In a per curiam opinion, the Texas Supreme Court has directed the Waco Court of Appeals to reconsider a decision affirming a trial court order denying a motion to compel arbitration.
Alliance Auto Auction of Dallas, Inc. v. Lone Star Cleburne Autoplex, Inc. (No. 22-0191) arose from a dispute between a vehicle auction company and an auto dealer in which the dealer alleged that the auction company conspired with two of the dealer’s employees to embezzle money. When the dealer filed suit, the auction company moved to stay the suit and compel arbitration. Under the authorization agreements between the dealer and a third party, a company the auction company uses to verify and authorize dealers to buy and sell in its auctions, the parties agreed to resolve by binding arbitration “any controversy or claim related to the authorization agreements.” Should the parties fail to agree on an ADR firm, the rules of the American Arbitration Association would govern the mediation or arbitration of the controversy or claim. The arbitration agreement further authorized the auction company, as a third-party beneficiary of the agreement, to elect whether to invoke the arbitration agreement.
The trial court denied the motion to compel. The Waco Court of Appeals affirmed, holding that the “question of whether a case should be sent to arbitration is a gateway issue that courts must decide at the outset of the litigation.” Taking up the petition for review without oral argument, SCOTX pointed out that after the auction company filed its petition in this case, the Court decided TotalEnergies E&P USA, Inc. v. MP Gulf of Mexico, LLC, 667 S.W. 3d 694 (Tex. 2023). In TotalEnergies (a case in which TCJL participated as an amicus), SCOTX held that “as a general rule, an agreement to arbitrate in accordance with the AAA or similar rules constitutes a clear and unmistakable agreement that the arbitrator must decide whether the parties’ dispute must be resolved through arbitration.” 667 S.W.3d at 719. In light of this holding, the Court ruled, the case should be remanded to the court of appeals for further consideration.
The dealer argued TotalEnergies should not control because the arbitration agreements at issue based on the language requiring AAA rules only if the parties could not agree otherwise and the third-party beneficiary provision. These provisions, it asserted, prevented the agreement from “clearly and unmistakably” delegating arbitrability to the arbitrator. Rather than getting into the weeds, the Court left this argument to the court of appeals on remand.
