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Texas: Arbitration agreement requiring employee to pay own attorney's fees was not substantively unconscionable

In Ophthalmic Consultants of Texas, P.A. v. Morales, the Court of Appeals for the Thirteenth District of Texas reversed the trial court's ruling denying a motion to compel arbitration. The Court of Appeals held that a valid arbitration agreement existed and that the claims fell within the scope of the agreement. Morales, a doctor. was hired by OCT and signed an agreement to arbitrate employment claims. The arbitration agreement provided that OCT would bear all costs and expenses of arbitration, unless Morales instituted arbitration. In that circumstance, Morales would be responsible for paying no more than $100.00 for any AAA administrative fee. Morales filed a claim with the Texas Workforce Commission alleging that OCT engaged in discriminatory practices and later filed a lawsuit. OCT asserted that the suit should be stayed pending arbitration. The Court of Appeals considered whether the agreement to arbitrate was illusory, failed for indefiniteness, or was substantively unconscionable. The Cour ...

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Blog: Inaccurate Translation Invalidates Arbitration Agreement

The Jackson|Lewis California Workplace Law Blog reports on a decision from the California Court of Appeal that held an automobile dealership that translated a sales contract into Spanish, but did not include the arbitration agreement in the translation, could not enforce the agreement. According to the decision, despite signing the English version of the contract (that did contain an arbitration provision), under California law, the arbitration agreement was not enforceable because (1) Spanish was the primary language of the party seeking to invalidate the arbitration agreement; (2) negotiations were conducted in Spanish; and (3) the party seeking to invalidate the arbitration agreement was unaware of the arbitration provision in the Spanish version of the contract.

Texas: No interlocutory appeal from order granting arbitration

In Prophet Ronald Dwayne Whitfield v. Big Star Honda, et al., the Court of Appeals for the First District of Texas held that under the Texas Arbitration Act or the Federal Arbitration Act, there is no interlocutory appeal over an order granting a motion to compel arbitration. An appellate court has no jurisdiction in that instance and must dismiss the appeal. The Court of Appeals noted an exception to that rule, established by the Texas Supreme Court in In re Gulf Exploration, LLC, 289 S.W.3d 836, 840 (Tex. 2009): courts may review an order compelling arbitration if the order also dismisses the underlying litigation so it is final, rather than interlocutory.

Here, the trial court entered no final judgment and the arbitration order stayed the litigation but did not dismiss the case. Accordingly, the court of appeals lacked jurisdiction and the appeal was dismissed.

Thanks to Ronnie Hornberger for bringing this decision to our attention.

Texas: Party waived right to arbitration by substantially invoking the judicial process

In Hogg v. Lynch, Chappell & Alsup, P.C., the El Paso Court of Appeals held that a law firm's client waived her right to seek arbitration by substantially invoking the judicial process to the law firm's detriment. Ms. Hogg and the law firm entered into a contingent fee agreement. Ms. Hogg and her attorneys attended a mediation relating to the estate of Ms. Hogg's late husband. The MSA stated that warranty deeds would be executed and an estate closing would take place. Ms. Hogg asked the law firm to take a lower contingency fee percentage, the firm declined, and Ms. Hogg terminated the law firm's services. Ultimately, the law firm and Ms. Hogg engaged in scheduling orders and discovery. The El Paso Court of Appeals outlined relevant factors when making the determination if a party has impliedly waived its rights to arbitration, including:  • whether the party who pursued arbitration was the plaintiff or the defendant; • how long the party who pursued arbitration delayed before ...

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Texas: Arbitration agreement with employee enforceable even though she did not sign

In Firstlight Federal Credit Union v. Loya, the Eighth District Court of Appeals held that the trial court abused its discretion in refusing to compel arbitration. The court held that Loya, an at-will employee, was bound by the arbitration agreement as a matter of law despite her lack of signature because she continued working after receiving notice of the arbitration agreement. According to the Court of Appeals, there was evidence that Loya received a notice of the arbitration policy and acknowledged its receipt electronically through a secure web-portal. It was undisputed that Loya did not print, sign, and return the online version of the company's Dispute Resolution Policy & Procedure. The Court of Appeals also examined the "delegation clause" of the agreement--that portion of the agreement that determines whether the court or the arbitrator has the power to rule on gateway issues, such as the validity and enforceability of the arbitration agreement. Here, the Court of Appeals held that the agree ...

