Opinion filed April 30, 2015

In The

Eleventh Court of Appeals 

__________

No. 11-11-00093-CV

__________

VENTURE COTTON COOPERATIVE AND

NOBLE AMERICAS CORP., Appellants

V.

SHELBY ALAN FREEMAN ET AL., Appellees

On Appeal from the 106th District Court

Gaines County, Texas

Trial Court Cause Nos. 11-02-16176 & 11-02-16184

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

This is a consolidated interlocutory appeal of the trial court’s orders in 

which it denied Venture Cotton Cooperative’s and Noble Americas Corp.’s 

motions to compel arbitration under the Federal Arbitration Act (FAA). See 9 

U.S.C. §§ 1–16; TEX. CIV. PRAC. & REM. CODE ANN. § 51.016 (West Supp. 2015).

We reverse and remand.

Venture is a cotton cooperative-marketing association managed by Noble. 

Appellees are a group of twenty-eight cotton farmers who each contracted to sell 

cotton to Venture. In the trial court, there were two separate suits. Two farmers 

were plaintiffs in one suit, and the twenty-six other farmers were plaintiffs in 
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another suit. Appellees sued Appellants, as well as the cotton gin that acted as 

Appellees’ agent when Appellees entered into the contracts, and asserted several 

causes of action, including claims such as fraud, negligent misrepresentation, and 

breach of fiduciary duty. Appellants filed a motion to compel arbitration in each 

case based on the mandatory arbitration agreement contained in the contracts. The 

trial court found that the arbitration agreement was unconscionable, and it denied 

Appellants’ motions to compel arbitration.

In a single issue, Appellants argued that the trial court erred when it found 

that the arbitration agreement was unconscionable and, thus, unenforceable. 

Specifically, Appellants challenged Appellees’ arguments that the agreement was 

procedurally unconscionable on one ground and substantively unconscionable on 

three grounds. In a footnote, Appellants also challenged Appellees’ argument, to 

the extent that Appellees raised it, that the agreement was substantively

unconscionable because of a conflict of interest or favorable bias present between 

Appellants and the arbitration committee. Appellants also addressed the issue of 

whether the underlying controversies were within the scope of an arbitration 

agreement governed by the FAA; however, Appellees did not dispute that issue.

We initially affirmed the orders in which the trial court denied Appellants’ 

motions to compel. See Venture Cotton Coop. v. Freeman, 395 S.W.3d 272 (Tex. 

App.—Eastland 2013), rev’d, 435 S.W.3d 222 (Tex. 2014) (Venture Cotton I). In 

that opinion, based on the arguments in the parties’ briefs, we set out five 

arguments1that Appellees raised in the trial court and that Appellants challenged

on appeal as to whether the agreement was substantively unconscionable. Id. at 

274–75. We held that the arbitration agreement was substantively unconscionable 

 

1We note that Appellants raised four challenges to Appellees’ arguments that the agreement was 

substantively unconscionable. We divided one of those challenges into two, creating a total of five 

arguments regarding whether the agreement was substantively unconscionable. It was on the one ground 

that we divided into two that we initially affirmed the trial court’s orders.
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on two of the five grounds raised by Appellees. Id. at 274–76. We did not reach 

the other three grounds raised by Appellees in the trial court and challenged by 

Appellants on appeal, nor did we reach the argument regarding procedural 

unconscionability. Id. at 277. Because Appellees did not dispute that the 

underlying controversies fell within the arbitration agreement, we also declined to 

address that issue, and we assumed without deciding that the claims fell within the 

agreement’s scope. Id. at 274. The two grounds that we found to be 

unconscionable were that certain provisions in the arbitration agreement and in the 

American Cotton Shippers Association’s (ACSA) rules prevented Appellees from 

recovering statutory remedies under the Deceptive Trade Practices–Consumer 

Protection Act, TEX. BUS. & COM. CODE ANN. §§ 17.41–17.63 (West 2011 & 

Supp. 2014), and from recovering attorney’s fees under TEX. CIV. PRAC. & REM.

CODE ANN. § 38.001 (West 2015). Id. at 274–76. We also held that the trial court 

did not err when it did not sever the unconscionable terms from the agreement 

because Appellants never asked the trial court to sever the terms. Id. at 277. 

Therefore, we held that Appellants waived that argument. Id. 

After it granted Appellants’ petition for review, the Supreme Court of Texas

concluded that the limitation on the recovery of statutory remedies and attorney’s 

fees that we held to be unconscionable was insufficient to defeat arbitration under 

the FAA. Venture Cotton Coop. v. Freeman, 435 S.W.3d 222, 225, 233 (Tex. 

2014) (Venture Cotton II). The court opined that Appellees did not contractually 

waive the DTPA remedies at issue and that, as such, any implied waiver under the 

ACSA rules was “contrary to public policy and therefore invalid.” Id. at 230. In 

addition, the court held that we erred when we declined to consider the severability 

issue even though Appellants did not present the issue to the trial court. Id. at 230. 

