### TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03

- 20

- 00458

- CV

5th and West Owner, L.P.; and Joshua Needham , Appellant s

v. Daryn Wasek and Donald Wasek , Appellee s

FROM THE 200TH DISTRICT COURT OF TRAVIS COUNTY NO. D
- 1

- GN

- 20

- 000762 , THE HONOR A B LE LORA J. LIVINGSTON , JUDGE PRESIDING

M E M O R A N D U M O P I N I O N

5 th and West Owner, L.P. , and Joshua Needham a ppeal from an interlocutory order denying their motion to c ompel arbitration of the claims brought against them by
Da ryn and D onal d Wasek

. See Tex. Civ. Prac. & Rem. Code § 171.098 (a)(1) (allowing interlocutory appeal from order denying motion to compel arbitration). We will reverse and remand.

BACKGROUND
5 th and West is the developer of a residential c ondom inium building in downtow n Au stin

. I n December of 2017 , the Wase ks signed a contract to purchase a u ni t in the building,

w hich was then in the early stages of development. The con tract required the parties to resolve

“ claims relating to the design or construction of the units, c ommo n ele me n ts or any improvement
located within the regime established by the [condominium] declaration ” i n “ accordance with the2 dispute resolution procedures set forth in the declaration. ” Article 19 of th at declaration requires parti es to arbitrate cer tain type s of cla ims, including “ claims relating to the design or construction of the units, c ommon eleme n ts or any improvement located within the [condomini um ] r eg ime

. ” It also lays out certain p reconditions to initiating arbitration , including
mediation

. T h e Wa seks acknowl edged in the contra c t that they had r eceived a copy of the
declaration two months earlier

. In December of 201 8 ( while construction was still ongo ing ) , 5 th and West adopted an amended d eclaration that rewrote and expanded article 19. T he a m ende d article 19
retained the original definition of “ claim ” but substantially expanded the preconditions to initiating an arbitration.
T he W aseks closed on the condomini u m i n A pril of 201 9 , when the building was complete. They had purchased the unit i n “whit e box ” con dition, meani ng they w ere respon sible
fo r desi gning and constructing the interior. Shortly after beginning work , the Was eks d i scovered
leaks in the unit ’ s curta in wall

. 1 The general contractor determined the leaks were the result o f
de fe ct s in the construction of the wall and repaired the leak s
. The Was ek s sued 5 th and West for fraud and negligent misrepresentation for failing to disclose the leaks prior to closing. 5 th an d West filed a motion to abate and to compel
arbitration

. See i d

. § 171. 021 (a) ( p rovidi ng that courts “ shall order the parties to arbitrate ” upon applicatio n show ing “ an agreement to arbi trate ” )

. S pecifically, 5th and West asked t he court to abate the case and order the parties to “ comply with the dispute resolution p r ocesses and requirements ” r equired by the contract and declaration and to refer all claims to binding

1 According t o the parties, t he curtain wall is t h e exterior wall of the bui lding.3 arbitration. 5th and West attached t o its motion copies of the contract and the amended vers ion
of article 19.
T he Waseks amended their pet ition to add N eedham

— who acted on beha lf of 5 th
and West during the transaction

— as a defendan t . They also alleged that the adoption of th e

am ended condominium declaration was a “ separate and additional fraud ” because it was “ an
at tempt to thwart or effectively preven t the Was eks and other owners from pursuing claims such
as th ose the W aseks pursue here

. ” T h e Waseks also added claims for declaratory relief that (1) the amended version of a rticle 19 does not apply to the Waseks ’ claims , and (2) appellants
should be est op ped fro m arguing they were not resp onsi ble for “ investigating, repairing and

tes ting the leaks in the Waseks ’ curtain wall. ”
A p pellan ts jointl y file d a n amended motion to compel arbitra tion, appending to
the amended motion the pre - amen dment ver sion of a r ticle 19 , among other document s
. T he
Waseks responded that their claims are outsi de the scope of th e agreement and, a lternatively, that the contractual prec onditions to arbitra tion have not been sati s fied

. They also asserted that both
versions of arti cl e 19 are p ro ce du rally and substantively unconscionable and illusory

. Follow ing

an evidentiary hearing , t he district court signed an order den ying appel lants ’ motion without

st ati n g its re asons
. This interloc utory appeal f ollowed.

