509 S.W.3d 523
Tex. App.2016Background
- AA Builders constructed a house warranted by Bonded Builders Warranty Group (BBWG); Patricia Rockoff acquired the warranty by assignment after purchasing the house and reported structural defects.
- BBWG’s warranty contains a broad arbitration clause covering “any Dispute” relating to the warranty and sets procedures: conciliation/mediation first, then binding arbitration; BBWG must provide a list of approved arbitration companies and parties share arbitration costs equally.
- Rockoff filed suit asserting DTPA, breach of express and implied warranties, negligence, and declaratory relief challenging the arbitration clause as unconscionable; she also submitted warranty claim forms before suing.
- BBWG and AA Builders moved to compel arbitration; the trial court denied those motions and this interlocutory appeal followed under the FAA.
- The appellate court found a valid, broad arbitration agreement covering Rockoff’s claims, rejected several unconscionability and breach arguments on the record, and remanded for appointment/selection of an arbitrator to permit resolution of whether arbitration costs render the agreement unconscionable.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Existence & scope of arbitration | Rockoff: she never agreed; some claims fall outside arbitration | BBWG/AA Builders: warranty (signed by conduct) contains broad clause covering disputes “relating to” the warranty | Held: Valid arbitration agreement exists; claims fall within broad scope because facts, not labels, control |
| Arbitrator-selection control | Rockoff: BBWG’s right to supply pool gives it control and risks biased arbitrators | BBWG: it provides a list of arbitration companies; homeowner selects; firms appoint neutral arbitrators | Held: Not per se unconscionable — warranty requires a neutral third-party arbitrator; selection concern can be raised later with specific proof |
| Cost of arbitration (access to forum) | Rockoff: sharing arbitration costs may be prohibitively expensive and bar vindication of statutory rights (DTPA) | BBWG: costs speculative absent identified arbitrator/firm; plaintiff must prove cost burden | Held: Cost-based unconscionability claim is premature on this record; remand to appoint arbitrator so costs can be evaluated |
| Failure to exhaust pre-arbitration procedures / breach | Rockoff: BBWG failed to contact builder/appoint conciliator, so arbitration condition precedent not met | BBWG: any disputes about exhaustion are for the arbitrator; evidence does not show breach | Held: No record support of a clear breach; procedural prerequisites generally for arbitrator to decide unless undisputed; trial court erred to deny arbitration on this basis |
Key Cases Cited
- In re AdvancePCS Health L.P., 172 S.W.3d 603 (Tex. 2005) (framework for proving existence and scope of arbitration agreements)
- J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex. 2003) (state contract law governs formation of arbitration agreements)
- In re Poly-America, L.P., 262 S.W.3d 337 (Tex. 2008) (arbitration of statutory claims valid if remedies are not effectively waived)
- Venture Cotton Cooperative v. Freeman, 435 S.W.3d 222 (Tex. 2014) (invalid remedial waivers severable; preserve arbitration forum)
- In re Olshan Foundation Repair Co., L.L.C., 328 S.W.3d 883 (Tex. 2010) (test for whether arbitral forum allows effective vindication of rights)
- Green Tree Financial Corp.-Alabama v. Randolph, 531 U.S. 79 (2000) (party asserting cost-based barrier to arbitration bears burden of proof)
- Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002) (procedural questions about arbitration prerequisites are for arbitrator unless clearly for court)
- Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983) (FAA creates strong federal policy favoring arbitration)