De Los Santos v. Mattress By Appointment LLC, 1:25-cv-00855

Background

Santos (dealer) and Mattress by Appointment LLC (MBA) entered a dealer agreement giving Santos an exclusive Austin territory in exchange for MBA’s training, materials, and platform access.
MBA alleges Santos marketed unapproved AI tools to other MBA dealers, refused to purchase products, used MBA IP, and ultimately breached and was terminated.
Santos sued in Texas state court seeking a declaratory judgment that Texas courts have exclusive jurisdiction and arguing the arbitration and forum-selection clauses are procedurally and substantively unconscionable and unenforceable.
MBA removed to federal court and moved to compel arbitration under the agreement, invoking an express delegation clause that assigns arbitrability questions to the arbitrator and calls for AAA arbitration in Duval County, Florida.
The magistrate judge found a valid arbitration agreement under Texas law (signed documents, consideration, mutual assent) and that the delegation clause clearly and unmistakably delegates gateway arbitrability issues to the arbitrator.
Recommendation: grant MBA’s motion to compel arbitration, stay the case pending arbitration, and dismiss Santos’s other pending motions as moot.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether a valid arbitration agreement exists	Santos contends the arbitration clause is unconscionable, not explained, and he did not meaningfully consent	MBA points to the signed dealer agreement, consideration, and mutual assent establishing a valid arbitration agreement	Court: Valid arbitration agreement exists under Texas law (signatures, consideration, meeting of minds)
Whether gateway arbitrability questions are for the court or arbitrator	Santos challenges enforceability of arbitration clause generally but did not specifically attack the delegation clause	MBA cites the delegation clause assigning interpretation, applicability, enforceability, formation, and jurisdiction challenges to the arbitrator	Court: Delegation clause is clear; absent a specific attack on it, arbitrability issues go to the arbitrator
Effect of alleged procedural/constitutional defects (e.g., unconscionability, due process)	Santos argues unconscionability and due‑process violations (including alleged coercion around family death) make arbitration unenforceable	MBA argues such challenges go to the arbitrator under the delegation provision	Court: Because the delegation clause was not specifically challenged, such defenses are for the arbitrator; the timing of the alleged coercion was factually inconsistent and not persuasive here
Whether the court should stay the litigation pending arbitration	Santos seeks to litigate in Texas courts	MBA requests enforcement of arbitration and a stay per the FAA	Court: Recommend stay of the federal case pending arbitration pursuant to 9 U.S.C. § 3

Key Cases Cited

Safer v. Nelson Fin. Grp., Inc., 422 F.3d 289 (5th Cir. 2005) (federal policy favors arbitration)
AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (courts must enforce arbitration agreements according to their terms)
Kubala v. Supreme Prod. Servs., Inc., 830 F.3d 199 (5th Cir. 2016) (analytical framework: formation and coverage of arbitration agreements; delegation clauses shift arbitrability questions)
Henry Schein, Inc. v. Archer & White Sales, Inc., 586 U.S. 63 (2018) (parties can delegate gateway arbitrability questions to arbitrator)
Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63 (2010) (challenge to delegation clause must be made specifically to avoid enforcement of delegation)
Newman v. Plains All Am. Pipeline, L.P., 23 F.4th 393 (5th Cir.) (courts must first determine existence of a valid arbitration agreement; parties cannot delegate questions over existence itself)
Huckaba v. Ref-Chem, L.P., 892 F.3d 686 (5th Cir. 2018) (Texas contract formation elements summarized)
Edwards v. DoorDash, Inc., 888 F.3d 738 (5th Cir. 2018) (enforce delegation clause absent a specific attack on it)