award. Id. § 171.087.


7

c. Stay of proceedings in another court

After an initial application is filed, the court maystay a proceeding under a later filed application inanother court to invoke the jurisdiction of that court orto obtain an order, or may stay a proceeding institutedafter the initial application has been filed. TEX. CIV.PRAC. & REM. CODE § 171.084(a). A stay affects onlyan issue subject to arbitration. Id. § 171.084(b).

7. Appellate review

A party may appeal an order denying an applicationto compel arbitration, or an order granting an applicationto stay arbitration. TEX. CIV. PRAC. & REM. CODE §171.098(a)(1), (2). In contrast, there is no statutoryauthority recognizing an interlocutory right to appealfrom 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.).

B. Federal Arbitration Act

The FAA authorizes courts, upon application by aparty, to stay litigation, compel arbitration, appointarbitrators, compel witnesses, confirm awards, andvacate, modify or correct awards. See 9 U.S.C. § 1, etseq.

1. Jurisdiction

Federal court. The FAA does not create anyindependent subject-matter jurisdiction. SouthlandCorp. v. Keating, 465 U.S. 1, 15 n. 9, 104 S.Ct. 852, 861n. 9, 79 L.Ed.2d 1 (1984); United Offshore Co. v.Southern Deepwater Pipeline Co., 899 F.2d 405, 407(5th Cir. 1990). To sue in federal court to enforce anarbitration claim, a petitioner must otherwisedemonstrate the existence of federal subject matterjurisdiction on the underlying contract claim. Bank OneN.A. v. Shumake, 281 F.3d 507, 513 (5th Cir.), cert.denied, 537 U.S. 818 (2002). As a result, suits tocompel arbitration may only be brought in federal courtif diversity of citizenship or federal question jurisdictionexists. Id.

State court. Actions to enforce arbitration underthe FAA may be brought in state court.

2. Motion to Compel Arbitration

Federal courts, like Texas courts, determinewhether a written agreement to arbitrate exists andwhether any of the issues raised are within the reach ofthat agreement. Tittle v. Enron Corp., 463 F.3d 410,

418-19 (5th Cir. 2006); Brown v. Pacific Life Ins. Co.,462 F.3d 384, 396 (5th Cir. 2006). While doubts will bedecided in favor of arbitration, the strong federalpresumption does not apply to the determination ofwhether there is a valid agreement to arbitrate betweenthe parties or to the determination of who is bound bythe arbitration agreement. See American Heritage LifeIns. Co. v. Lang, 321 F.3d 533, 537-538 (5th Cir. 2003).Instead, court's will determine whether there is a validagreement to arbitrate and who is bound by it based onordinary contract principles. Id.

a. Burden of proof

A party attempting to compel arbitration under theFAA must establish a valid arbitration agreement whosescope includes the claims asserted. In re AdvancePCSHealth L.P., 172 S.W.3d 603, 605 (Tex. 2005); In reOakwood Mobile Homes, Inc., 987 S.W.2d 571, 573(Tex. 1999) (per curiam). Once the movant establishesthe existence of an arbitration clause governing thisdispute, the burden shifts to the party opposingarbitration to raise an affirmative defense to arbitration.In re AdvancePCS Health L.P., 172 S.W.3d at 607; J.M.Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex.2003).

b. Federal court - procedural issues

A party aggrieved by the alleged failure, neglect, orrefusal of another to arbitrate under a written agreementmay petition any United States District Court which,save for such agreement, would have jurisdiction of thesubject matter of a suit arising out of the controversybetween the parties, for an order directing that sucharbitration proceed in the manner provided for in suchagreement. 9 U.S.C. § 4. Any application to the courtshall be made and heard in the manner provided by lawfor the making and hearing of motions. Id. § 6. Fivedays' notice is required. Id. § 4.

The court shall hear the parties. Upon beingsatisfied that the making of the agreement for arbitrationor the failure to comply therewith is not an issue, thecourt shall make an order directing the parties toproceed to arbitration in accordance with the terms ofthe agreement. Id. § 4.

If the making of the arbitration agreement or thefailure, neglect or refusal to perform the arbitration is anissue, the court shall proceed summarily to the trialthereof. Id. If no jury trial is demanded by the partyalleged to be in default, the court shall hear anddetermine such issue. Id. If a jury trial is demanded, thecourt shall make an order referring the issue to a jury inthe manner provided in the Federal Rules of CivilProcedure or may specially call a jury for that purpose.


8

Id. If the jury finds that no agreement in writing forarbitration was made or that there is no default, theproceeding shall be dismissed. Id. If the jury finds thatan agreement for arbitration was made in writing andthat there is a default, the court shall make an ordersummarily directing the parties to proceed with thearbitration in accordance with the terms thereof. Id.

c. State court

Federal procedure does not apply in Texas courts,even when Texas courts apply the FAA. Bison BuildingMaterials, Ltd. v. Aldridge, No. 06-1084, 2012 WL3870493 (Tex. Aug. 17, 2012), quoting Jack B. AnglinCo. v. Tipps, 842 S.W.2d 266, 272 (Tex. 1992) (orig.proc.). Rather, general Texas procedure applies. Id.

3. Motion to Stay Litigation

If a suit is brought in any of the courts of theUnited States upon any issue referable to arbitration, thecourt shall, upon application of one of the parties, staythe trial of the action until such arbitration has been hadin accordance with the terms of the agreement. 9 U.S.C.§ 3. The court has no discretion to deny the stay if theissues in litigation are within the reach of the arbitrationagreement. Texaco Exploration & Prod. Co. v. AmClydeEngineered Prod. Co., 243 F.3d 906, 909 (5th Cir.2001). But cf. Alford v. Dean Witter Reynolds, Inc., 975F.2d 1161, 1164 (5th Cir. 1992) (noting that dismissalmay be warranted when all claims are referable toarbitration). Additionally, claims against a non-signatory to an arbitration agreement may be stayedwhere the claims are inherently inseparable from otherclaims in the same action that must be arbitratedpursuant to an agreement. See Hill v. G.E. PowerSystems Inc., 282 F.3d 343 (5th Cir. 2002).

4. Court Appointment of Arbitrators

A party may move the court to designate andappoint one or more arbitrators or an umpire if nomethod for appointing arbitrators is provided in theparties' agreement, if the provided method fails or ifthere is a need to fill a vacancy. 9 U.S.C.A. § 5. Thearbitrators appointed by the court shall act under theparties' arbitration agreement and shall have fullauthority under the agreement. Id.

Where the parties have contracted for appointmentof an arbitrator by the parties, the trial court is permittedto appoint an arbitrator under section 5 of the FAA onlyif one or both of the parties "fail[s] to avail" itself of theagreed-upon arbitrator selection method, or there is a"lapse" in the selection of an arbitrator. 9 U.S.C. § 5.See In re Serv. Corp. Int'l, 355 S.W.3d 655, 659 (Tex.

2011). The section 5 substitution process triggered bythe "fail to avail" and "lapse" language of the FAAshould be invoked by the trial court when there is some"mechanical breakdown in the arbitrator selectionprocess" or "one of the parties refuses to comply,thereby delaying arbitration indefinitely." In re Serv.Corp. Int'l, 355 S.W.3d at 659. An unreasonable delayin such an appointment, sufficient to constitute a lapseor failure to avail, should be measured from the pointwhen mutual agreement failed. Id.

