Supreme Court of Texas

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No. 22-0214

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Houston AN USA, LLC d/b/a AutoNation USA Houston, 

Petitioner,

v.

Walter Shattenkirk, 

Respondent

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On Petition for Review from the

Court of Appeals for the Fourteenth District of Texas

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Argued February 21, 2023

JUSTICE LEHRMANN delivered the opinion of the Court.

The issue in this employment-discrimination suit is whether an 

arbitration agreement is unconscionable, and thus unenforceable, on the 

ground that the costs associated with arbitration are so excessive they 

would foreclose the employee from pursuing his claims. The court of 

appeals held that the agreement is unconscionable and affirmed the 

trial court’s order denying the employer’s motion to compel arbitration. 

Because the burden is on the party resisting arbitration to prove 

unconscionability, and because the evidence does not rise above the 
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speculative “risk” that the employee will actually incur prohibitive costs, 

we reverse the court of appeals’ judgment. 

I. Background

Petitioner Houston AN USA, LLC d/b/a AutoNation USA 

Houston, which owns a car dealership in Houston, hired Respondent 

Walter Shattenkirk in May 2017 to be the dealership’s general manager. 

According to AutoNation, as part of the onboarding process Shattenkirk 

electronically signed and accepted an arbitration agreement requiring 

arbitration of all claims and disputes arising from, related to, or 

connected with Shattenkirk’s employment, including termination and

discrimination claims. The agreement, which AutoNation attached to 

its motion to compel arbitration in this suit, states that any arbitration 

conducted thereunder will be governed by the Federal Arbitration Act 

(FAA) and “in conformity with the Federal Rules of Evidence, the 

Federal Rules of Civil Procedure, and the substantive law governing the 

claims pled.” The agreement provides for a single arbitrator who “shall 

be a retired judge or licensed attorney with experience serving as an 

arbitrator, as mutually agreed to by the parties.” Notably, the 

agreement does not: specify any arbitration rules—such as American 

Arbitration Association (AAA) or JAMS rules—that would apply to a 

proceeding; designate a particular arbitration organization to conduct 

the arbitration; or discuss arbitration costs or how they would be 

allocated between the parties.

Shattenkirk alleges that in August 2017, he heard one of his 

superiors make racist comments and reported the incident to a senior 

director. The following month, AutoNation placed Shattenkirk on a 
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Performance Improvement Plan. On November 6, 2017, AutoNation 

terminated Shattenkirk’s employment. Shattenkirk claims his 

termination was due to discrimination and in retaliation for his 

reporting the racist comments. AutoNation’s position is that it 

terminated Shattenkirk for poor performance.

After Shattenkirk obtained a right-to-sue letter from the Equal 

Employment Opportunity Commission, the parties’ attorneys 

corresponded about arbitration logistics. The discussions largely 

involved attempts to agree on an arbitrator, though the attorneys also 

communicated about the arbitration agreement’s silence on costs and 

governing rules. AutoNation’s attorney noted in one email that 

“AutoNation and the Claimant usually agree to split the arbitration 

costs,” but no further discussion ensued on that topic. 

When additional efforts to agree on an arbitrator proved 

unsuccessful, Shattenkirk sued AutoNation for race discrimination and 

retaliation under federal and state law. AutoNation moved to compel 

arbitration and to stay or dismiss the lawsuit. Shattenkirk opposed the 

motion on the grounds that (1) AutoNation failed to present sufficient 

evidence that he signed the arbitration agreement or, alternatively,

(2) the agreement is unconscionable, and thus invalid, because excessive 

arbitration costs will likely preclude him from effectively vindicating his 

statutory rights. To support his unconscionability defense, Shattenkirk 

submitted his own affidavit, his attorney’s affidavit, and an invoice from 

an unrelated employment arbitration conducted by the AAA. The trial 

court denied the motion to compel, and AutoNation appealed the order. 

See TEX. CIV. PRAC. & REM. CODE § 51.016; 9 U.S.C. § 16. 
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The court of appeals affirmed, holding that the agreement was 

unconscionable because Shattenkirk produced uncontroverted evidence 

that he would likely be required to incur prohibitive arbitration costs. 

657 S.W.3d 331, 336–37 (Tex. App.—Houston [14th Dist.] 2022). The 

court did not address whether Shattenkirk signed the agreement. Id. at 

337 n.3. We granted AutoNation’s petition for review. 