The court reasoned that, because “this is an interlocutory appeal, and the case 

remains pending in the trial court,” Appellants could raise the severability 
4

argument when the case was again before the trial court. Id. “Conservation of 

time and resources recommend that we consider the issue now because nothing 

prevents Venture from urging severance in the trial court and, if denied, from 

renewing its complaint in yet another interlocutory appeal.” Id. The court 

concluded that the limitation upon recovery of statutory rights and remedies under 

the DTPA was not an essential purpose of the agreement and that we erred when 

we “declin[ed] to sever the objectionable limitation on the farmers’ statutory 

rights.” Id. at 230–31 (relying on In re Poly-America, L.P., 262 S.W.3d 337, 360 

(Tex. 2008) (orig. proceeding)). Therefore, we now sever the following provision 

from the ACSA rules: “The awards shall be limited to the monetary damages 

arising out of the failure of either party to perform its obligations pursuant to the 

contract as determined by the Arbitration Committee and shall not include 

attorney’s fees unless provided for in the contract.”

With regard to attorney’s fees, the court concluded “that neither the 

contract’s attorney’s fee provision nor its effect on attorney’s fees under 

Section 38.001 is sufficient to invalidate the arbitration agreement as 

unconscionable.” Id. at 231. The court explained that “a contract that expressly 

provides for one party’s attorney’s fees, but not another’s, is not unconscionable 

per se”; “the attorney’s fee provision here is not, standing alone, decisive proof of 

an unconscionable bargain.” Id.

In this court originally, Appellants argued that Appellees had contractually 

waived their right to recover attorney’s fees and that, because they had, they could 

not recover attorney’s fees under Section 38.001. However, we disagreed and held 

that waivers must be specific in order to be effective. Venture Cotton I, 395 

S.W.3d at 276 (citing Tex. Nat’l Bank v. Sandia Mortg. Corp., 872 F.2d 692, 701 

(5th Cir. 1989)). Because there was no specific waiver of attorney’s fees under 
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Section 38.001, we concluded that Appellees had not waived their rights to 

attorney’s fees under Section 38.001. Id.

On appeal from our earlier decision, the supreme court wrote: “[T]he court 

of appeals itself concludes that the arbitration agreement did not waive the 

farmers’ statutory right to attorney’s fees under section 38.001 and so its relevancy 

to the court’s unconscionability analysis is unclear.” Venture Cotton II, 435 

S.W.3d at 231. The supreme court then concluded that because we had found that,

no harm had been visited upon Appellees, the agreement to arbitrate was not 

unconscionable. Id. at 232.

We concede that we inartfully chose our words in Venture Cotton I; we did 

not intend to convey the idea that Appellees were not harmed. We felt that the 

harm was found in the fact that Appellees could not recover attorney’s fees under 

Section 38.001 even though they had not waived them. That is because of the 

following provisions in the ACSA rules and the arbitration agreement: “[A]wards 

shall be limited to the monetary damages arising out of the failure of either party to 

perform its obligations pursuant to the contract . . . and shall not include attorney’s 

fees unless provided for in the contract,” and “[i]n the event of breach of this 

Agreement by [Appellees], [Appellees] agree[] to pay all arbitration and court 

costs, if any, and the reasonable attorney’s fees and litigation and arbitration 

expenses of Venture.” By those provisions, Appellees could not recover 

attorney’s fees even if they were otherwise entitled to them. The ACSA provision 

has now been severed from the remaining provisions of the ACSA rules.

The supreme court indicated in its opinion that it was premature for us to 

consider whether these provisions that limited the recovery of Appellees’ 

attorney’s fees were unenforceable, and it instructed that such determinations 

should be entrusted to the arbitrator. Id. at 232–33; see also, G.T. Leach Builders, 

LLC v. Sapphire V.P., LP, No. 13-0497, 2015 WL 1288373, at *11–12 (Tex. 
6

Mar. 20, 2015) (not yet released for publication) (holding that whether arbitration 

agreement limits rights under the agreement itself is an issue of procedural 

arbitrability and is for the arbitrators to decide). As instructed, we will leave that

determination to the arbitration committee. 

The supreme court reversed the judgment of this court, and it remanded the 

case for us to consider the remaining arguments on the issue of unconscionability. 

Id. at 225. Therefore, we must first address whether the other three grounds of 

unconscionability raised by Appellees in the trial court and challenged by 

Appellants on appeal were in fact substantively unconscionable.

The other three grounds of unconscionability that we did not reach in our 

first opinion are as follows: (1) whether the ACSA rules provided an arbitration 

forum that was cost prohibitive due to fee shifting and excessive costs; (2) whether 

the rules limited Appellees’ right to discovery; and (3) whether there was a conflict 

of interest between Appellants and the ACSA. “[T]he basic test for 

unconscionability is whether, given the parties’ general commercial background 

and the commercial needs of the particular trade or case, the clause involved is so 

one-sided that it is unconscionable under the circumstances existing when the 

parties made the contract.” In re FirstMerit Bank, N.A., 52 S.W.3d 749, 757 (Tex. 