5. Appeals

a. Federal court

An appeal may be taken from an order denying anapplication to compel arbitration under the FAA. 9U.S.C. § 16(a)(1). In contrast, an appeal may not betaken from an interlocutory order compelling arbitration.Id. § 16(b). Although section 16(b) of the FAA forbidsappeals of interlocutory orders granting a stay undersection 3 or directing arbitration to proceed undersection 4, "a final decision with respect to an arbitration"is appealable under section 16(a)(3). A decision isconsidered final under the FAA if it "ends the litigationon the merits and leaves nothing more for the court to dobut execute the judgment." Green Tree Fin. Corp.-Ala.v. Randolph, 531 U.S. 79, 85-86, 121 S.Ct. 513, 148L.Ed.2d 373 (2000) (where the District Court hasordered the parties to proceed to arbitration, anddismissed all the claims before it, the decision is "final"under § 16(a)(3), and therefore appealable).

A party may appeal an order refusing to staypending litigation on the grounds that the dispute issubject to arbitration. 9 U.S.C. § 16. An appeal maynot be taken of the granting of such a stay. 9 U.S.C. §16. But cf. Brown v. Pacific Life Ins. Co., 462 F.3d 384,391 (5th Cir. 2006) (decision appealable wherearbitration ordered, even though stay also was ordered,where stay was not properly issued under 9 U.S.C. § 3and court could not stay remanded state proceedings).

b. State court

Prior to 2009, the TAA did not provide an avenuefor interlocutory appeals of FAA arbitrations. Forproceedings to compel arbitration under the FAA inTexas state courts, review was permitted through apetition for writ of mandamus. Bison Bldg. Materials,Ltd. v. Aldridge, 2012 WL 3870493 *4 (Tex. Aug 17,2012) (No. 06-1084); Jack B. Anglin Co., 842 S.W.2d at272. As a result, when a party to a dispute sought toappeal an interlocutory order adverse to arbitrationunder the TAA and FAA, the party was required to file


9

both a petition for writ of mandamus and interlocutoryappeal. Id.

The Texas Legislature has now amended the CivilPractice and Remedies Code to permit interlocutoryappeals "to the court of appeals from the judgment orinterlocutory order of a district court . . . under the samecircumstances that an appeal from a federal districtcourt's order or decision would be permitted by 9 U.S.C.Section 16." TEX. CIV. PRAC. & REM CODE § 51.016;CMH Homes v. Perez, 340 S.W.3d 444, 448 (Tex.2011). However, this act is applicable only to appeals ofan interlocutory order in an action filed on or afterSeptember 1, 2009. Act of June 19, 2009, 81st Leg.,R.S., ch. 820, § 2, 2009 Tex. Gen. Laws 2061. SeeBison Bldg. Materials, Ltd. v. Aldridge, 2012 WL3870493 *4.

In CMH Homes Inc. v. Perez, 340 S.W.3d 444(Tex. 2011), the Texas Supreme Court addressedwhether an order appointing an arbitrator may bechallenged by interlocutory appeal pursuant to TEX. CIV.PRAC. & REM. CODE § 51.016. Because it was unclearto the Texas Supreme Court whether an interlocutoryappeal would be available in the same circumstance infederal court, the Supreme Court held that interlocutoryappeal was not available under section 51.016.

V. L E G A L C H A L L E N G E S T O T H EE N F O R C E M E N T O F A R B I T R A T I O NAGREEMENTS

As noted above, arbitration may be enforced underboth federal and state law, and the FAA may beenforced by both federal and state courts. The TexasSupreme Court has noted the importance of keepinginterpretations consistent to the extent possible. PerryHomes v. Cull, 258 S.W.3d 580, 594 (Tex. 2008); In reWeekley Homes, L.P., 180 S.W.3d 127, 130-31 (Tex.2005); In re Kellogg Brown & Root, Inc., 166 S.W.3d732, 738-39 (Tex. 2005).

A. Determination of arbitrability by court or byarbitrator

One initial question is who is to determine the issueof arbitrability. A challenge to the validity of thecontract as a whole is to be determined by the arbitrator.Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388U.S. 395, 403-04, 87 S.Ct. 1801, 18 L.Ed.2d 1270(1967). A challenge to the validity of the arbitrationprovision itself is to be determined by the court.Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S.440, 444, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006); seeIn re Morgan Stanley, 293 S.W.3d 182 (Tex. 2009).Where the challenge is to whether any agreement was

ever concluded, the courts are less clear. Buckeye CheckCashing, Inc. v. Cardegna, 546 U.S. at 444 (reservingissue). In In re Morgan Stanley, 293 S.W.3d 182 (Tex.2009), however, the Texas Supreme Court determinedthat when the issue of mental capacity is raised as adefense to arbitration, the very existence of the contractis at issue and courts are the proper forum to decide theissue of mental capacity to assent to a contractcontaining an arbitration clause.

A possible exception exists when the partiesincorporate the rules of the American ArbitrationAssociation, which empower the arbitrator to decidearbitrability. Some courts have held that incorporationof such rules means that all issues of arbitrabilitytherefore are referred to the arbitrator. Petrofac, Inc. v.DynMcDermott Petroleum Operations Co., 687 F.3d671, 675 (5th Cir. 2012) ("We agree with most of oursister circuits that the express adoption of these rulespresents clear and unmistakable evidence that the partiesagreed to arbitrate arbitrability"); Qualcomm Inc. v.Nokia Corp., 466 F.3d 1366, 1372-73 (Fed. Cir. 2006).

B. Absence of agreement

As discussed above, the determination of whetherparties agreed to arbitrate generally requires a court tosummarily answer two questions: (1) is there a validagreement to arbitrate between the parties, and (2) is thedispute before the court within the scope of thearbitration agreement. Tittle v. Enron Corp., 463 F.3d410, 418-19 (5th Cir. 2006); Brown v. Pacific Life Ins.Co., 462 F.3d 384, 396 (5th Cir. 2006); In re DillardDep't Stores, Inc., 186 S.W.3d 514, 515 (Tex. 2006)(FAA); In re Kellogg Brown & Root, Inc., 166 S.W.3d732, 737 (Tex. 2005).

Contract law determines the validity of arbitrationagreements. In re Dillard Dep't Stores, Inc., 186S.W.3d at 515; In re Kellogg Brown & Root, Inc., 166S.W.3d at 737. Under general contract law, the partiesmust mutually consent to the contract's essential terms.Foreca, S.A. v. GRD Dev. Co., 758 S.W.2d 744 (Tex.1988). The presumption favoring arbitration arises onlyafter party seeking to compel arbitration establishesvalid agreement to arbitrate, because purpose of FAA isto "make arbitration agreements as enforceable as othercontracts, not more so." In re Kellogg Brown & Root,Inc., 166 S.W.3d at 737-38 (quoting Bridas S.A.P.I.C.v.. Gov't of Turkmenistan, 345 F.3d 347, 354 n.4 (5thCir. 2003)).

Courts treat arbitration agreements as othercontracts in applying the legal rules to interpret them. Inre Olshan Foundation Repair Co., LLC, 328 S.W.3d883, 889 (Tex. 2010). The goal is to discern the trueintentions of the parties, as the FAA's primary purpose


10

is to ensure private agreements to arbitrate are enforcedaccording to their terms, "no more, no less." Id., citingVolt Information Sciences Inc. v. Board of Trustees ofLeland Stanford Junior Univ., 489 U.S. 468, 479, 109S.Ct. 1248, 103 L.Ed.2d 488 (1989).

C. Statutory limits

As discussed above, both the FAA and the TAAcontain express limits on their application. For example,the FAA does not apply to claims involving contracts ofemployment of seamen, railroad employees, or anyother class of workers engaged in foreign or interstatecommerce. 9 U.S.C. § 1. This exclusion is more limitedthan it might appear. The "workers" exclusion, forexample, "is limited to transportation workers, defined,. . . as those workers 'actually engaged in the movementof goods in interstate commerce.'" Circuit City Stores,Inc. v. Adams, 532 U.S. 105, 111, 121 S.Ct. 1302, 149L.Ed.2d 234 (2001). That is, the exclusion relates to "aclass of workers in the transportation industry, ratherthan . . . workers who incidentally transported goodsinterstate as part of their job in an industry that wouldotherwise be unregulated." Hill v. Rent-A-Center, Inc.,398 F.3d 1286, 1289 (11th Cir. 2005).