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Texas: Arbitration agreement between law firm and client is enforceable

In Parallel Networks, LLC v. Jenner & Block, LLP, the Fifth District Court of Appeals examined the trial court's judgment confirming an arbitration award. The law firm, Jenner & Block, represented Parallel in patent infringement litigation pursuant to a contingent fee agreement. Jenner & Block later terminated its professional relationship with Parallel and alleged that Parallel owed it attorneys' fees--both under an hourly fee arrangement and a contingency fee arrangement. Jenner & Block filed a demand for arbitration and the arbitrator found that Parallel owed Jenner & Block $3,000,000 in attorneys' fees (hourly) and a sixteen percent contingency fee. The Court of Appeals held that the trial court correctly enforced the arbitration award. The arbitration provision was not unconscionable nor did it violate public policy. Using the FAA, the statutory grounds for vacating an arbitration award did not exist here, according to the court.   Note: Parallel has filed a Mo ...

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Texas: Agreement to arbitrate employment agreement enforceable

In Ophthalmic Consultants of Texas, P.A. v. Morales, the Thirteenth District Court of Appeals held that the agreement to arbitrate between an ophthalmology specialist and his employer was enforceable. The employee sought to have the agreement declared invalid on a number of grounds, including the defenses of it being an illusory agreement, it failed for indefiniteness, it was substantively unconscionable, and that the employer waived its right to arbitrate. The Court of Appeals held that the agreement to arbitrate was valid and enforceable.

Thanks to Ronnie Hornberger for bringing this decision to our attention.

What is a Reasoned Award?

This blog is written by Lionel M. Schooler, a partner in the Houston office of Jackson Walker L.L.P.  He currently serves as the Chair-Elect of the State Bar Alternative Dispute Resolution Section and as the Chair-Elect of the Houston Bar Association’s Alternative Dispute Resolution Section.  Mr. Schooler is a frequent writer and speaker on arbitration arbitrator and member of the State Bar of Texas' ADR Council. Lonnie is the chair-elect of the ADR Section. Thank you, Lonnie, for this contribution. Experienced Arbitrators and advocates frequently use boilerplate terms without pausing to decide what they actually mean.  The undoubtedly unanticipated consequence of such casual usage of the term “reasoned award” was on full display on October 8, when the Houston First Court of Appeals issued its opinion in Stage Stores, Inc. v. Gunnerson, addressing a question of first impression:  what is meant by the term “reasoned award” in an arbitration claus ...

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Texas: Arbitration clause between attorney and client upheld

This post is authored by Lonnie Schooler with Jackson Walker. Lonnie is on the State Bar of Texas' ADR Section Council. Thanks to Lonnie for brining this decision to us and for providing this outstanding analysis of Royston, Rayzor, Vickery & Williams LLP v. Lopez. Introduction.  The Texas Supreme Court on June 26, 2015, through Justice Johnson issued its unanimous decision in Royston, Rayzor, Vickery & Williams L.L.P. v. Lopez (which included a concurring opinion by Justice Guzman, joined by Justices Lehrman and Devine), upholding an arbitration clause contained within an engagement letter that the Royston, Rayzor law firm had entered into with the client. Background Facts.  The arbitration clause in question required submitting to arbitration any dispute arising out of the agreement except for claims made by the law firm for recovery of fees or expenses.  The law firm took on the representation of the client in a divorce proceeding, subject to the terms of this agreement ...

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Texas: Trial court correctly denied motion to arbitrate--Chapter 154, not 171, governs

In Beldon Roofing Co. v. Sunchase IV Homeowners' Ass'n, Inc., the Thirteenth District Court of Appeals affirmed the trial court's denial of a motion to arbitrate. The parties agreed, in their original contract, to arbitrate in accordance with the Federal Arbitration Act and the Construction Industry Arbitration Rules of the AAA. While Beldon's request to compel arbitration was pending, the parties entered into an agreed order referring the parties to arbitration pursuant to Chapter 154 of the Texas Rules of Civil Procedure, the general ADR statute, but not Chapter 171, the Texas Arbitration Act. The Court of Appeals held that the ADR Act and the TAA cannot govern the same proceeding. The TAA contemplates limited judicial review and is binding. The ADR Act, on the other hand, is nonbinding unless the parties stipulate beforehand that the award will be binding. The TAA applies to private agreements to arbitrate; the ADR Act applies only to court-ordered referrals to arbitration. Because this arbitra ...

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