in Re Olshan Foundation Repair Company, LLC and Olshan Foundation Repair Company of Dallas, Ltd.
328 S.W.3d 883
| Tex. | 2010Background
- Olshan Foundation Repair Company sought to compel arbitration in four consumer-home foundation repair cases; trial courts denied; appellate courts also denied writs in most cases.
- Arbitration clauses in three contracts stated disputes would be resolved by AAA arbitration under state arbitration laws; Waggoner contract specified arbitration under the Texas General Arbitration Act (TAA).
- Homeowners argued FAA preempts the TAA’s §171.002(a)(2) requirements (signatures) and that AAA arbitration would be unconscionable due to costs and THSA violations.
- Trial court in Waggoner held TAA applies and unenforceable; three other actions proceeded under FAA; appellate courts split, leading to consolidated review by the Texas Supreme Court.
- Court held: FAA governs the Kilpatrick, Tisdale, and Tingdale agreements; TAA governs Waggoner; mandamus relief granted in three FAA-governed cases and denied in the Waggoner case.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does FAA preempt TAA's §171.002(a)(2) in FAA-governed contracts? | Olshan | Olshan | FAA preempts the TAA for the three agreements |
| Are the arbitration agreements unconscionable due to cost under FAA standards? | Homeowners | Olshan | No sufficient evidence of prohibitive costs; not unconscionable in these cases |
| Does the language 'arbitration laws in your state' indicate choice of Texas law excluding FAA? | Homeowners | Olshan | Such general language does not exclude FAA; FAA applies to three contracts |
| Is the THSA basis to void contracts a ground to deny arbitration? | Homeowners | Olshan | Arbitration not denied; issues to be decided by arbitrator; THSA voidness not a basis to foreclose arbitration |
Key Cases Cited
- Volt Info. Sciences, Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468 (U.S. 1989) (FAA preemption limited to conflicts with arbitration terms; enforcement via consent)
- Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52 (U.S. 1995) (choice-of-law provisions can affect arbitral scope but do not automatically foreclose FAA)
- L & L Kempwood Associates, L.P., 9 S.W.3d 125 (Tex. 1999) (contract language invoking arbitration laws includes FAA in Texas)
- Capital Income Props. v. Blackmon, 843 S.W.2d 22 (Tex. 1992) (FAA is part of Texas substantive law governing arbitration)
- In re Nexion Health at Humble, Inc., 173 S.W.3d 67 (Tex. 2005) (FAA preemption discussed in Texas context)
- In re FirstMerit Bank, N.A., 52 S.W.3d 749 (Tex. 2001) (mandamus relief when trial court refuses to compel arbitration)
- Green Tree Financial Corp.-Ala. v. Randolph, 531 U.S. 79 (U.S. 2000) (costs can render arbitration unconscionable; burden of proof on party opposing arbitration)
- Poly-America, L.P. v. See, 262 S.W.3d 337 (Tex. 2008) (case-by-case analysis of arbitration costs and accessibility)
- Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (U.S. 2006) (arbitrability questions are for arbitrator unless challenges to arbitration clause itself)
- Rent-A-Center, W. v. Jackson, 561 U.S. 63 (U.S. 2010) (case-by-case approach to arbitration costs and accessibility)
- In re Palm Harbor Homes, Inc., 195 S.W.3d 672 (Tex. 2006) (unconscionability and enforcement of arbitration provisions in consumer contracts)