Other statutory limits on arbitration include:

- Loan agreements with military. It is amisdemeanor for a lender to put an arbitrationclause into loan agreements with members of themilitary or their dependent family members, atleast with regard to consumer credit. 10 U.S.C. §987(e)(3), (f)(1), (4) Section f(4) provides:

Notwithstanding section 2 of title 9, or anyother Federal or State law, rule, or regulation,no agreement to arbitrate any disputeinvolving the extension of consumer creditshall be enforceable against any coveredmember or dependent of such a member, orany person who was a covered member ordependent of that member when theagreement was made.

"Consumer credit" is "closed-end creditoffered or extended to a covered borrowerprimarily for personal, family or householdpurposes." 32 C.F.R. § 232.3(b). It includessuch things as payday loans and vehicle titleloans, but does not include residentialmortgages. Id.

- Homeowner warranty plans. Certain warrantyprotection plans in connection with HUD mortgage

insurance (FHA/VA) require a judicial remedyoption. 24 C.F.R. 203.204(g).

- Residential loan mortgages. No residentialmortgage loan and no extension of credit under anopen end consumer credit plan secured by theprincipal dwelling of the consumer may includeterms which require arbitration or any othernonjudicial procedure as the method for resolvingany controversy or settling any claims arising outof the transaction. 15 U.S.C. § 1639c(e). However,the parties may agree to arbitration to arbitrationafter a controversy has arisen. Id.

In addition, the new Bureau of Consumer FinancialProtection has been assigned the task of reviewingarbitration in regard to consumer financial products orservices. See 12 U.S.C. § 5518(a). Further regulationmay be forthcoming.

In In Re Odyssey Healthcare, Inc., 310 S.W.3d 419(Tex. 2010), the Texas Supreme Court considered anarbitration provision in an employee benefit plan. Thecourt concluded that the agreement to arbitrate did notconstitute an unlawful waiver of a cause of actionpursuant to TEX. LABOR CODE § 406.033(e).

D. Common law defenses

1. Requirement of specific relation to arbitration

In regard to arbitration agreements, courts generallyhave considered the same types of challenges that areraised with respect to the enforcement of contracts ingeneral. These include fraud, unconsionability,illegality and waiver. Doctors Assoc., Inc. v. Casarotto,517 U.S. 681, 687, 116 S.Ct. 1652, 134 L.Ed.2d 902(1996) (noting that generally applicable contractdefenses, such as fraud, duress, or unconscionability,may be applied to invalidate arbitration agreementswithout contravening FAA § 2). However, if they are todefeat arbitration, these defenses must specifically relateto the arbitration agreement itself, not the contract as awhole. In re FirstMerit Bank, 52 S.W.3d 749,756 (Tex.2001) (citing Prima Paint Corp. v. Flood & ConklinMfg. Co., 388 U.S. 395, 403-04, 87 S.Ct. 1801, 18L.Ed.2d 1270 (1967)). See also In re RLS LegalSolutions, LLC, 221 S.W.3d 629, 631-32 (Tex. 2007) (toprovide defense to enforcement of arbitration agreement,"duress" must relate to the arbitration agreement, not tothe contract as a whole). Unless the arbitration provisionis singled out from the other provisions, the defensegoes to the agreement generally and must be decided inarbitration. In re RLS Legal Solutions, LLC, 221S.W.3d at 632.


11

2. Fraud

If the fraud claim relates to the making of thearbitration agreement itself, the court should address thefraud claim before enforcing the arbitration agreement.If, however, the fraud claim relates to the entire contract,the court should compel the parties to arbitrate and leavethe fraud claim to be decided by the arbitrator. PrimaPaint Corp. v. Flood & Conklin Mfg. Co., 388 U.S.395, 403-04, 18 L. Ed. 2d 1270, 87 S. Ct. 1801 (1967)(FAA); Miller v. Public Storage Mgmt., 121 F.3d 215,219 (5th Cir. 1997) (FAA); In re FirstMerit Bank, N.A.,52 S.W.3d 749, 756 (Tex. 2001) (FAA).

In Forest Oil Corp. v. McAllen, 268 S.W.3d 51, 56(Tex. 2008), however, the Texas Supreme Courtaddressed a fraudulent inducement claim. The courtheld that a contract provision that disclaimed reliance onfactual representations defeated a fraudulent inducementdefense as a matter of law under the facts of the case,even where the alleged fraud allegedly related to thearbitration clause. Although allegedly inducing thearbitration clause, the alleged factual misrepresentationrelated to environmental damage. Id. at 55.

3. Unconscionability and duress

Arbitration agreements which are unconscionableare unenforceable. Doctor's Assoc., Inc. v. Casarotto,517 U.S. 681, 687-88, 116 S. Ct. 1652, 134 L. Ed. 2d902 (1996) (FAA). See also Green Tree Fin. Corp.-Ala.v. Randolph, 531 U.S. 79, 89, 121 S.Ct. 513, 148L.Ed.2d 373 (2000) (holding that unconscionablearbitration fee would render clause unenforceable).Whether a contract is unconscionable is a question to bedecided under applicable state law. Doctor's Assoc.,517 U.S. at 687 (noting, however, that the law must beapplicable to contracts generally, not merely directed atarbitration agreements).

Texas law renders unconscionable contractsunenforceable. In re Olshan Foundation Repair Co.,328 S.W.3d 883, 892 (Tex. 2010); In re Poly-America,L.P., 262 S.W.3d 337, 338 (Tex. 2008). Uncon-scionability may be substantive or procedural.Substantive unconscionability refers to the fairness ofthe arbitration provision itself, whereas proceduralunconscionability refers to the circumstancessurrounding adoption of the arbitration provision. In rePalm Harbor Homes, Inc., 195 S.W.3d 672, 677 (Tex.2006); In re Halliburton Co., 80 S.W.3d 566, 571 (Tex.2002). Generally, a contract is unconscionable if, "giventhe parties' general commercial background and thecommercial needs of the particular trade or case, theclause involved is so one-sided that it is unconscionableunder the circumstances existing when the parties made

the contract." FirstMerit Bank, 52 S.W.3d at 757 (citingTEX. BUS. & COM. CODE § 2.302 cmt. 1).

Arbitration agreements are not per seunconscionable. Olshan Foundation, 328 S.W.3d at892, quoting EZ Pawn Corp. v. Mancias, 934 S.W.2d87, 90-91 (Tex.1996) (per curiam). Parties claimingunconscionability bear the burden of demonstrating it.See, e.g., In re Oakwood Mobile Homes, Inc., 987S.W.2d 571, 574 (Tex. 1999). Similarly, an arbitrationagreement is not unconscionable merely because:

- it requires arbitration of a statutory claim. OlshanFoundation, 328 S.W.3d at 892; Green Tree Fin.Corp.-Ala. v. Randolph, 531 U.S. 79, 90, 121 S.Ct.513, 148 L.Ed.2d 373 (2000).

- it is offered on a "take it or leave it" basis. In reHalliburton Co., 80 S.W.3d 566, 572 (Tex. 2002)(granting mandamus to enforce an arbitrationprovision in an employment contract).

- it is contained in a "form" contract. See In reOakwood Mobile Homes, Inc., 987 S.W.2d 571,574 (Tex. 1999) (granting mandamus to compelarbitration in regard to a standardized mobile homepurchase contract).

- the parties have unequal bargaining power. In reAmerican Homestar of Lancaster, Inc., 50 S.W.3d480, 484-86, 489 (Tex. 2001) (granting mandamusto compel arbitration, noting the strong policy infavor of arbitration and stating that "the SupremeCourt has recognized that perceived unevenbargaining power is not a justifiable reason to holdthat arbitration agreements are never enforceable").

