Texas Supreme Court Set to Decide Whether Arbitrator or Court Must Decide Whether Arbitration Can be Conducted on a Class Basis
In a case worth watching, the Texas Supreme Court has been asked to decide whether an arbitrator or a trial court judge should decide whether class allegations should be decided in arbitration or in state court. The Robinsons contracted for the construction of a home that included a warranty program administered by Home Owners Management Enterprises, Inc. (“Home”). The Robinsons sued in state court for breach of warranty for certain construction defects. Home moved to compel arbitration pursuant to a binding arbitration provision. Once in arbitration, the Robinsons amended their claim to include claims for class relief. Home, after an award on the individual claims by the arbitrator, requested that the state court strike the class allegations. The trial court agreed. The Robinsons appealed from the order, which was upheld on appeal. 549 S.W.3d 226 (Tex. App. – Fort Worth 2018). The Texas Supreme Court granted the Robinsons’ petition for review.
The Robinsons argued Home engaged in improper forum shopping, since it had initially argued the arbitration provision was broad and all-inclusive in its motion to compel arbitration, but subsequently retreated from that position once the Robinsons amended their arbitration claim. The Robinsons also showed that Home initially asked the arbitrator to decide whether the class allegations fell within the scope of the arbitration provision, and that Home’s request occurred after it lost the argument that it sought to have the trial court decide the correct forum. Home argues that the question of arbitrability of class claims is a “gateway matter” to be decided by the trial court, relying on a series of United States Supreme Court cases for its position that only the trial court can decide the initial issue of arbitrability. Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 130 S. Ct. 1758 (2010); AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 131 S. Ct. 1740 (2011); and Oxford Health Plans LLC v. Sutter, 569 U.S. 564, 133 S. Ct. 2064 (2013).
Oral argument was held on September 18, 2019. The decision of the Texas Supreme Court is expected to bring clarity to the issue of whether the arbitrability of class allegations is a gateway matter for Texas trial courts to decide.
Part of the Fall 2019 Class Action Litigation Newsletter available here.