TBJ January 2022

2021: The Year in Review

ARBITRATION LAW

Written by Yolanda Cornejo Garcia and Mason Parham

Although there were no landmark arbitration decisions from the U.S. Supreme Court during 2021, this article discusses several notable arbitration-related decisions from the Texas Supreme Court.

Parties to arbitration agreements often include provisions that exclude certain types of disputes from the scope of mandatory arbitration—i.e., carve-outs. In December, the U.S. Supreme Court heard oral argument in Henry Schein, Inc. v. Archer and White Sales, Inc., in which the arbitration agreement included a carve-out for “actions seeking injunctive relief.”1 During a previous term, the court issued an opinion in the same case holding that the Federal Arbitration Act prohibits lower courts from deciding gateway issues of arbitrability where the parties’ agreement “clearly and unmistakably” delegated that responsibility to the arbitrator (regardless of whether the court determines that the argument for arbitration is “wholly groundless”).2 On remand, the U.S. Court of Appeals for the 5th Circuit relied on the carve-out in holding that there was no clear and unmistakable delegation, and that the district court correctly determined that the case was not subject to arbitration.3 Although the Supreme Court heard oral argument, it then dismissed the writ of certiorari as “improvidently granted.”4

Not long after, the Texas Supreme Court addressed a similar issue in Wagner v. Apache Corporation.5 In that case, the buyer and seller of certain oil and gas assets executed an agreement requiring mandatory arbitration, but they included a carve-out for claims asserted in an action brought by a third party.6 When a third party brought suit years later, the seller initiated an arbitration against the buyer and its assignees seeking indemnification.7 The buyer then filed a separate lawsuit seeking declaratory relief, arguing that under the 5th Circuit’s decision in Henry Schein, carve-out language should be interpreted broadly. The Texas Supreme Court disagreed. It held that the plain language of the carve-out only applied to claims asserted in a third party action.8 The court further reasoned that even if the agreement had been silent about whether claims could be asserted outside a third-party action, it would reach the same conclusion because the scope of the agreement must be interpreted using a presumption in favor of arbitration.9 In so holding, the court resolved the question of arbitrability in favor of the seller.

In a separate decision, the Texas Supreme Court also addressed the availability of pre-arbitration discovery—i.e., discovery regarding arbitrability before the court rules on a motion to compel arbitration. In In re Copart, Inc., an employer moved to compel arbitration of an employee’s lawsuit, attaching a signed and authenticated arbitration agreement.10 The employee moved to take discovery on the enforceability of the agreement, and the trial court granted the request. The Texas Supreme Court reversed, reasoning that “a trial court abuses its discretion in ordering pre-arbitration discovery when the requesting party presents no colorable basis or reason to believe that the discovery would be material in resolving any disputed issues of arbitrability.”11 Because the employee did not challenge that she received and signed the agreement, and made only conclusory assertions regarding its validity, the employee presented no colorable basis to believe that the requested discovery would be material in establishing the existence and enforceability of the agreement.12

Finally, in Aerotek, Inc. v. Boyd,13 the Texas Supreme Court addressed the enforceability of electronically signed arbitration agreements. In that case, the plaintiffs admitted to signing an electronic job application but submitted declarations that they had never been presented with the arbitration agreement. Relying on the Texas Uniform Electronic Transactions Act,14 the court held that the defendant established the validity of plaintiffs’ electronic signatures with evidence that the employees were required to execute the arbitration agreement to complete the application process.15 The court rejected the proposition that “merely denying an electronic signature qualifies as some evidence in showing an electronically signed arbitration agreement’s invalidity.”16

Notes
1. No. 19-963.
2. Henry Schein, Inc. v. Archer and White Sales, Inc., 139 S. Ct. 524 (2019).
3. Archer and White Sales, Inc. v. Henry Schein, Inc., 935 F.3d 274 (5th Cir. 2019).
4. Opinion, No. 19-963 (Jan. 25, 2021).
5. 627 S.W.3d 277 (Tex. 2021).
6. Id. at 281.
7. Id.
8. Id. at 284.
9. Id. at 284-85.
10. 619 S.W.3d 710 (Tex. 2021).
11. Id. at 714.
12. Id. at 715-16.
13. 624 S.W.3d 199 (Tex. 2021).
14. Tex. Bus. & Comm. Code ch. 322.
15. Id. at 203.
16. Id. at 208.

YOLANDA CORNEJO GARCIA is the global co-head of Sidley Austin’s Securities and Shareholder Litigation Practice and is a partner in the firm’s Dallas office. She represents corporations, corporate officers, and directors in matters including domestic and international arbitrations, national class actions, multi-jurisdictional cases, securities cases, and internal investigations.

MASON PARHAM is an associate of the Commercial Litigation and Disputes Group in Sidley Austin’s Dallas office. He focuses his practice on business and commercial litigation and has experience in a range of areas including employment disputes, oil and gas litigation, derivative litigation, and international arbitration.

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