- the contract as a whole may be void. OlshanFoundation, 328 S.W.3d at 898 (issue of whethercontract as a whole, including the arbitrationagreement, was void under Texas HomeSolicitation Act was for arbitrator).

An arbitration agreement may be deemedunconscionable if:

- violates public policy, and is unenforceablebecause of the multiple one-sided, unconscionableprovisions. Hooters of America Inc. v. Phillips, 39F.Supp. 2d 582 (D.S.C. 1998).

- it involves a waiver of substantive statutory rightsand remedies. In re Poly-America, L.P., 262S.W.3d at 348-53 (arbitration agreementsubstantively unconscionable where the agreementpurported to limit key remedies, including


12

reinstatement, available under the Texas Workers’Compensation Act). Cf. id. at 359-60 (finding itunnecessary to determine if shortened limitationsperiod and application of agreement to disputesbeyond employment context were unconscionablewhen suit was brought within the shortenedperiod). Federal courts have noted that arbitrationcontracts are not enforceable when a party is forcedto "forgo the substantive rights afforded by thestatute," as opposed to merely "submit[ting] toresolution in an arbitral, rather than a judicial,forum." Mitsubishi Motors Corp. v. SolerChrysler-Plymouth, Inc., 473 U.S. 614, 628, 105S.Ct. 3346, 87 L.Ed.2d 444 (1985).

Even if a portion of the agreement is unconscionableand unenforceable, however, the existence of aseverance clause may allow arbitration to proceed. Inre Poly-America, L.P., 262 S.W.3d at 359-60 (in light ofseverance provision, arbitration could proceed withunenforceable provisions stricken).

An arbitration agreement may render a contractunconscionable if "the existence of large arbitrationcosts could preclude a litigant . . . from effectivelyvindicating [his or her] federal statutory rights in thearbitral forum." Green Tree Fin. Corp.-Ala. v.Randolph, 531 U.S. 79, 90; Olshan Foundation, 328S.W.3d at 892; FirstMerit Bank, 52 S.W.3d at 756 . Theparty opposing arbitration bears the burden to show thatthe costs of arbitration render it unconscionable. GreenTree, 531 U.S. at 92, 121 S.Ct. 513; Olshan Foundation,328 S.W.3d at 895. Mere "'risk' that . . . [the plaintiffs]will be saddled with prohibitive costs is too speculativeto justify the invalidation of an arbitration agreement."Green Tree, 531 U.S. at 91, 121 S.Ct. at 522. Specificinformation is required. In Re Odyssey Healthcare, Inc.,310 S.W.3d 419 (Tex. 2010); In re FirstMerit Bank,N.A., 52 S.W.3d 749, 756 (Tex. 2001) (discussing GreenTree). The party opposing arbitration must at leastprovide evidence of the likely cost of their particulararbitration, through invoices, expert testimony, reliablecost estimates, or other comparable evidence. OlshanFoundation, 328 S.W.3d at 895; Poly-America, 262S.W.3d at 354-55 (concluding that the plaintiff's "ownaffidavit and that of an expert witness providing detailedestimates of the likely cost of arbitration in [theplaintiff's] case" constituted sufficient evidence, butconcluding that fee splitting agreement was notunconscionable under circumstances). Once the partyopposing arbitration provides this evidence, however,the burden shifts to the party seeking arbitration, whomust come forward with contrary evidence. OlshanFoundation, 328 S.W.3d at 895.

Discovery limitations that impede a litigant's abilityto present his case also may be unconscionable.

However, the Texas Supreme Court has indicated that,in most circumstances, courts will be unable to evaluatethis issue at the beginning of litigation and that the issueof discovery limitations thus generally will be best leftto the arbitrator. Poly-America, 262 S.W.3d at 358("We agree that if the discovery limitations thearbitration agreement imposes operate to preventeffective presentation of Luna's claim they would beunenforceable. But at this point in the proceedings,without knowing what the particular claims anddefenses-and the evidence needed to prove them-will be,discerning the discovery limitations' potential preclusiveeffect is largely speculative").

4. Illegality

An arbitration agreement in a contract can beunenforceable if the contract is void for illegality.However, if the challenge goes to the agreement as awhole, the matter is one for determination by thearbitrator, not the court. Buckeye Check Cashing, Inc.v. Cardegna, 546 U.S. 440, 449, 126 S.Ct. 1204, 163L.Ed.2d 1038 (2006); In re FirstMerit Bank, 52 S.W.3d749,756 (Tex. 2001).

Where the arbitration agreement itself ischallenged, the courts may enforce arbitration clausesupon finding the illegal clause in the contract was not socentral to the contract as to require the entire contract tobe held void. In re Poly-America, L.P., 262 S.W.3d at359-60 (in light of severance provision, arbitration couldproceed with unenforceable provisions stricken).

5. Mental capacity

Lack of mental capacity to contract may be adefense to an arbitration agreement, as with allcontracts. When the issue of mental capacity is raised asa defense to arbitration, the very existence of thecontract is at issue. Courts are therefore the properforum to decide the issue of mental capacity to assent toa contract containing an arbitration clause. In re MorganStanley, 293 S.W.3d 182 (Tex. 2009).

6. Waiver

An agreement to arbitrate can be waived just likeany other contractual right. Generally, courts findwaiver when a party has substantially invoked thejudicial process to the detriment or prejudice of the otherparty. Williams v. CIGNA Financial Advisors Inc., 56F.3d 656, 661 (5th Cir. 1995); Perry Homes v. Cull, 258S.W.3d 580, 589-90 (Tex. 2008). Waiver of arbitrationby litigation conduct is an issue to be decided by thecourt rather than the arbitrator. Perry Homes v. Cull,258 S.W.3d at 587-88. A showing of prejudice is


13

required. Id. at 594. Prejudice "refers to the inherentunfairness in terms of delay, expense, or damage to aparty's legal position that occurs when the party'sopponent forces it to litigate an issue and later seeks toarbitrate that same issue. Id. at 597, citing Republic Ins.Co. v. PAICO Receivables, LLC, 383 F.3d 341, 346 (5thCir. 2004).

A strong presumption against waiver of arbitrationexists. Perry Homes, 258 S.W.3d 590; In re Bank One,N.A., 216 S.W.3d 825, 827 (Tex. 2007). Waiver isevaluated under the totality of the circumstances on acase-by-case basis. Perry Homes, 258 S.W.3d at 587-88(discussing federal standard). The courts haveconsidered a wide variety of factors, including:

• whether the movant was plaintiff (who chose tofile in court) or defendant (who merely responded);• when the movant knew of the arbitration clause;• how long the movant delayed before seekingarbitration, and how much time and expense hasbeen incurred in litigation;• how much discovery has been conducted and whoinitiated it; • whether discovery related to the merits rather thanarbitrability or standing; • how much of the discovery would be useful inarbitration;• what discovery would be unavailable inarbitration; • whether the movant sought judgment on themerits;• whether the movant sought or opposed arbitrationearlier in the case;• whether the movant filed affirmative claims ordispositive motions;• whether activity in court would be duplicated inarbitration; and• when the case was to be tried.

Id. at 291-92 (citing various federal and state cases).Texas courts have not found waiver by actions such

as:

• filing suit;• moving to dismiss a claim for lack of standing;• moving to set aside a default judgment andrequesting a new trial;• opposing a trial setting and seeking to move thelitigation to federal court;• moving to strike an intervention and opposingdiscovery;• sending 18 interrogatories and 19 requests forproduction;

• requesting an initial round of discovery, noticing(but not taking) a single deposition, and agreeing toa trial resetting; or• seeking initial discovery, taking four depositions,and moving for dismissal based on standing.