2001) (orig. proceeding). “Unconscionability is to be determined in light of a 

variety of factors, which aim to prevent oppression and unfair surprise; in general, 

a contract will be found unconscionable if it is grossly one-sided.” Poly-America, 

262 S.W.3d at 348. 

As to Appellees’ argument that the ACSA rules provided an arbitration 

forum that was cost prohibitive, Appellants argue that Appellees failed to establish 

that they would incur excessive arbitration costs and that such costs would deter 

Appellees from pursuing their claims against Appellants. We agree that Appellees 

failed to meet their requisite burden of proof. “[E]xcessive costs imposed by an 
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arbitration agreement render a contract unconscionable if the costs prevent a 

litigant from effectively vindicating his or her rights in the arbitral forum.” In re 

Olshan Found. Repair Co., LLC, 328 S.W.3d 883, 893 (Tex. 2010) (orig. 

proceeding) (citing Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 90 

(2000)). The party that opposes arbitration has the burden of proof. Id. It is not 

sufficient for the party to show that it is at risk of incurring excessive fees and 

costs. Poly-America, 262 S.W.3d at 356 (“the ‘risk’ that [a claimant] will be 

saddled with prohibitive costs is too speculative to justify the invalidation of an 

arbitration agreement”) (alteration in original) (quoting Green Tree, 531 U.S. at

91) (internal quotation marks omitted). The complaining party must present “some 

evidence that [it] will likely incur arbitration costs in such an amount as to deter 

enforcement of statutory rights in the arbitral forum.” Id. (citing In re U.S. Home 

Corp., 236 S.W.3d 761, 764 (Tex. 2007); FirstMerit Bank, 52 S.W.3d at 756–57)). 

Such evidence may be shown “through invoices, expert testimony, reliable cost 

estimates, or other comparable evidence.” Olshan, 328 S.W.3d at 895.

To determine whether an arbitral forum is an adequate substitute to litigation 

on the basis of costs, we analyze three factors: (1) the claimant’s ability to pay the 

arbitration fees and costs, (2) the expected cost differential between arbitration and 

litigation and whether that differential is so substantial that it deters the claimant 

from bringing its claims, and (3) the actual cost of arbitration compared to the total

amount of damages that the claimant is seeking. Id. at 893–95. “[A] comparison 

of the total costs of the two forums is the most important factor in determining 

whether the arbitral forum is an adequate and accessible substitute to litigation.” 

Id. at 894–95. At the hearing on the motions to compel arbitration, Appellees 

presented general testimony about how the arbitral forum was cost prohibitive in 

comparison to litigation. Robert Perry Brewer, one of the Appellees, testified that, 

based on his reading of Appellants’ arbitration demand letter and the arbitration 
8

rules, he would have to pay all arbitration costs, court costs, and attorney’s fees.

Shelby Alan Freeman, another Appellee, testified that he agreed with Brewer’s 

testimony and understanding of the arbitration rules. Although Freeman testified 

that he did not know the exact amount of what the arbitration costs would be, he 

agreed that it would easily be in the tens of thousands of dollars and that he could 

not afford to pay those expenses. Freeman further testified about the potential for 

Appellees to have to be away from their farms during the critical planting season; 

he explained that one could not put a dollar amount on that cost. David Bergen, 

another Appellee, also testified that he could not afford to go to arbitration. Out of 

the twenty-eight Appellees, Brewer, Freeman, and Bergen were the only three that 

testified that they could not afford the costs of arbitration; however, none of the 

three testified at the hearing as to what specific cost amounts they would incur if 

they were subject to arbitration under the ACSA rules.

Appellees attached an affidavit by Brewer to their post-hearing brief in 

which Brewer provided detailed cost estimates for fees and travel for Appellees 

and the arbitrators. Brewer calculated that the cost of arbitration would be 

$167,314, without an appeal, and that the cost of trial—a filing fee and a jury fee—

would be $265. However, Appellants objected to, and the trial court struck, 

Brewer’s affidavit. Thus, we cannot consider this evidence in our review of 

whether Appellees presented sufficient evidence to show that they would incur 

arbitration costs in such an amount as to deter them from pursuing their claims in 

the arbitral forum. 

Although none of Appellees testified as to the specific fees imposed under 

the ACSA rules, the rules were admitted into evidence, and the rules provide for 

what expenses the parties must bear. The rules require that the party that requests 

arbitration must submit an arbitration service fee in the amount of one-half of one 

percent of the amount claimed for damages along with the party’s complaint.
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ACSA members must pay a minimum of $1,000 and a maximum of $3,000. 