APPLICABLE LAW AND STA ND A RD OF REV IEW
As a t hreshold matter , we first addre ss the parties ’ dispute over the governing law.
A ppellants argue that the Federal Arbitr ation Act (FAA) , see 9 U.S.C. §§ 1

– 307 , and the Texas
Arbitration Act , s ee Tex. Civ. Prac. & Re m. Code § 171.001

– . 09 8 , both ap ply to th is dispute.
T h e Waseks respond that the FAA does not apply because th e contract does not i nvolve4 interstate commerce
. See Fredericksburg Care Co. v. Perez , 4 61 S.W.3d 513, 517 (Tex. 2015) ( “ The FAA applies to arbit ration clauses in c on t racts t ha t affect interstate commerce. ” ). We
need not resolve this question because no p arty argues that the FAA preempts the TAA on any
issue in this case

. S ee G .T. Leach Builders, LLC v. Sapphire V.P., LP , 458 S.W.3d 502, 51 9 n.1 4 ( T ex. 2015 ) ( e xpla ini ng that “ [t] he TAA is preempted only when it or other state law would not
allo w enforcem ent of an arbitration agreement that the FAA would enfor ce ” and that party seeking to avoid application of TAA has burden of raisi ng that is sue ( cit i ng Ellis v. Schl imm er , 337 S .W.3d 860, 862 (Tex. 2011) ) )

. We therefore presume the TA A appli es, but we find gui dance in court decisions addressing both acts. See id .; Forest Oil Corp. v. McAllen , 268 S.W.3d 51, 56 (Tex. 2008) ( “ Whether a cas e is gov erned by the Federal Arb itration Act (FAA) or the TAA, many of the underlying substantive principles are the same [.] ” ).
A party seeking to compel arbi tration must prove the existence of a valid agreement to arbitrate and tha t the disputed claims a re with i n the scope of that a gree ment. G

. T.
Leach Builders , 458 S.W.3d at 519

. We resolve these questions by applyin g “ common principles of general contract law to determine the parties ’ intent

. ” Id. at 520 n.15 ; see also Wagner v. Apache Corp. , 627 S.W .3d 277, 283 (Tex. 2021) ( “ Ar bitr ation agr eements are on equal footing with other contracts and must be enforced according to their terms. ” ). I f a p arty proves that the di sputed claims are within the scope of a va lid agreement to arbitrate, t he b urden
shi fts to t he op posing party to se t up an af f irmativ e defense to arbitration. Bonsmara Nat. Beef
Co. v. Hart of Te x. Cattl e Feeders , LLC , 603 S.W.3d 385, 397

– 98 (Tex. 2020)

. We review the denial of a motion to compel arbitration for an abuse of discretion,
def errin g t o the trial court ’ s fa ctua l fi n din gs but r eviewing legal questions de n ovo. Henry5 v. Cash Biz, LP , 551 S.W.3d 111 , 115 (Tex. 2018)

. The validity and scope of an arbitratio n agreement are legal questions that we review de novo. Wagne r , 627 S.W.3d at 2 83

.

D ISCUSSION
The partie s join is sue over whether the Waseks ’ claims fall within the scope of the
arbitration agreement and whether the Waseks fai led to estab lish a defense to arbitration.
T he parties do not dispute that the purc hase contract re quire s a rbitration of cert ain
claim s, so “ a ‘ strong pres umption favoring arbitration arises ’ and we resolve doubts as to the agreement ’ s scope in favor of arbitration. ” Rachal v. R eitz , 40 3 S.W. 3d 840, 85 0 (Tex. 2013) (quoting Ellis , 33 7 S.W.3d at 862 )

. W hen det erm in ing whether c laim s fal l within the scope of a n arb itratio n agreement , we look to the factual allegations rather than the lega l claims

. Id. (c iti ng In re Firs tMerit Bank, N.A. , 52 S.W.3d 749, 754 (Tex. 2001) (orig . proceeding) )

. The

“ allegati ons n eed only be factually intertwi ned with arbitrable claims or otherwise touch upon the subject matter of the agreement containing the arbitration provision. ” Dargahi v. Handa , No. 03

- 17

- 00386

- C V, 2017 WL 5247517, at *2 (Tex. App.

— Austin Nov. 8, 2017, n o pet .) (mem. op.) ; see S o uthwinds Express C onstr., LLC v. D.H. Griffin of Te x., Inc. , 51 3 S.W.3d 66, 74 (Te x. App.

— Houston [14th Dis t.] 2016, no pet.)