Perry Homes, 258 S.W.3d at 590 (citing cases). Seealso In re Citigroup Global Markets, Inc., 258 S.W.3d623 (Tex. 2008) (no waiver where litigation conduct islimited to jurisdictional transfers, and not the merits);Williams v. CIGNA Financial Advisors Inc., 56 F.3d656, 661 (5th Cir. 1995) (waiver not found when partyremoved case to federal court, filed answer, motion todismiss, motion to stay, asserted a counterclaim andparticipated in discovery, but filed a motion for staypending arbitration when the arbitration agreement wasdiscovered).

The Texas Supreme Court in Perry Homes did findthat a waiver of arbitration had occurred where theplaintiff (seeking arbitration) had filed suit, conductedextensive discovery on the merits, resisted a motion tocompel arbitration filed by the defendant, and waitedsome 14 months after filing suit until, shortly before thetrial setting, requesting arbitration. Id. at 597-98. PerryHomes involved a split decision, and it is worthwhile toreview the dissents. See also Price v. Drexel BurnhamLambert Inc., 791 F.2d 1156, 1159-62 (5th Cir. 1986)(waiver found based on party's participation in litigationfor seventeen months, including initiation of extensivediscovery the filing motions to dismiss and for summaryjudgment); Hoxworth v. Blinder Robinson & Co. Inc.,980 F.2d 912, 925-27 (3rd Cir. 1992) (waiver foundbased on party's participation in pretrial proceedings foreleven months, including the filing a motion to dismissand a motion to disqualify opposing counsel andopposition to class certification, and participation indiscovery); Marble Slab Creamery, Inc. v. Wesic, Inc.,823 S.W.2d 436, 438-39 (Tex. App.–Houston [1st Dist.]1992, no writ) (waiver found when party filed suit,obtained injunctive relief, engaged in discovery, and didnot seek arbitration until one month before trial).

7. Impossibility

In National Iranian Oil Co. v. Ashland Oil Inc.,817 F.2d 326, 331, 334 (5th Cir.), cert. denied, 484U.S. 943 (1987), the arbitration agreement requiredarbitration in Iran. The court, however, held it did nothave the power to order the parties to arbitrate in Iran soit refused to enforce the arbitration agreement. But cf.Great Earth Co. v. Simons, 288 F.3d 878, 890-91 (6thCir. 2002) (finding place of arbitration severable fromarbitration agreement).


14

8. Lack of Consideration; Illusory Nature ofAgreement

Lack of consideration can be a defense to theenforcement of an arbitration agreement. In the contextof stand-alone arbitration agreements where otherconsideration is not involved, binding promises arerequired on both sides. In re AdvancePCS Health L.P.,172 S.W.3d 603, 607 (Tex. 2005). See, e.g., J.M.Davidson, Inc. v. Webster, 128 S.W.3d 223, 228 (Tex.2003). See In re 24R Inc., 324 S.W.3d 564 (Tex. 2010)(stand alone arbitration agreement, supported by mutualpromises, sufficed to provide consideration even thoughemployee handbook indicated that the handbook couldbe altered). However, when an arbitration clause is partof an underlying contract, the rest of the parties'agreement may provide the consideration. In reAdvancePCS Health L.P., 172 S.W.3d at 607. E.g., Inre FirstMerit Bank, N.A., 52 S.W.3d 749, 752-53, 755-57 (Tex. 2001) (applying arbitration clause in loanagreement to entire mobile-home transaction).

Consideration may be illusory (and hence fail tosupport arbitration) in some situations. An arbitrationclause is illusory if one party can "avoid its promise toarbitrate by amending the provision or terminating italtogether." In re 24R, Inc., 324 S.W.3d 564, 567 (Tex.2010). In In re Halliburton Co., 80 S.W.3d 566 (Tex.2002), a Halliburton employee argued that a mandatoryarbitration provision was illusory because Halliburtonhad retained the right to modify or discontinue thearbitration program. The Texas Supreme Court held thatthe agreement was not illusory because the agreementprovided that both that no amendment would apply to adispute of which the Halliburton had actual notice on thedate of amendment, and that any termination of thearbitration program would not be effective until 10 daysafter reasonable notice of termination is given toemployees and would not be effective or as to disputeswhich arose prior to the date of termination. Id. at569-70 (internal quotation marks omitted). See also Inre Odyssey Healthcare, Inc., 310 S.W.3d 419, 421, 424(Tex. 2010) (holding that an arbitration clause in aworkers' compensation plan was not illusory where,although the employer reserved the right to "amend,modify, or terminate the Plan at any time," it alsoprovided that "no such amendment or termination willalter the arbitration provisions . . . with respect to . . . anInjury occurring prior to the date of such amendment ortermination"). Absent such notice or continuing validityprovisions, however, the capacity to unilaterally alter anarbitration agreement will suggest that the considerationis illusory. Morrison v. Amway Corp., 517 F.3d 248,253 (5th Cir. 2008); Carey v. 24 Hour Fitness, USA,Inc., 669 F.3d 202, 205 (5th Cir. 2012).

9. Termination and Revocation

An arbitration agreement contained within acontract survives the termination or repudiation of thecontract as a whole. See Henry v. Gonzalez, 18 S.W.3d684, (Tex. App.–San Antonio, 2000, pet. dism'd byagr.). This is so unless the parties have expressly statedor clearly implied their intention that their arbitrationobligations cease with the contract. Mississippi Ins.Managers Inc. v. Providence Washington Ins. Co., 72 F.Supp. 2d 689, 695 (S.D. Miss. 1999).

E. Agreements for expanded judicial review

Under the FAA, the parties may not by agreementexpand the scope of judicial review. In Hall StreetAssociates v. Mattel, 552 U.S. 576, 578, 128 S.Ct. 1396,170 L.Ed.2d 254 (2008), the U.S. Supreme Court heldthat the FAA does not allow not allow parties to agree toa different scope of review than that provided by theFAA. When a party seeks to vacate an arbitration awardby using the FAA procedure for expedited judicialreview, the FAA's grounds for vacating an award areexclusive, and federal courts cannot enforce acontractual expansion of those grounds.

Under the TAA, however, agreed expansion of thescope of judicial review is available. Nafta Traders Inc.v. Quinn, 339 S.W.3d 84 (Tex. 2011), involved claimsof sex discrimination in the termination of employment.The employee handbook provided for the arbitration ofsuch a dispute, but also contained a provision statingthat the arbitrator did not have authority to "render adecision which contains a reversible error of state orfederal law" or "apply a cause of action nor remedy notexpressly provided for under existing state or federallaw." The arbitrator awarded damages to the employee.When the employee sought confirmation of the award instate court, the employer argued that the arbitrator hadnot followed state law in rendering the decision and thatthe decision therefore could not be confirmed. TheTexas Supreme Court declined to follow the reasoningin Hall Street, and concluded that the TAA did notpreclude parties from modifying the scope of judicialreview of arbitration awards.

VI. ENFORCEABILITY OF ARBITRATIONA G R E E M E N T S B Y A N D A G A I N S TNONSIGNATORIES

Generally, parties must sign arbitration agreementsbefore being bound by them. In re Rubiola, 334 S.W.3d220, 224 (Tex. 2011). See Grigson v. Creative ArtistsAgency, L.L.C., 210 F.3d 524, 528 (5th Cir.) (noting that"arbitration is a matter of contract and cannot, in


15

general, be required for a matter involving an arbitrationagreement non-signatory"), cert. den.,. 531 U.S. 013(2000) An obligation to arbitrate not only attaches toone who has personally signed the written arbitrationagreement but may also bind a non-signatory underprinciples of contract law and agency. In re Rubiola,334 S.W.3d at 224. Although "[a]rbitration agreementsapply to nonsignatories only in rare circumstances [,]"the question of "[w]ho is actually bound by anarbitration agreement is [ultimately] a function of theintent of the parties, as expressed in the terms of theagreement." Id., quoting Bridas S.A.P.I.C. v. Gov't ofTurkmenistan, 345 F.3d 347, 355, 358 (5th Cir.2003).

