The Austin Court of Appeals has sided with The Boring Company, an entity created by Elon Musk in 2017 to tackle urban traffic by digging tunnels for high-speed vehicles, in a dispute with a construction contractor in Bastrop County.
TBC-The Boring Company v. 304 Construction, LLC (No. 03-23-00394-CV; May 17, 2024) arose from a construction contract under which 304 undertook to build a commercial manufacturing facility in Bastrop County. The parties executed a purchase order providing for payment in three installments at certain stages of the project. The order referred to the “Terms and Conditions” posted on TBC’s website. When the relationship soured a few months later, 304 sued TBC for breach of contract, fraud, and quantum meruit. TBC answered and filed a motion to compel arbitration. Together with the motion, TBC served affidavits of TBC’s CFO and its Director of Legal Affairs that included a copy of its terms and conditions, which contained an arbitration provision calling for FAA arbitration of disputes arising from the purchase order. 304 challenged the admissibility of this essay on the basis that it wasn’t properly authenticated and that it did not show that the alleged webpage with the terms and conditions actually existed on the date the purchase order was executed. After a hearing, the trial court denied the motion to compel. TBC filed an interlocutory appeal.
In an opinion by Justice Theofanis, the court of appeals reversed. It determined that TBC had produced conclusive, authenticated evidence that a valid arbitration agreement existed and that the dispute between the parties fell within the scope of the agreement. It determined further that 304 did not establish a valid defense to arbitration. 304 asserted fraudulent inducement and failure of consideration as defenses, but the court pointed out that the alleged facts supporting these allegations went to breach of contract, not the elements of these defenses. In short, arguing that TBC didn’t perform its part of the deal or didn’t pay what 304 thought it owed, were not up to the level of evading arbitration in a case about whether TBC performed or paid what it owed.
This case is straightforward in its application of the law, and it is not a close call. What is unfortunate is that the trial court didn’t seem too interested in the law and didn’t really give any reasons to justify denying TBC’s motion to compel. We are seeing so many of these types of cases that perhaps it would be worth considering requiring a trial court to state its specific reasons for denying a motion to compel arbitration. At least that would require a party asserting that an arbitration agreement does not exist or that the dispute is not within the scope of the agreement to make the trial court sign an order including specific justification, knowing full well that a trial court probably doesn’t want to do that in the first place. Perhaps trial courts would think twice about it when they could be called out for not doing what the law required.