Nonmembers must pay a minimum of $5,000; no maximum amount is specified. It 

is undisputed that Appellants are members of the ACSA and that Appellees are 

nonmembers. Appellees argue that, for just two of the farmers, the filing fee of 

one-half of one percent of their $6,771,270 claim is $33,856.35. However, 

Appellants have already filed a complaint against Appellees and paid the required 

service fee. Under the rules, Appellees are permitted “to file a cross-complaint, 

counterclaim, or offset, arising out of the same transaction upon which the 

complaint is based.” The rules do not address whether the party that files a crosscomplaint, counterclaim, or offset must also submit a fee with its filing as is the 

case when a party files a complaint. Therefore, based on our review of the rules 

and the testimony Appellees presented at the hearing, Appellees have not shown 

that they will likely incur such an exorbitant filing fee.

In addition to the filing fees, the rules also provide that “an amount may be 

required to compensate the arbitrators for their time and reimburse them for 

expenses (including travel and legal counsel), if any” (emphasis added). This 

additional amount is paid equally by the parties. “Unless it demonstrates by 

affidavit and proof satisfactory to the arbitrators that it is unable to pay its share of 

fees and expenses, a party refusing to pay its share of fees or expenses shall forfeit

its right to appear and be heard.” This section of the rules provides nothing but 

speculation as to whether Appellees will incur any costs related to the arbitrators’ 

time and expenses. Furthermore, even if Appellees were required to pay these 

extra costs, the rules provide an opportunity for Appellees to show that they could 

not afford to pay such costs and, thus, could avoid the additional costs altogether.

Appellees also raised a concern regarding the costs associated with 

requesting a hearing before the arbitration panel. The ACSA rules provide that the 

party requesting the hearing must pay the additional expenses of the hearing, 
10

including the expense to make the record and the travel expenses of the arbitrators, 

the executive vice president, and legal counsel for the ACSA. Nonmembers must 

advance the amount that the arbitrators determine is necessary to cover such 

expense. If both parties request a hearing, “the amount to be paid by each in 

advance shall not exceed one-half of the estimated amount.” “Failure to advance 

expenses may be grounds for denying a request for an oral hearing or rendering the 

noncomplying party in default.” Parties are refunded any money paid in excess of 

the actual expense of the hearing. While it appears that Appellees would have to 

advance the full estimated cost of the hearing if they were the only party to request 

a hearing, the rules provide that Appellees could be awarded those fees in the 

arbitrators’ decision.

The rules further provide that an oral hearing, if requested, shall be held in 

Memphis, Tennessee. Thus, Appellees also argue that they would have to pay for 

themselves—twenty-eight farmers—to travel to and stay in Memphis, which 

would “easily run into the tens of thousands of dollars.” Appellants assert that 

Appellees can request the hearing to be held in Houston, Texas, instead of in 

Memphis. The arbitration agreement provides that “[t]he site of the arbitration 

shall be either Houston, Texas or Memphis, Tennessee, as chosen by Venture, 

unless otherwise directed by the arbitrator(s).” Brewer testified that the rules, 

based on his understanding, required that the hearing would be conducted in 

Memphis. Although the arbitration agreement provides that Venture may choose 

the “site of the arbitration,” the rules expressly provide that oral hearings shall be 

held in Memphis. Thus, based on the rules, it does not appear that Appellees can 

request the hearing to be held in Houston. As we discussed earlier, although 

Brewer testified by affidavit regarding detailed estimates of the costs for all 

twenty-eight farmers to travel to Memphis, the trial court struck Brewer’s affidavit,

and we cannot consider it as evidence in our review. Appellees have not presented 
11

any other specific evidence as to the costs associated with traveling to Memphis. 

Furthermore, it is not known whether a hearing will even be necessary in the 

arbitral forum, nor is it known whether all twenty-eight farmers would actually 

attend the hearing, considering the fact that only three of the farmers testified at the 

hearing on the motions to compel arbitration. We do not believe that Appellees 

have sufficiently shown that the potential cost of a possible arbitration hearing is so 

great as to deter them from filing their cross-claims in the arbitral forum.

The ACSA rules also contain provisions relating to appellate costs. A party 

who wishes to appeal the arbitrators’ decision must pay an appellate fee equal to 

the filing fee, with a minimum fee of $1,000 and a maximum fee of $3,000. The 

appealing party must also send a certified check for the amount of the arbitrators’ 

award, payable to the adverse party. The rules require the executive vice president 

to hold the check while the appeal is pending. Nonmembers who request oral 

argument on appeal must also pay for the estimated appellate hearing expenses in 

advance. As with the other cost provisions that we have evaluated, this one is also 

speculative. If the arbitrators grant Appellees the relief that they seek, there will be 

no reason for Appellees to incur any appellate costs.

Likewise, Appellees’ argument that the arbitration agreement provides that 

they must pay all arbitration expenses and attorney’s fees is without merit. While

it is true that the agreement provides that Appellees agreed “to pay all arbitration 

and court costs, if any, and the reasonable attorney’s fees and litigation and 

arbitration expenses of Venture,” the agreement only requires Appellees to pay 

such costs and attorney’s fees if they breached their contracts with Venture. If the 

arbitrators do not find that Appellees breached their contracts with Venture, 

Appellees will not be required to pay all of Venture’s costs under this provision. 