A. Enforcement by non-signatories.

The Texas Supreme Court addressed an attempt bynon-signatories to enforce an arbitration agreement in Inre Rubiola, 334 S.W.3d 220 (Tex. 2011). In Rubiolathe parties signed a standard form Texas real estate salescontract, which did not contain an arbitration clause.However, as part of the loan process, the buyersexecuted an arbitration agreement, which designatedcertain non-signatories as parties to the agreement thatincluded "individual partners, affiliates, officers,directors, employees, agents, and/or representatives ofany party to [the house purchase] documents. . ." Whenthe house buyers sued the seller, the seller (the Rubiolas)sought to compel arbitration as non-signatory parties tothe arbitration agreement. The Texas Supreme Courtheld that signatories to an arbitration agreement mayidentify other parties in their agreement who mayenforce arbitration as though they signed the agreementthemselves, and further concluded that the underlyingarbitration agreement in this case was sufficiently broadto identify the Rubiolas as parties to the agreement.Accordingly, the Rubiolas had the right to compelarbitration. See also In re Next Financial Group Inc.,271 S.W.3d 263 (Tex. 2008) (employer of securitiesbroker who had signed a Uniform Application forSecurities Industry Registration or Transfer form (U-4),which included an arbitration clause, could enforcearbitration agreement).

B. Enforcement against non-signatories

Courts have recognized at least six theories arisingout of common principles of contract and agency lawthat may bind nonsignatories to arbitration agreements:(1) incorporation by reference; (2) assumption; (3)agency; (4) alter ego; (5) equitable estoppel, and (6)third party beneficiary. Arthur Andersen LLP v.Carlisle, 556 U.S. 624, 631, 129 S.Ct. 1896, 173L.Ed.2d 832 (2009) (noting that traditional principles ofstate law allow a contract to be enforced by or against

nonparties to the contract through assumption, piercingthe corporate veil, alter ego, incorporation by reference,third-party beneficiary theories, waiver or estoppel);Bridas S.A.P.I.C. v. Government of Turkmenistan, 345F.3d 347, 356 (5th Cir. 2003); In re Kellogg Brown &Root, Inc., 166 S.W.3d 732, 739 (Tex. 2005). Seegenerally D. Uloth & H. Rial, Enforcing ArbitrationAgainst Nonsignatories, 65 TEX. BAR. J. 802, 804-05(2002).

Estoppel is perhaps the most used theory in Texas.Under "direct benefits estoppel," a non-signatoryplaintiff seeking the benefits of a contract is estoppedfrom simultaneously attempting to avoid the contract'sburdens, such as the obligation to arbitrate disputes. Inre Kellogg Brown & Root, 166 S.W.3d at 739;Washington Mutual Finance Group, LLC v. Bailey, 364F.3d 260, 268 (5th Cir. 2004). Thus, a non-signatoryplaintiff may be compelled to arbitrate if it seeks toenforce terms of a contract containing an arbitrationprovision. In re Kellogg Brown & Root, 166 S.W.3d at739. Cf. In re Weekley Homes, 180 S.W.3d 127, 135(Tex. 2004) ("A nonparty cannot both have his contractand defeat it too").

Wrongful death beneficiaries are generally boundby a decedent's pre-death contractual agreement becauseof the derivative nature of their claims. In re LabattFood Service L.P., 279 S.W.3d 640 (Tex. 2009). Thearbitration agreement in the agreement between thedecedent and his employer requires the wrongful deathbeneficiaries to arbitrate the wrongful death claims. Seealso In re Golden Peanut Co., 298 S.W.3d 629 (Tex.2009); In re Jindal Saw Ltd., 289 S.W.3d 827 (Tex.2009).

VII. ENFORCEABILITY OF ARBITRATIONAGREEMENTS IN LAWYER ENGAGEMENTCONTRACTS

Ethically, it is permissible under the TexasDisciplinary Rules of Professional Conduct to include inan engagement agreement with a client a provision, theterms of which would not be unfair to a typical clientwilling to agree to arbitration, requiring the bindingarbitration of fee disputes and malpractice claimsprovided that (1) the client is aware of the significantadvantages and disadvantages of arbitration and hassufficient information to permit the client to make aninformed decision about whether to agree to thearbitration provision, and (2) the arbitration provisiondoes not limit the lawyer's liability for malpractice. Tx.Ethics Op 586. See also ABA Op. 02-425. Whethersuch agreements are wise are the subject of moredispute. Cf. Henry v. Gonzalez, 18 S.W.3d 684 (Tex.App.–San Antonio 2000, pet. dism'd by agr.) (enforcing


16

arbitration agreement between attorney and client, butwith dissent that would hold that agreement violatedpublic policy).

Further, the Texas courts of appeals are split onwhether a legal malpractice claim is one for "personalinjury," which under the Texas Arbitration Act can bethe subject of an arbitration agreement only if the clienthas separate representation in entering into theagreement. One court has indicated that a legalmalpractice claim is a personal injury claim. In re Godt,28 S.W.3d 732, 738 -39 (Tex. App.–Corpus Christi2000, orig. proc.). Other courts disagree. In re Pham,314 S.W.3d 520, 525 (Tex. App.–Houston [14 Dist.]2010, orig. proc.); Taylor v. Wilson, 180 S.W.3d 627,629-31 (Tex. App. –Houston [14th Dist.] 2005, pet.denied); Miller v. Brewer, 118 S.W.3d 896, 898-99(Tex. App.–Amarillo 2003, no pet.); In re Hartigan, 107S.W.3d 684, 689-91 (Tex. App.–San Antonio 2003)(orig. proc.) (each holding that a legal malpractice claimis not a personal injury claim).

If the agreement is not enforceable under the TAA,the issue becomes whether the FAA is applicable. SeeIn re Godt, 28 S.W.3d at 738 -39 (finding no interstatecommerce). As noted above, courts have held that anagreement to arbitrate under the FAA will control. In rePham, 314 S.W.3d at 526.

VIII. ARBITRATION PROCEDURES

A. Arbitration Procedure under the Texas ArbitrationAct

The TAA provides basic procedural guidance.TEX. CIV. PRAC. & REM. CODE § 171.041, et seq.

1. Appointing the Arbitrators

The method for appointing the arbitrators is asspecified in the arbitration agreement. TEX. CIV. PRAC.& REM. CODE § 171.041(a). If the arbitration agreementdoes not set forth the manner for appointing arbitrators,the parties may move the court to appoint the arbitratorsas described previously in this paper. See id. §171.041(b). All arbitrators, whether appointed by themanner set forth in the arbitration agreement or by thecourt, have the powers of the arbitrator as set forth inthe arbitration agreement. Id. § 171.041(c).

2. Pre-hearing issues

An arbitrator may authorize a deposition. TEX.CIV. PRAC. & REM. CODE § 171.050. However, theTAA provides no procedure regarding other discovery.As a practical matter, parties utilize the discoveryprocedures, if any, that are specified in the agreement or

in the rules of a sponsoring organization. The partiesalso may agree to discovery.

3. The Arbitration Hearing

The TAA describes the procedures to be followedin an arbitration hearing. However, the TAA proceduresare subject to any provisions in the arbitrationagreement. See, e.g., TEX. CIV. PRAC. & REM. CODE §§171.042, 171.043.

The arbitration hearing shall be conducted by all ofthe arbitrators. Id. § 171.043(a). If, during the course ofthe hearing, an arbitrator ceases to act, one or more ofthe remaining arbitrators appointed to act as neutralarbitrators may hear and determine the controversy. Id.§ 171.043(b). Upon motion of a party, replacementarbitrators may be appointed by the Court. The powersof the arbitrators are exercised by a majority, unlessprovided otherwise. Id. § 171.042.