. The contract requires arb itration of “ claims relating to the design or construction of the units, comm on el eme nts or any improve ment locat ed with in the regime established by t he [condo minium] declaration

. ” The Waseks argue that their clai ms do not relat e to the leaks b ut to appellants ’ alleged nondis closure and the adoption of the amen ded d eclaration . Co urts hav e held
that agreem ents re qui ring ar bi tration of claims “relating to ” a subject are “ extreme ly br oad” and “capable of expansive r each

. ” See Kirby Highland Lakes Surgery Ctr., L.L.P. v. Kirby ,6 183 S.W.3d 891, 898 (T ex. App.

— Austin 2006, no pet.)

. F or ex amp le , in Kirby , we i nterpreted
a clause requiring parties to arbitrate all disputes “relating to ” an agreemen t as covering “ all disputes between the parties having a significant relationship to the contract regardless of the
label attached to the dis pute

. ” Id. ; see Toll Da l l

. TX, LLC v. D using , No. 03

- 18

- 00099

- CV,
2019 WL 212788 5, at *6

– 7 (Tex. App.

— Austin May 16, 2019, no pet.) (mem. op.) (holding that

a g reement requiring arbitration of all claims “related to ” design or con struction of home

“ extend [e d] to all dispute s that ‘ touch ’ mat ters ” cov ered by agreement ). G iven the breadth of the
arbitrat ion clause and the significant fac tual rela tionship between the Waseks ’ claims and the
leaks , we conclude that their claims fall within the scope of the arbi t rati o n claus e
. Neverth e less , t he W a seks in si st that the district court did not abuse its disc retion
because article 19 ’ s prerequi sites to arbitration have not b een satisfied and Texas c our ts

“ consistentl y have upheld denial of arbitration when the [con t ractu al] pre requi sites fo r arbitration
have not been satisfied

. ” Specifically, they contend that it is undisputed that at least one precondition

— th at a claimant in itiate mediation

— has not been satisfied

. Appellan ts respond
that whether the parties must m ediat e is a matte r for th e arbitrator. We agree with appellants. Cour ts generally presume that the parties “ i ntend arbitrators, not courts, to decide disputes about the meaning and applica tion of particular procedural preconditions for the us e of arbitrat ion. ” G .T. Leac h Builde rs , 458 S.W .3d at 521 ( c iting BG Gr p
. , PLC v. Republic of Argentina , 572 U.S. 25, 34

– 35 (2014) )

. These proced ural

matte rs include “ the satisfaction of prerequisites such as time limits, notice, lach es, estoppel, and
other conditi ons p rece dent to an obl iga t i on to arbitra te.” 2 Id

. “ If, howe ver, there is clearly

2 T he Waseks ar gu e that it “do[ es ] not make sense ” to re quire th em to complete cer tain of arti cl e 19 ’s dispute

- resolution procedures , such as a t hird

- party inspection report of the wall7 established proof that a strictly procedural requirement has not been met and tha t procedural requirement precludes arbitration, a court can deny a motion to compel arbitrat ion o n th is
groun d.” Rodr i guez v. Tex as Leaguer Brewing Co. , 586 S.W.3d 423, 430 (Tex. App.

— Houston [14th Dist.] 2019, pet. denied) (citing Amir v. Int ernational Bank of Com

. , 419 S.W.3d 687, 692 (Tex. App.

— Houston [1st Dist .] 2 013, no pet.) ). T h is exc ep ti on is “ rare ” and applies only when

“ ‘n o rationa l mind ’ could qu estion

. . . that the parti es intended for a procedural provision to preclude arbitration [

. ] ” Bonsmara Na t. Beef Co. , 603 S.W.3d at 399 (citing Gen eral
Warehou seme n & Helpers Union Loc

. 7 67 v. Albertson ’ s Distrib

. , Inc. , 331 F.3d 485, 488 (5th
Cir. 2 003) )

. Appellants argue that this case is indistinguishable from Pisces Foods , wher e we upheld a ruling denying a motion to compel arbitration because the parties had not attempte d to med ia t e
. See In re Pisces Foods , L.L.C. , 22 8 S.W.3d 349, 353

– 54 (Tex. App.