Moreover, the rules provide that “[t]he arbitrators may, in their decision and award, 

provide for payment by one party to the other of all or any part of fees and 
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expenses incurred.” Therefore, if Appellees are successful in their claims against 

Appellants, Appellees may ultimately bear no cost at all in the arbitral forum.

As to evidence of litigation costs, the only mention of litigation costs during 

the hearing on the motions to compel came when Freeman’s attorney questioned

him as to whether he had been asked to pay for an attorney for the district judge or 

for the judge’s travel, meals, expenses, or time. Freeman testified that he had not 

been asked to pay for those things and that, if he had, it would be tough for him to 

pay those costs. Thus, Appellees also failed to present, during the hearing on the 

motions to compel arbitration, any specific evidence regarding the cost of 

litigation. As we have previously discussed, we cannot consider Brewer’s affidavit 

in which Brewer testified that the cost of litigation would be $265.

Because Appellees failed to present any evidence of the cost of litigation and 

because the evidence regarding the cost of arbitration was speculative, we cannot 

compare the total costs of the two forums. Therefore, we conclude that Appellees 

did not present sufficient evidence to show that arbitration of their claims would be 

unconscionable on the ground that the arbitral forum was cost prohibitive. See 

Olshan, 328 S.W.3d at 897, 899.

The next argument that we must consider is whether the arbitration 

agreement is substantively unconscionable because the ACSA rules limit 

Appellees’ right to discovery. We look to whether the agreement imposes 

discovery limitations that would prevent a party from effectively presenting its

claims. Poly-America, 262 S.W.3d at 358. Here, however, the rules do not 

expressly limit Appellees’ right to discovery. The rules provide that “[t]he scope 

of discovery in any matter submitted pursuant to these rules shall be subject to the 

discretion of the arbitrators.” Appellees argue that, although discovery is at the 

discretion of the arbitration panel, there is no time allowed for discovery under the 

rules because the rules also require the panel to act promptly and to make a report 
13

within thirty days of receiving the final papers from the executive vice president. 

Although the rules do not specify when and how discovery is permitted, we 

assume that the arbitrators can allow for discovery and extend the deadline of when 

the final papers are due if necessary. One of the specific concerns raised at the 

hearing on the motions to compel was that, if the parties had to submit to 

arbitration, the pleading deadline in the arbitral forum would expire before the 

federal government completed its yearly documentation of the amount that each 

farm produced. Because several years have elapsed since the initial hearing on the 

motions to compel, we assume that this specific concern is now moot.

Appellees also argue that no procedures exist under the rules that permit

witnesses to testify or that allow a party to cross-examine the opposing party’s

witnesses. While this is true, the rules are silent as to whether testimony is 

permitted at a requested hearing; thus, it is equally true to state that the rules do not

prohibit witnesses from testifying or from being cross-examined.

Appellees further assert that Appellants’ course of conduct was unconscionable when Appellants demanded that some farmers, who fully delivered 

the bales of cotton that they produced, be sent to arbitration. For example, Bergen 

testified that he fully delivered all the bales of cotton that he produced, yet he still 

received an arbitration demand letter. Bergen further testified that, without a right 

to discovery in the arbitral forum, he was worried that he would have to fight a 

claim that Appellants had not even tried to substantiate. Appellees contend that, if 

those farmers, such as Bergen, were allowed to proceed in the trial court instead of 

being sent to arbitration, they could file a motion for summary judgment and defeat 

Appellants’ claim that they breached the contract. While we agree that Appellants 

should not succeed on their breach of contract claims until they prove that 

Appellees did not deliver the bales of cotton as required under the contract, we do 

not believe that the arbitrators will rule in favor of Appellants without such proof. 
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The rules provide that “[p]arties to the arbitration are responsible for clearly 

presenting all aspects of their case (the Executive Vice President and the 

Arbitration panel are not responsible for undertaking fact-finding searches or 

discovery).” There is no provision in the rules that allows Appellants to succeed 

on any claim before the arbitrators without presenting sufficient evidence to prove 

such claim. We also note that, while the rules state that the arbitration panel is 

“not responsible for undertaking fact-finding searches or discovery,” the same is 

true for a trial court or jury. While the trial court or jury is responsible for finding 

facts based on the evidence presented, the factfinder is not responsible for 

discovering facts.

At this juncture, Appellees have not shown that their right to discovery will 

be limited in any way in the arbitral forum. Thus, until an arbitrator actually 

denies Appellees’ requests for discovery, it is only speculative that Appellees’ 

right to discovery will be limited. Therefore, Appellees’ argument does not 

support their claim that the arbitration agreement is substantively unconscionable.

