DAN MORALES

ATTORSEY GENERAL 

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### .&date ofQexae
June 17,1992 Honorable Carl A.Parker Chairman Subcommittee on Insurance Texas State Senate P.0. Box 12068 Austin, Texas 78711 Opinion No.DM-127
Re: Whether V.T.C.S. article 224 et seq., the Texas general arbitration statute, violates article I, section 13of the Texas Constitution, the open courts amendment (RQ-199)
Dear Senator Parker:
You have requested our opinion as to whether V.T.C.S. article 224 et seq., the Texas general arbitration statute, violates article I, section 13 of the Texas Constitution, the “open courts” provision. Article 224, first enacted in 1965, provides:
A written agreement to submit any existing controversy to

arbitration or a provision in a written contract to submit to arbitration any controversy thereafter arising between the parties is valid, enforceable and irrevocable, save upon such grounds as exist at law or in equity for the revocation of any contract. A court shall refuse to enforce an agreement or contract to submit a controversy to arbitration ifthe court finds it wasunconscionable at the time the agreement or contract was made. Provided, however, that none of the provisions of this Act shall apply to: (a) any collective bargaining agreement between an employer and a labor union: (b) any contract for the acquisition by an individual person or persons (as distinguished from a corporation, trust, partnership, association, or other legal entity) of real or personal property, or services, or money or credit where the total consideration therefor to be paid or furnished by the individual

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is SSO,OOO

or less, unless said individual and the other party or parties agree inwriting to submit to arbitration and suchwritten agreement is signed by the parties to such agreement and their attorneys; (c) any claim for personal injury except upon the advice of counsel to both parties as evidenced by a written agreement signed by counsel for both parties. A claim for workers’ compensation shall n&tbe submitted to arbitration under this Act. With certain exceptions, the statute declares a prior written agreement to arbitrate to be “valid, enforceable and irrevocable,” except where the agreement itself is tainted, for example, by fraud, partiality on the part ofthe arbitrator, absence of an effective arbitration agreement,’ orunconscionability. Article I, section 13ofthe Texas Constitution provides inpart: All courts shaIl be open, and every person for an injury done him, inhis lands, goods,person or reputation, shall have remedy by due course oflaw.
The Texas Supreme Court has indicated that establishing an “open courts”violation requires compliance with a two-pronged test. First, the litigant “must show that he has a well-recognized common-law cause of action ,$at is being restricted.” In addition, “he must show that the restriction is unreasonable or arbitrary when balanced against the purpose . ..of the statute.” Momw v. SterlingDmg, Inc, 787 s.w.2d 348,355 (Tex 1990). InitiaIiy, we note that every legislative act carries with it a presumption of COllStitUtiOMIity.

It is to be presumed that the Legislature has not acted unreasonably or arbitrarily; and a mere difference of opinion, where reasonable minds could differ, isnot a sutEcient basis for striking downlegislation as arbitrary or unreasonable.

%‘.T.C.S.art.237.