— Austin 2007, orig. proceeding )

. T h is Court held tha t the trial court did not abuse its discretion by denying
Pisces ’ s motion to compel because the arbitration agreement “ expressl y re qu ir e [d] mediation as a
preco n dition for requesti ng ar bitration , ” and the re was no evidence that mediation had occurred

. Id. A rticle 19 also contemplates that mediation would occur before ar bitration , but nothing indicates the parties intended to dis pens e wi th arbitration if m ediati o n does not occur fi rst. To the contrary, the contract expressl y re quires compliance with all the dispute resolution procedures set out in article 19 , including arbitration

. S ee In re U.S. Home Corp. , 236 S.W.3d 761 , 764 (Tex. 2007) (orig. proceedi ng ) (r e jecting ma terially i dent ical argument because “ while the

where the leaks were discovered , when there is no dispute that the leaks existed or have been repaire d. We must reje c t this argumen t because nothing in the contract rebuts the presumption that the parties intended the arbitrators to decide the meaning and applicability of these procedures. S ee G .T. Leach Builde rs, LLC v. Sapphire V.P. , 458 S.W.3d 50 2, 521 (T ex. 2015 )

.8 parties ’ agreements clearly contemplated m ediation before arbitration, there is no indication th ey i ntended to dispense with arbitration if mediation did not occur firs t ” )

. 3 We conclude that th e di s trict court erred b y dec iding that the parties ’ failure to mediate precluded arbitration under

a rticle 19

. See id. ; In re R & R Pers

. Specialists of Tyl er, Inc. , 146 S.W .3d 699, 705 (Tex. Ap p.

— Tyler 2004 , orig. proceeding ) ( “ Whether R & R ha s satisfied t h e prerequisites to ar bitra tion and
the e ffec t of any failure to do so are questions for the arbitrator to decide

. ” ).

D efense s We now turn to whether the Waseks carried their burden to estab li sh a defense

to arbitrat ion. T h e Waseks a ssert that article 19 i s illuso ry and th at t he am ended version
is un conscionable

. We first co nsider whether the arbitration agreement was illusory

. Gener ally, a

contract “ is illusory if it does not bind the prom is or , such as when the promisor retains t he op tion
to discontinue p er formance. ” In re 2 4R, I nc. , 324 S.W.3d 564, 567 (Tex. 2010) (o rig. proceeding) (per curiam ) (citing Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding , 289 S.W.3d 844, 849 (Tex. 2009 ) )

. In the arbit ration context, an agree ment “ is illusory if it
b i nd s one party to arbi trate , while allowing the other to choose whether to arbitrate. ” Royston,

3 This case is di stinguishable fro m Pis ces Foods in another respect. T he agreement at issue there required both parties to attempt to mediate dis putes before resorting to arbitration. In re Pisces Foods, L

. L. C. , 228 S.W.3d 349, 3 53

– 54 (Tex. App.

— Austin 200 7, orig. proc ee ding )

. On the ot her h and, a rticle 19 provides that a “[c] laimant may not init iate any proce eding before any administrative tribu nal seeking redress of resolution of its Claim until Claiman t ha s complied with the p rocedures of this article

. ” Article 1 9 de fines “claimant ” as “a ny party having a claim against another party

. ” Thus, 5th and West was not required to initiate mediation when i t had no claim against the Waseks. See In re Oakwood M o bi le Homes, Inc. , 987 S .W.2d 571, 574 (Tex. 1999) (orig. procee di ng ) ( “ It was neve r Oak wood ’ s burden under the Agreement to initiate the arbitration proces s ag ainst itself or assis t the Brandons in doing so. ”) , abrogated on other grounds by In re Halliburton Co. , 80 S .W.3d 566 (Tex. 2002) (orig. proceeding)9 Rayzor, V ickery, & Willia ms, LLP v. Lopez , 467 S.W.3d 494, 505 (Tex. 2015 )

. Even a mutual
ag re em ent to arbitrate “r emains illusory if th e contract permits o n e party to legitima te ly av oid its promise to arbitrate, such as by unilaterally amending or terminating the arbitration provision

a nd completely escaping arbitration. ” Id. ; se e In re Odyss ey H ealthcare, Inc. , 310 S.W.3d 419,
424 (Tex. 2010) ( orig. procee d in g) (per curiam ) ( ex pl ain ing that “ an arbitration clause is not illusory unless one party can avoid its promise to arbitrate by am ending the provision or terminating it altogether ” ). The Wa se ks argu e that the contract is illusory because 5th and West

c o u ld escape its agreeme nt to arbitrate by furthe r amending o r even repealing article 19

. However , the “ mere fact that an arbitration clause is one - sided does not make it illusory. ” See Royston , 467 S .W .3 d at 505

. For examp le, the supreme court has determ i ne d that an ar bitrati on cl ause was not i llusory even though it allowed one party to unilaterally modify the clause with
thir ty days ’ notice

. In re AdvancePCS Health L.P. , 172 S.W.3d 603, 607

– 08 (Tex. 20 05 ) (orig. proceeding). T h e supreme court held that th e clau se was not il lusor y b ecause it required
AdvancePCS to arbitrate claims falling within the thirty

