Totalenergies E&P USA, Inc. v. Mp Gulf of Mexico, LLC, 667 S.W.3d 694

Background

Parties: TotalEnergies E&P USA, Inc. (Total) sued MP Gulf of Mexico, LLC over whether a dispute must proceed in AAA arbitration under a System Operating Agreement (SOA) and related Cost Sharing / Chinook agreements. The Texas Supreme Court considered the issue on petition for review from the court of appeals.
SOA Article 16.16 prescribes management negotiation, then mediation under the AAA Commercial Rules, and—if unresolved within 60 days—binding arbitration.
Article 16.16.1 states in a single conditional sentence: if a dispute “arises out of this Agreement” and other conditions are met, “the same shall be submitted to arbitration . . . in accordance with the rules of the AAA and the provisions in this Article.”
At the time, AAA Commercial Rule 7(a) provided that an arbitrator “shall have the power to rule on his or her own jurisdiction, including any objections with respect to . . . the arbitrability of any claim.”
The majority compelled arbitration, treating incorporation of AAA Rule 7(a) as a clear-and-unmistakable delegation of arbitrability to arbitrators. Justice Busby dissented, arguing (1) the SOA’s conditional “if” language creates a substantive condition precedent that courts must decide, and (2) Rule 7(a) is non‑exclusive and does not oust courts from deciding arbitrability.

Issues

Issue	Plaintiff's Argument (Total)	Defendant's Argument (MP Gulf)	Held (majority vs. Busby dissent)
Whether incorporation of AAA rules in a clause that limits arbitration by express conditional language ("If X, then AAA rules") clearly and unmistakably delegates arbitrability to arbitrators	The conditional wording makes the antecedent (does the dispute "arise out of" the SOA?) a substantive condition precedent for arbitration, so courts must decide scope before applying AAA rules	Incorporation of AAA rules—including Rule 7(a)—delegates arbitrability to the arbitrator even where parties limited which disputes are arbitrable	Majority: incorporation delegates arbitrability to arbitrators. Busby dissent: conditional clause prevents delegation; court must decide scope first.
Whether AAA Rule 7(a) gives arbitrators exclusive power to decide arbitrability (ouster of courts)	Rule 7(a) is not exclusive; arbitrators get authority to decide arbitrability but courts retain power (and FAA §10 review) to decide or police arbitrators’ jurisdiction	Rule 7(a)’s mandatory phrasing ("shall have the power") makes delegation clear and exclusive	Majority: treated Rule 7(a) as a clear delegation to arbitrators. Busby dissent: Rule 7(a) is non‑exclusive; AAA’s 2022 amendment confirms non‑exclusivity; courts retain role.
Whether courts may resolve arbitrability when an arbitration agreement both (a) carves out some disputes and (b) incorporates AAA rules	Courts should decide arbitrability where the agreement expressly conditions arbitration on antecedent facts or contains limitations on scope	Incorporation of AAA rules covers arbitrability except for explicit carve‑outs; courts should only decide carve‑outs that are textually carved out from arbitration	Majority: incorporation governs and arbitrators decide; Busby dissent: when scope is expressly conditional, courts should decide whether conditions are met before referring to AAA rules.

Key Cases Cited

First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) (party can be forced to arbitrate only issues it agreed to; delegation of arbitrability must be clear and unmistakable)
AT&T Techs. v. Communications Workers of America, 475 U.S. 643 (1986) (arbitrators derive authority from parties’ agreement; courts ordinarily decide arbitrability)
BG Group PLC v. Republic of Argentina, 572 U.S. 25 (2014) (distinguishing procedural delegation questions from merits; scope/validity separable inquiries)
Archer & White Sales, Inc. v. Henry Schein, Inc., 935 F.3d 274 (5th Cir. 2019) (incorporation of AAA rules delegates arbitrability for all disputes except expressly carved‑out claims; court retains power over carve‑outs)
DDK Hotels, LLC v. Williams‑Sonoma, Inc., 6 F.4th 308 (2d Cir. 2021) (where arbitration clause is limited or exclusionary, mere incorporation of AAA rules alone does not suffice to show clear intent to delegate arbitrability)
Rent‑A‑Center, West, Inc. v. Jackson, 561 U.S. 63 (2010) (parties may delegate arbitrability to arbitrators; separable delegation provisions enforceable if clear and unmistakable)
Jody James Farms, JV v. Altman Group, Inc., 547 S.W.3d 624 (Tex. 2018) (incorporation of AAA rules may be limited to disputes specifically identified; presumption favors judicial determination)
Americo Life, Inc. v. Myer, 440 S.W.3d 18 (Tex. 2014) (when arbitration agreement incorporates outside rules, specific provisions of the agreement control and outside rules apply only to the extent they do not conflict)
Ally Align Health, Inc. v. Signature Advantage, LLC, 574 S.W.3d 753 (Ky. 2019) (in carve‑out cases, arbitrator may determine whether a claim is carved out and, if so, refer that claim to a court)
Airbnb, Inc. v. Doe, 336 So. 3d 698 (Fla. 2022) (held that arbitrability must be determined before arbitration starts; interpreted Rule 7(a) as problematic for pre‑arbitration judicial resolution)