The third argument that Appellees raised in the trial court and that 

Appellants challenge on appeal, as to whether the agreement was substantively 

unconscionable, deals with Appellants’ relationship with the ACSA. Appellees 

contended that a conflict of interest existed between Appellants and the ACSA

because the manager of Noble, one of the Appellants, was also on the ACSA’s 

board of directors and because Appellants’ legal counsel was also legal counsel for 

the ACSA. However, according to the ACSA’s rules, it does not appear that any 

one director on the board plays a vital role in the arbitration process. The 

executive vice president and the president have active roles in the selection process 

in that the executive vice president selects the three arbitrators to hear a case and 

the president approves the selection. Arbitrators are “selected from the 

membership, retired members, or from a roster of qualified arbitrators approved by 
15

the Board of Directors.” Thus, it is possible that the arbitrators that are selected by 

the executive vice president to hear this case will come from a list of arbitrators 

that Noble’s manager, as one of the directors on the board, approved. However, 

the rules also provide that, “[t]o qualify as an arbitrator, a member should be 

commercially disinterested with respect to the particular dispute intended to be

presented to him for judgment.” A selected arbitrator must also disclose “any 

circumstances likely to affect his or her impartiality, including any bias or any 

financial or personal interest in the result of the arbitration.” Such arbitrator shall 

be replaced if either party requests replacement. Furthermore, “either party to the 

case may challenge the appointment of [an arbitrator] for prejudicial or other 

causes.” And, if the challenge is determined to be valid, the executive vice

president is to replace the arbitrator. Parties may also challenge the appointment of 

an arbitrator in an appeal of the initial award.

Appellees argue that their ability to object to appointed arbitrators is a 

“hollow and worthless right because disqualification simply leads to an endless 

procession of ACSA cotton merchant members” who will “benefit from arbitration 

rulings that favor member cotton merchants in disputes with non-member cotton 

producers.” Appellees do not argue whether unbiased arbitrators can, in general, 

be found. Instead, they argue whether, under the rules in this case, unbiased 

arbitrators will be found. However, according to the rules, arbitrators are not 

necessarily members or retired members of the ACSA. They may also be selected 

“from a roster of qualified arbitrators approved by the Board of Directors.” 

While it is possible that the arbitral forum will be biased because one of the 

Appellants serves on the board of directors for the ACSA and because he or she

might play a role in approving a biased arbitrator that is not replaced upon request, 

it is simply that—a mere possibility. Until Appellees are denied access to unbiased 

arbitrators, it would be a matter of pure speculation to find that there is a conflict of 
16

interest that will not be resolved. See Lawson v. Archer, 267 S.W.3d 376, 384 

(Tex. App.—Houston [14th Dist.] 2008, no pet.) (“We do not know who the 

specific arbitrators will be; and, like the United States Supreme Court . . . , we 

‘decline to indulge the presumption that the parties and arbitral body conducting a 

proceeding will be unable or unwilling to retain competent, conscientious and 

impartial arbitrators.’”) (quoting Gilmer v. Interstate/Johnson Lane Corp., 500 

U.S. 20, 30 (1991)).

Regarding Appellees’ argument that there is a conflict of interest because 

Appellants’ legal counsel is also legal counsel for the ACSA, Appellants contend 

that there is no indication from the record that Appellants’ legal counsel will 

violate the rules of professional conduct regarding conflicts of interest by

representing Appellants and counseling the arbitrators. Appellants also contend 

that there is no evidence that the ACSA will violate the provisions of the FAA by 

engaging in conduct that would authorize a court to vacate the arbitrators’ decision.

If indeed Appellants’ counsel were to continue to represent Appellants and advise 

the arbitrators in ruling on this case, there would be no doubt that the arbitral 

forum would be partial. But we cannot speculate as to what will happen in the 

future.

Appellees also argue that Venture has exclusive access to prior ACSA 

arbitration decisions allowing Venture to tailor its arbitration strategy based on 

prior successful or failed arguments and the tendencies of particular arbitrators.

The rules require the ACSA to publish, to all of its members, a bulletin that 

includes the details of all cases arbitrated, the awards made, the full text of all 

decisions, the names of all the parties, and any other information that may be of 

interest to its members. Appellees assert that there is no mechanism for a 

nonmember to receive or request the ACSA’s arbitration bulletins. As to this 

issue, the rules are again silent. We do not know whether Appellees would be 
17

denied access to these bulletins or to the information contained in the bulletins if 

Appellees presented their request to the ACSA or if Appellees requested such 

information in discovery.

Because Appellees failed to present evidence that the ACSA will in fact 

provide biased arbitrators to hear Appellees’ case, that Appellants’ legal counsel 

will in fact continue to represent both Appellants and the ACSA during the

arbitration proceedings, or that Appellants have access to pertinent information that 

Appellees cannot in fact obtain, Appellees have failed to show that the rules 

prevent them from effectively vindicating their rights in the arbitral forum.

Therefore, Appellees’ argument that the arbitral forum will be biased does not 

support the trial court’s determination that the arbitration agreement was 

unconscionable.