- day window. Id

. ; see In re Hallib urton
Co. , 80 S.W.3d 566, 569

– 70 (Tex. 2002) (orig . proceeding ) ( u ph olding clause that allowed
Hall iburton t o unilat e ra lly amend arbitrati on ru les with ten days ’ notice because amendments did not apply to any claim filed within that period). Similarly, a pp ellant s argue that the agreement is not illusory because a statu te
p rohibits applying the amendments to the Waseks ’ c la im :

An amendment to the declaration tha t modifies or removes the arbitr ation requirement or the process associated with resolution of a c l aim may not apply retroactively to a claim regardi ng the constr uc ti o n or design of units or c ommon elements based o n a n al leged act or om issio n that occurred before the date of th e amendmen t.10 Tex. Prop. Code § 82.120 (b)

. Appel lants concede that Section 8 2.120 applies and requires them

to arbitrate any claims arising be fo re the amendments und er th e original vers ion of a rt icle 19

. The Wasek s res pond that Section 82.1 20 does not appl y be cause thei r c laims are based in part on
fa cts which occurred after the adoption of the amendments. But the Waseks base their cla ims

on o mi ssions that began prior to the adoption of the a m en de d declaration

— the fail ure
to disclosure the leaks

— and conti nued afte rwards, and on the adoptio n itself

. Applying the plain language of th e statute, we conclude that it applies to the Waseks ’ claims

. S ee D avis v. Morath , 624 S.W.3d 215 , 222 (Tex. 202 1 ) ( “ We must apply sta tutes as written and refrain from rewriting
text that lawmakers chose.” ). We conclude that the arbitration agreement is not illuso ry because
Section 82.120 pr ohibits appellants from es ca pi ng their obligation to arbitrate clai ms entir e ly

. S

ee AdvancePCS , 172 S .W.3d at 607

– 08 ; Halliburto n Co. , 80 S.W.3d at 569

– 70

. 4 Next, the Waseks argue that the amend ed article 19 is invali d because it is
substantive ly and procedurally u nconscionable. Se e Ro yston , 467 S.W.3d at 499 ( “ Arbitration
ag re e me nts may be ei ther s ubsta ntively or procedurally unconscionable, or both. ”). A p pellants
have conceded that the amend ed declaration does not apply to the W a seks ’ cla im s , and the
Waseks do not make the same c la im regarding the original version of article 1 9. Because the

a mend ments are not applicable to the present dispute , it is unnecessary for us to decide whether
the amendments are un conscion able

. See Tex. R. App. P. 47.1 ( requiring courts of appeals to

4 Relying on In re Datamark, Inc. , 296 S.W.3d 614 (Tex. App.

— El Paso 2009, orig. proceeding ) , t he Waseks argue that “[n] otice of an amendment of an arbitra tion provision and an opportunity to enforce the arbit r a ti on provision before the amendment goes into effect al so are required in orde r for th e arbitration provision not to be illusory. ” T he arbitration provision at issue there allowed Datamark to unil aterally mod ify the arbitration at any time without notic e
. Id. at 617

– 1 8

. This meant that Datamark could avoid ar bitrating any di sp ute by amending th e arbitration provision before an employee request ed arbitration. Id. at 618. Datamark does not assist the Waseks because Section 82.120 of the Property Code p r o hi bit s 5 th and West from avoiding arbitration in the sa me manner.11 wr it e opinion “ that addresses every iss ue rais ed a nd necessary to final disp osition of the appeal ” )

. Cf. In re Poly

- Am., L.P. , 262 S.W.3d 337, 359 (Tex. 2008) (orig. proceeding) (declining to decide whether arbitration agreement that shortened statute of li mi t a tions was
unconscionabl e when claimant file d c laim w ithin that s h orten ed period ). After reviewing the record, we conclude that appel lants prove d the existence of an
arbitration agreemen t , that the Waseks ’ claims fall within its scope , and that the W a s e ks failed to carry their burden to establish an af firmat ive def ense. We s ustain appellants ’ issue on appeal

.

C O NCLUSION
We rev erse the order denying appellants ’ motion to compel arbit ration and
remand for further proceedings consistent with this opin io n
. See Tex. Civ. Prac. & Rem. Code § 171.025 ; Te x
. R. App . P. 43 .2( d).

___ ______________ _________________________ Edwa rd Smith , Justic e Be fore C h i ef Justice Byrne , Justice s Baker and Smith
Reve r se d an d R e man ded
Fi led: January 7, 2022