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Saxv. Votteler,648 S.W.2d 661,664 (Tex. 1983)(quoting Smithv.Davir,426 S.W.2d 827,831 (Tex. 1968)). Article J,section 13“prohibits legislative bodies from arbitrarily withdrawing all legal remedies from one having a cause of action well established and well defined in the common law.” Canilb v. Hidalgo County WaterDirt. No. I, IT1 S.W.2d 633, 636 (Tex. App.-Corpus Christi 1989,no writ). The clause “does not, however, apply to a statutory cause of action which expands the rights of an individual beyond those granted bythe common law.” Id Many of the causes of action covered by article 224, et seq., are stafuto~ rather than common-law causes of action, and therefore fall outside the ambit of article I, section 13. See.e.g.,Bus. & Com. Code 0 17.41et seq., (Deceptive Trade Practices -Consumer Protection Act); Ins. Code arts. 21.21 (Unfair Competition and Unfair Practices), 21.21-2 (Unfair Claim Settlement Practices Act). Furthermore, article 224,efseq.,does not itselfdeprive alitigant ofa remedy for any wrong he has suffered. Eather, it &nitshis choice ofremedy to one that he himself has pre-selected. Even in those instances in which arbitration is mandatory, an aggrieved party may still bring a cause of action to show that the arbitration agreement itself is tarnished by fraud, unconscionability, or invalidity. To the extent, however, that article 224,et seq., does impose restrictions on the commonlawright to litigate those disputes which cominue to be covered by article J, section 13, we do not believe that a court would find that those restrictions are either nnreasonable or arbitrary. Although the Texas general arbitration act has been in effect since 1965, common-law arbitration continues to exist in this state. L. H. Lay Co. v. Ci@ of Lubbock, 559 S.W.2d 34&3Sl-52 (Tex. 1977). Prior to L H. Lacy Company, “the Texas common law rule was that either party could revoke the agreement to arbitrate at any time” prior to the actual award WZieIndq~. School Disk v. TMC Found, Inc, 770 S.WZd 19, 21 (Tex. App.-Dallas 1989, writ dism’dw.0.j.). In L. H. Lucy Company,thecourt,whilefindingit unnecessary to actually overturn the common-Iaw rule, made clear that it bad no future in Texas. BVie Independent School D&&t, 770 S.W.2d at 21. Chief Justice Greenhill took the opportunity to extol the virtues ofarbitration:

Under the traditional common law, courts have refused specific enforcement to agreements to arbitrate @ruz disputes. [Emphasis in original.] Either party to an executory agreement

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providing for arbitration offuture disputes has been allowed to revoke the agreement at any time before the arbitration proceeding resulted in an award. The only penalty for such revocation consisted of damages, if any, for breach of contract..
..The rationale behind these rules rested on a “public policy” argument against allowing private persons to oust the courts oftheir jurisdiction to determine the rights and liabilities ofparties to a contract. This notion was a result ofearly English precedent which was transferred to the United States and to Texas through our adoption of the common law. The doctrine has long since been abandoned in England by case law and by statute, and an increasing number of American jurisdictions have rejected the rationale by adopting modem and comprehensive arbitration statutes.
.. .The doarine ws evolved in~e~whencourtcongestionwarnotamajorp~b~aritir today,and in modem tbnes a policy encowtzgbag agteements to arbitrate isp@kmbk In additiontoalkvk&g some meavue of rhebwdenonthecourtr,arbitmtioninacommercialcontextisa valuabletoolwhich

piwides buiness people, and allulizem, with greata jlexibility, efficient, and privaq....While it is unnecessary in this case to alter common law arbitration rules, the policy of refusing specific enforcement to executory arbitration agreements isnotjustifiable wherithe case fitswithin the common mold
L H. Lucy Compwy, 559 S.W.2.dat 352(emphasis added, footnotes omitted ).2

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suggesting that the easy revocation of arbitration agreements under common law wasbased on an outmoded idea ofpublic policy. When such sentiments are coupled with the presumption ofconstitutionality which every statute commands, webelieve that it is even more clear that the court would find that article 224,erseq., does not impose any restrictions upon a litigant’s right to judicial redress which are
“unreasonable or arbitrary when balanced against the purpose of the statute.” Accordingly, we conclude that article 224, er seq., does not contravene article I, section 13ofthe Texas Constitution. 

### SUMMARY V.T.C.S. article 224 et seq., the Texas general arbitration statute, does not contravene article I, section 13 of the Texas Constitution, the “opencourts”provision.

DAN MORALES Attorney General ofTexas
WILLPRYOR First Assistant Attorney General
MARYKELLER Deputy Assistant Attorney General
RENEAHIcKs Special Assistant Attorney General
MADELEINE B.JOHNSON Chair, Opinion Committee Prepared byRick Gilpin Assistant Attorney General

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