Unless otherwise provided by the agreement, thearbitrators are required to set the time and place for thehearing and notify each party. Id. § 171.044(a). Thenotice must be served no later than the fifth day beforethe hearing by personal delivery or by certified mailreturn receipt requested. Id. § 171.044(b). A party mayrequest the court to order an expedited arbitrationproceeding. Id. § 171.044(c).

The arbitrators may adjourn the hearing orpostpone the hearing upon request of a party for goodcause shown or upon their own motion. Id. § 171.045.The hearing may be postponed to any time before thedate set by the arbitration agreement for making theaward, or any other later date agreed to by the parties.Id.§ 171.045.

The arbitration may proceed, and the arbitratorsmay hear and determine the controversy on the evidenceproduced, even if a party who had proper notice of thearbitration hearing fails to appear. Id. § 171.046. Aparty at the hearing is entitled to be heard, presentevidence material to the controversy, cross-examine anywitness, and be represented by an attorney. Id. §§171.047, 171.048.

Arbitrators are authorized to administer the oathrequired of witnesses appearing in a civil action pendingin district court to all witnesses appearing at thearbitration. Id. § 171.049. Arbitrators also have theauthority to issue subpoenas for the attendance of awitness or for the production of books, records,documents or other written evidence. Id. § 171.051(a).A witness appearing by subpoena may appear either atthe hearing before the arbitrators or at a deposition. Id.§ 171.051(b). Service of the subpoena and enforcementof the subpoena are governed by the provisions forsubpoenas issued in civil actions pending in districtcourt. Id. § 171.051(c),(d).


17

Likewise, the arbitrators may authorize adeposition, for use in the hearing, to be taken of awitness who cannot be subpoenaed to attend the hearingor who is unable to attend the hearing. Id. § 171.050(a).Depositions taken for purposes of arbitration are to betaken in the same manner as provided for a deposition ina civil action in district court, i.e., pursuant to the TexasRules of Civil Procedure. Id. § 171.050(b). Witnessesare entitled to a witness fee the same as in a civil case.Id. § 171.052.

4. The Arbitration Award

The arbitrators' award must be in writing, signedby each arbitrator joining in the award and delivered toeach party personally, by registered mail or as providedin the agreement. TEX. CIV. PRAC. & REM. CODE §171.053(a), (b).

The award must be made within the timeestablished by the arbitration agreement, or if a time isnot established by the agreement, within the timeordered by the court on application of a party. TEX. CIV.PRAC. & REM. CODE § 171.053(c). The deadline bywhich the award must be made may be extended, eitherbefore or after the deadline passes, upon writtenagreement of the parties. Id. § 171.053(d). Anyobjection to the timeliness of the award must be made tothe arbitrators prior to delivery of the award to theobjecting party. Otherwise, the objection is waived. Id.§ 171.053(e). Once handed down, an arbitration awardmay be entered as judgment in the trial court, clarified,modified, vacated or appealed. See id. § 171.081, et seq.Enforcement and appeal of the arbitration award arediscussed later in this paper.

The arbitrators' expenses and fees, including otherexpenses incurred in conducting the arbitration, shall bepaid pursuant to the terms of the award unless otherwiseprovided in the arbitration agreement. Id. § 171.055.

Attorneys fees may be awarded, but only if the feesare provided for in the arbitration agreement or if Texaslaw otherwise would allow the recovery of attorney'sfees on the claim. TEX. CIV. PRAC. & REM. CODE §171.048(c). Cf Monday v. Cox, 881 S.W.2d 381, 384-85(Tex. App.–San Antonio 1994, writ denied) (suggestingthat the parties may provide by contract that the courtshall award the prevailing party's attorney's fees in a suitto enforce an arbitration agreement). Expert fees mayalso be awarded to the prevailing party in the arbitrationaward, at least where the rules or arbitration agreementso provides. See Thomas v. Prudential Securities, Inc.,921 S.W.2d 847 (Tex. App.–Austin 1996, no writ)(allowing award based on securities rule). If the partiesintend for expert fees and costs to be awarded in anarbitration, it is always best to spell out those terms inthe arbitration agreement.

B. Arbitration Procedure under the Federal ArbitrationAct

The federal statutes governing procedure of thearbitration hearing may be altered by the parties' writtenarbitration agreement. See, e.g., 9 U.S.C. § 5. TheFAA provides less procedural guidance than the TAA.

1. Appointment of Arbitrators

Under the FAA, appointment of arbitrators may bemade pursuant to the terms of the arbitration agreementor by court order (discussed above). 9 U.S.C.A. § 5.However, if the agreement fails to specify the number ofarbitrators that will hear the dispute, the act specificallyprovides that the arbitration shall be conducted by asingle arbitrator. Id.

Parties may object to the arbitrator on the groundsthat they are not qualified and that they may not be fairand impartial in arbitrating the dispute, among otherreasons. Further, the arbitrators may recuse themselvesin any matter they feel their impartiality may bequestioned. See Florasynth Inc. v. Pickholz, 750 F.2d171, 174 (2nd Cir. 1984). A party may, however, waiveits objection to an arbitrator if it proceeds with thearbitration without making an objection to the arbitrator.Behring Int'l Inc. v. Local 295 Int'l Brotherhood ofTeamsters, Chauffers, Warehousemen and Helpers ofAmerica, 449 F.Supp. 513, 517-18 (E.D. N.Y. 1978);Brook v. Peak Int'l Ltd., 294 F.3d 668, 673-74 (5th Cir.2002) (failure to follow proper contract procedure forselection of arbitrator waived).

The arbitrator's authority is ultimately governed bythe arbitration agreement. See generally General MotorsCorp. v. Pamela Equities Corp., 146 F.3d 242, 248 (5thCir. 1998); see also Lundgren v. Freeman, 307 F.2d104, 109-10 (9th Cir. 1962). Accordingly, you maywant to consider including in an arbitration agreementprovisions concerning the number and appointment ofarbitrators, disqualification and/or objection toarbitrators, filling of vacancies of arbitrators, andauthority and recusal of arbitrators in contractsinvolving interstate commerce. Once a dispute actuallyarises, the parties may supplement the contract with anagreement defining the issue to be submitted to thearbitrator and explicitly giving the arbitrator(s) authorityto act. See Pamela Equities Corp., 146 F.3d at 244.

2. Other Procedural Guidelines

Other than witness fees and attendance, the FAAprovides no other procedural guidelines for conductingarbitration. See 9 U.S.C.A. § 7. Accordingly,practitioners drafting arbitration agreements in contractsinvolving interstate commerce to be enforced in federal


18

courts may wish to specify in the agreement to arbitrateeither the procedure the parties will follow in conductingthe arbitration or whether they will agree to abide by thearbitration rules of a particular sponsoring organization.

C. Discovery

The TAA provides some limited specificationsconcerning discovery, as discussed above. Otherwise,discovery is generally conducted according to theagreement of the parties or according to the governingrules of the institution chosen to conduct the arbitration.