Another issue that Appellants raised in their briefs, but that we did not 

address in our first opinion, is whether the arbitration agreement was procedurally 

unconscionable. Although Appellees candidly admitted in their response brief that

this argument was probably not the basis of the trial court’s finding that the 

agreement was unconscionable and although Appellees stated that they were not 

advancing this argument on appeal, we will nevertheless address this issue because 

it was presented to the trial court for consideration in its determination of whether 

the arbitration agreement was unconscionable. The trial court did not express its 

reasons for finding the agreement unconscionable, nor did the trial court 

specifically exclude Appellees’ procedural argument as a basis for its finding of 

unconscionability; to avoid addressing it at a later date, we will address it now.

Procedural unconscionability “refers to the circumstances surrounding the 

adoption of the arbitration provision.” In re Halliburton Co., 80 S.W.3d 566, 571 

(Tex. 2002). Appellees argued that the arbitration agreement was procedurally 

unconscionable because Venture misrepresented the terms of the contract and 
18

fraudulently induced Appellees to enter into the contract as a result. However, this 

argument goes toward Appellees’ misrepresentation and fraudulent inducement 

claims as to the contract as a whole, not as to the arbitration agreement itself. 

“[D]efenses must specifically relate to the Arbitration Addendum itself, not the 

contract as a whole, if they are to defeat arbitration. Defenses that pertain to the 

entire . . . contract can be arbitrated.” FirstMerit Bank, 52 S.W.3d at 756 (footnote 

omitted). Therefore, this argument does not support the trial court’s finding that 

the arbitration agreement was unconscionable.

Appellees also argued that the arbitration agreement was procedurally 

unconscionable because Venture was the sole drafter of the agreement and yet 

Venture did not disclose the ACSA rules, describe the rules, or warn that the rules 

were biased against Appellees. Appellants counter that the rules were readily 

available on the ACSA website and that Appellees had notice of and an 

opportunity to review the rules before agreeing to arbitration under them.

Appellants were not present when Appellees entered into the contracts.

Ocho Gin Company, Ltd., a cotton gin that allowed Appellants to present their 

proposal to any interested farmers, acted as a facilitator between Appellants and 

Appellees. One of Ocho Gin’s employees, who marketed and sold cotton for the 

gin, was the person who mainly facilitated Appellees’ enrollment into the Venture 

Cotton pool. She testified at the hearing on the motions to compel that she vaguely 

read the arbitration provision in the contract but that she did not tell Appellees that 

there was an arbitration provision. Brewer testified that he did not know there was 

an arbitration provision in the contract when he signed the contract. Ocho Gin’s 

employee also testified that she did not go to the ACSA website to obtain a copy of 

the ACSA rules for arbitration and that she did not know what the rules required or 

prohibited. However, she believed that most cotton contracts contained an 

arbitration clause. It does not appear from the record that Appellees read the 
19

contract before signing it. And although each Appellee signed at least one of the 

documents in the contract, some of them did not sign the specific document that

contained the arbitration provision.

Regardless of whether Appellants or Ocho Gin told Appellees that there was 

an arbitration clause in the contract and regardless of whether Appellees read the 

contract or read the rules, the contract clearly provided that “[a]ll disputes will be 

resolved pursuant to binding arbitration pursuant to the arbitration rules of the 

American Cotton Shippers Association.” A party is bound to the contract he signs 

regardless of whether he read it or believed it had different terms. In re McKinney, 

167 S.W.3d 833, 835 (Tex. 2005) (orig. proceeding). While the ACSA rules were 

not attached to the contract, they were referenced and readily available on the 

ACSA website. “A contractual term is not rendered invalid merely because it 

exists in a document incorporated by reference.” In re D. Wilson Constr. Co., 196 

S.W.3d 774, 781 (Tex. 2006) (citing Owen v. Hendricks, 433 S.W.2d 164, 166 

(Tex. 1968)); see also In re December Nine Co., 225 S.W.3d 693, 702 (Tex. 

App.—El Paso 2006, orig. proceeding.) (“We fail to see how having to request a 

copy of the incorporated Rules is so onerous a requirement as to amount to

procedural or substantive unconscionability.”).

Appellees’ complaint that not all Appellees signed the specific document 

that contained the arbitration provision is also without merit. It is well settled that 

an unsigned document may be incorporated by reference in the signed document. 

Owen, 433 S.W.2d at 166. Here, each Appellee signed a document titled “Annual 

Enrollment Agreement.”2 The Annual Enrollment Agreement provided that the 

undersigned agreed to sell and deliver cotton to Venture in accordance with the 

Membership and Marketing Agreement. The Membership and Marketing 

 

2We have not been able to locate the signature page of the Annual Enrollment Agreement for 

Appellee Gerardo Froese. However, we have located his signature on the document titled “Terms and 

Conditions of Enrollment,” and this document also references the Membership and Marketing Agreement.
20

Agreement contained the arbitration clause. Thus, the failure by some Appellees 

to sign the Membership and Marketing Agreement does not invalidate the 

arbitration agreement. See, e.g., Teal Constr. Co./Hillside Villas Ltd. v. Darren 

Casey Interests, Inc., 46 S.W.3d 417, 420 (Tex. App.—Austin 2001, pet. denied)

(holding that an unsigned arbitration agreement contained in a document 

incorporated by reference into the signed contract constitutes an enforceable 

arbitration agreement). Appellees have not shown that the arbitration agreement 

was procedurally unconscionable. Therefore, Appellees’ procedural 

unconscionability arguments do not support the trial court’s finding that the 

arbitration agreement was unconscionable.

Although not addressed on appeal by the parties, Appellees raised two other 

arguments in the trial court in support of their claim that the arbitration agreement 

was substantively unconscionable. Because the trial court was presented with 

these two additional arguments, we feel that, in this interlocutory appeal, we must 

determine whether either argument could support the trial court’s conclusion that 

the agreement was unconscionable.

The first argument we will address is whether Appellees would be limited in 

their ability to adequately present their counterclaims in the arbitration forum as a 

result of the provision in the rules that provides that “in no case shall the matters 

submitted by the defendant be any other than those directly related to the 

transaction on which the original complaint is made.” Appellees argued that this 

rule prohibits any meaningful assertion of counterclaims by Appellees against 

Appellants, and they further claimed that there is a real risk that Appellees will not 

have a meaningful forum in which to adjudicate their counterclaims. Specifically, 

Appellees argued that they would be barred from bringing claims under the DTPA, 

bringing claims for consequential damages, and bringing claims for punitive 

damages. At the hearing on the motions to compel arbitration, Brewer testified 
21

that the rules required him to waive any counterclaims against Appellants, except 

as to the manner in which Appellants framed the dispute.

We have previously addressed Appellees’ argument that they cannot recover 

certain damages under the ACSA rules, and we have now severed from the 

agreement the ACSA rule that limited arbitration awards so that the rules no longer 

limit the type of damages that the arbitrators can award. It appears from the 

arguments of the parties that Appellants have initiated an arbitration proceeding 

against Appellees for breach of contract. The rules require that any counterclaim 

filed by Appellees be “directly related to the transaction on which the original 

complaint is made.” We do not see how any of Appellees’ counterclaims, such as

fraudulent inducement, would be barred under the ACSA rules. To the contrary, it 

appears to us that the claims that Appellees have raised against Appellants in the 

trial court are “directly related” to the contract—“the transaction”—that Appellants 

have claimed Appellees breached. We do not believe that Appellees will be 

limited in their ability to adequately present their counterclaims in the arbitral

forum. Therefore, this argument also does not support the trial court’s conclusion 

that the agreement was unconscionable.

The second argument that was presented to the trial court but that was not 

presented on appeal is whether Ocho Gin is subject to the arbitration agreement. 

Appellees argued at the hearing on the motions to compel arbitration that the 

arbitration rules deprived them of their right to pursue claims against Ocho Gin for 

joint and several liability because Ocho Gin was not subject to arbitration and that 

the arbitral forum did not have any jurisdiction over Ocho Gin. Appellants 

responded in a post-hearing brief that, although Ocho Gin was a non-signatory to 

the arbitration agreement, Ocho Gin should be compelled to arbitration based on 

contract principals such as agency and estoppel.
22

Even if we assume that Ocho Gin is not bound by the arbitration agreement 

and that Appellees cannot pursue their claims against Ocho Gin in arbitration 

without Ocho Gin’s consent, we have not found any authority that stands for the 

proposition that an arbitration agreement is unconscionable under such 

circumstances. We have found, however, authority that suggests such 

circumstances would not render the agreement unconscionable. See In re Palm 

Harbor Homes, Inc., 195 S.W.3d 672, 678 (Tex. 2006) (holding third-party 

beneficiary’s limited right, as provided for in the contract, to opt out of arbitration 

did not render the arbitration agreement so one-sided as to be substantively 

unconscionable). Therefore, Appellees’ argument that the arbitration rules deprive 

Appellees of their right to pursue claims against Ocho Gin for joint and several 

liability does not support the trial court’s finding that the agreement was 

unconscionable.

Because we conclude that none of Appellees’ remaining arguments support 

a finding that the agreement was unconscionable and because we have now

severed the ACSA provision that limits the award an arbitrator can give, we find 

that the trial court abused its discretion when it did not grant Appellants’ motions

to compel arbitration.

We reverse the orders of the trial court and remand this cause to the trial 

court for the court to enter an order in which it compels the parties to arbitration 

and in which it stays all proceedings in the trial court until the conclusion of such 

arbitration.

April 30, 2015 JIM R. WRIGHT

Panel consists of: Wright, C.J., CHIEF JUSTICE

Willson, J., and McCall.

3

Bailey, J., not participating.

 

3Terry McCall, Retired Justice, Court of Appeals, 11th District of Texas at Eastland, sitting by 

assignment.