IX. ENFORCEMENT AN D A P P E A L S OFARBITRATION AWARDS

A. Confirming an Award

1. Under the TAA

The Texas Arbitration Act allows state courts to"confirm" an arbitrator's award. TEX. CIV. PRAC. &REM. CODE § 171.087. The court, upon application ofa party, "shall confirm the award" unless "grounds areoffered for vacating, modifying, or correcting anaward." Id. § 171.087. What exactly "application"means in relation to having an arbitration agreementenforced is not well defined in the Texas ArbitrationAct, but it appears to encompass typical pleadings suchas a motion or petition: "[t]he filing with the clerk of thecourt of an application for an order under this chapterincluding a judgment or decree, invokes the jurisdictionof the court." Id. § 171.082. Thus, although notexplicitly explained in the Act or elsewhere, it appearsthe first step subsequent to an arbitrator issuing anaward would be for either party to file an application ormotion with the court. The court may require that theapplication: (1) show the jurisdiction of the court, (2)have attached a copy of the agreement to arbitrate, (3)define the issue subject to arbitration between theparties, (4) specify the status of the arbitration before thearbitrators, and (5) show the need for the court ordersought by the applicant. Id. § 171.085. Since the court"may require" such information, it seems prudent toinclude the information as a matter of course in themotion or petition to confirm the arbitration award. Id.§ 171.085.

Whether in the form of a motion or petition, theapplication must be set for hearing with proper notice"required by law or court rule for making and hearing amotion filed in a pending civil action in a district court."Id. § 171.093. Thus, although it may be more intuitiveto file an application entitled "Petition," proper noticemust be given and a hearing set under the Texas Rules

of Civil Procedure as though the petition is actually amotion filed in a pending civil action. Once theapplication is made, the "court shall confirm the awardunless grounds are offered for vacating, modifying, orcorrecting an award." Id. § 171.087. If the courtconfirms the award, "the court shall enter a judgment ordecree conforming to the order." Id. § 171.092(a). "Thejudgment or decree may be enforced in the same manneras any other judgement or decree." Id. § 171.092(a).Thus, all forms of post-judgment discovery andexecution on the judgement are available as if thejudgment or decree stemmed from a lawsuit fullyadjudicated in a court of law.

A party may seek immediate review of a trialcourt's decision to deny confirmation of an arbitrationaward, vacate the award, and direct arbitration to beundertaken again. East Tex. Salt Water Disposal Co.Inc. v. Werline, 307 S.W.3d 267, 270-74 (Tex. 2010).In Werline, the court found that, because the trial courtdenied confirmation of the award, the appellate courthad jurisdiction over an appeal related to the denial of aconfirmation of an arbitration award. That the trial courtordered the matter to be arbitrated a second time did notaffect the jurisdiction of the appellate court.

2. Under the FAA

A party seeking confirmation of an award under theFAA in federal court must file its application within oneyear after the award is made. 9 U.S.C. § 9. The courtmust grant such an order unless the award is vacated,modified, or corrected. Id.

B. Modifying, Correcting, or Vacating an Award

1. Under the TAA

In certain instances, the court may modify orcorrect the arbitration award. TEX. CIV. PRAC. & REM.CODE § 171.087. A party must seek modification/correction within 90 days after the "date of delivery ofa copy of the award to the applicant. Id. § 171.091 (b).Modification or correction of an award is limited towhether there was 1) an evident miscalculation offigures; 2) an award was made on a matter not submittedto the panel; or 3) the form of the award is imperfect. Id.§ 171.091(a). See Vernon E. Faulconer, Inc. v. HFI,L.P., 970 S.W.2d 36, 39 (Tex. App.–Tyler 1998, nopet.). Grounds for vacating an arbitration award areexpressly limited by statute. Texas law provides that anarbitration award may be vacated only where: 1) theaward was procured by corruption, fraud or unduemeans; 2) there was an evident partiality or corruptionof an arbitrator; 3) the arbitrators exceeded their powers;


19

4) the arbitrators refused to postpone a hearing; or 5)there was no agreement to arbitrate. TEX. CIV. PRAC. &REM. CODE § 171.088(a). A mere mistake of fact orlaw alone is insufficient to set aside an arbitrationaward. Id. An arbitration award is to be given the sameweight as a trial court's judgment, and the reviewingcourt may not substitute its judgment for the arbitrator'smerely 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). Inreviewing an arbitration award, the court considers theentire record. Id. at 294. Thus, it is prudent for any triallawyer who may at some point contest an arbitrationaward to ensure that a proper record is made of thearbitration proceedings.

As noted, a court shall vacate an arbitrationaward when there is "evident partiality" by an appointedneutral arbitrator. TEX. CIV. PRAC. & REM. CODE §171.088(a)(2)(A); see also Burlington N.R.R. Co. v.Tuco Inc., 960 S.W.2d 629, 629-30 (Tex. 1997). Aneutral arbitrator exhibits evident partiality if he doesnot disclose facts that might, to an objective observer,create a reasonable impression of his partiality. Id. at630. This evident partiality is established from thenon-disclosure itself, regardless of whether thenon-disclosed information establishes partiality or bias.Id. at 636. A neutral arbitrator need not discloserelationships or connections that are trivial, but shoulderr in favor of disclosure. Id. at 637. The "evidentpartiality" question necessarily entails a fact intensiveinquiry. Mariner Financial Group Inc. v. Bossley, 79S.W.3d 30, 34 (Tex. 2002), citing Lifecare Int'l, Inc. v.CD Med., Inc., 68 F.3d 429, 435 (11th Cir.1995).

Successful challenges to an arbitration awardare rare. Even if a party can prove to the trial court thatan arbitrator made significant mistakes of fact inreaching its decision, such arguments are insufficient tooverturn the arbitration award. Public policy groundsmay even, in very rare circumstances, support vacatingan arbitration award. See generally CVN Group, Inc. v.Delgado, 95 S.W.3d 234, 239 (Tex. 2002). In Delgado,the court noted that the homestead is given specialprotections in the Texas Constitution and in the PropertyCode provisions dealing with mechanic's liens, and that"[a]n arbitration award made in direct contravention ofthose protections would violate public policy." Id.However, the court concluded that the arbitrator did notwholly disregard Texas law, and hence declined tooverturn the award. The court concluded that "anarbitration award cannot be set aside on public policygrounds except in an extraordinary case in which theaward clearly violates carefully articulated, fundamentalpolicy."

2. Under the FAA

The Federal Arbitration Act also addressesmodification and correction of arbitration awards. Thefederal statute is similar to the state statute. See 9U.S.C.A. § 11. Notice of a motion to vacate, modify, orcorrect an award must be served upon the adverse partyor his attorney within three months after the award isfiled or delivered. Id. § 12.

The standard for reviewing an arbitration awardunder federal law also is similar. The FAA allows acourt to vacate an arbitration award:

(1) where the award was procured bycorruption, fraud, or undue means;(2) where there was evident partiality orcorruption in the arbitrators, or either of them;(3) where the arbitrators were guilty ofmisconduct in refusing to postpone thehearing...or refusing to hear evidence pertinentto and material to the controversy; or any otherbehavior by which the rights of any party hadbeen prejudiced;(4) where the arbitrators exceeded their powers,or so imperfectly executed them that a mutual,final, and definite award upon the subject matterwas not made.

9 U.S.C. § 10(a). The district may modify or correct theaward upon the application of any party to thearbitration:

(a) Where there was an evident materialmiscalculation of figures or an evident materialmistake in the description of any person, thing,or property referred to in the award.(b) Where the arbitrators have awarded upon amatter not submitted to them, unless it is amatter not affecting the merits of the decisionupon the matter submitted.(c) Where the award is imperfect in matter ofform not affecting the merits of the controversy.

The order may modify and correct the award, so as toeffect the intent thereof and promote justice between theparties. Id. § 11.

X. Conclusion

Arbitration can provide an alternative tolitigation. It can be cheaper and faster than a traditionaltrial on the merits, but that is not the universal result.Hopefully the authorities cited above will assist inevaluation of whether you wish to pursue or enforcearbitration.

Documents

ARBITRATION: CLIFF'S NOTES FOR THE GENERAL ...ARBITRATION: "CLIFF'S NOTES" FOR THE GENERAL PRACTITIONER SOFIA RAMON Atlas, Hall & Rodriguez, LLP 818 Pecan Blvd. Mcallen, Tx 78501 (956)