II. Discussion

Under the FAA, a party seeking to compel arbitration must 

establish the existence of a valid arbitration agreement and 

demonstrate that the disputed claims fall within the scope of that 

agreement. Wagner v. Apache Corp., 627 S.W.3d 277, 282 (Tex. 2021). 

As the court of appeals noted, the parties agree that the FAA applies 

and that, if the parties entered into a valid arbitration agreement, 

Shattenkirk’s claims fall within its scope. 

A. Applicable Law on Prohibitive Arbitration Costs

We apply Texas law to determine the validity of an agreement to 

arbitrate under the FAA. In re Poly-Am., L.P., 262 S.W.3d 337, 347 (Tex. 

2008). Under Texas law, an unconscionable contract is unenforceable. 

Id. at 348. “[T]he theory behind unconscionability in contract law is that 

courts should not enforce a transaction so one-sided, with so gross a 

disparity in the values exchanged, that no rational contracting party 

would have entered the contract.” In re Olshan Found. Repair Co., 328 

S.W.3d 883, 892 (Tex. 2010) (citing RESTATEMENT (SECOND) OF 

CONTRACTS § 208 cmt. b (AM. L. INST. 1981)). In limited circumstances, 

the cost of arbitration can render an agreement to arbitrate 
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unconscionable. See Poly-Am., 262 S.W.3d at 356 (holding that 

arbitration provisions in an employment agreement “that operate to 

prohibit an employee from fully and effectively vindicating statutory 

rights are not enforceable”). 

A party opposing arbitration on the ground that the prohibitive 

cost of arbitrating renders the agreement to do so unconscionable has 

the burden of proof. Olshan, 328 S.W.3d at 893 (citing Green Tree Fin. 

Corp.–Ala. v. Randolph, 531 U.S. 79, 90 (2000)). To meet that burden, 

the 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. (quoting Poly-Am., 262 S.W.3d at 356) 

(emphasis omitted). Pertinent factors include whether “the total cost of 

arbitration is comparable to the total cost of litigation” and “the 

claimant’s overall ability to pay the arbitration fees and costs.” Id. at 

894–95.1 Further, making the required showing entails presenting 

more than evidence of the “risk” of incurring excessive costs; it requires 

“specific evidence that a party will actually be charged excessive 

arbitration fees.” In re U.S. Home Corp., 236 S.W.3d 761, 764 (Tex. 

2007) (citing Green Tree, 531 U.S. at 90–91); see also Olshan, 328 S.W.3d 

at 895 (“While we do not mandate that claimants actually incur the cost 

of arbitration before they can show its excessiveness, parties must at 

least provide evidence of the likely cost of their particular arbitration, 

1 In Olshan, we explained that if the costs of proceeding in the two 

forums are comparable, that effectively ends the inquiry because it renders the 

arbitral forum “equally accessible.” 328 S.W.3d at 894–95.
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through invoices, expert testimony, reliable cost estimates, or other 

comparable evidence.”).2

In analyzing claims of excessive arbitration costs, courts must 

consider how the agreement addresses the allocation of those costs. In 

In re FirstMerit Bank, the agreement, like the one at issue here, did not 

mention arbitration costs at all. 52 S.W.3d 749, 757 (Tex. 2001). The 

plaintiffs, who asserted numerous claims premised on their purchase of 

an allegedly defective mobile home, presented evidence of the AAA’s

general filing and administrative fees but “no evidence that the AAA 

would actually conduct the arbitration or charge the specified fees.” Id. 

We also noted that the AAA’s commercial arbitration rules gave the AAA 

discretion to defer or reduce administrative fees in cases of extreme 

hardship. Id. For those reasons, we held that the plaintiffs failed to 

present legally sufficient evidence that they “would be denied access to 

arbitration based on excessive costs.” Id.; see also U.S. Home Corp., 236 

S.W.3d at 763–64 (holding that a schedule of the AAA’s usual fees was 

“not enough” to invalidate an agreement to arbitrate “in accordance with 

the [AAA’s] Commercial or Construction Industry Arbitration Rules, as 

appropriate”). 

2 AutoNation broadly asks us to revisit our jurisprudence on the 

unconscionability defense to contract enforcement, arguing that “most courts 

of appeals have [erroneously] made it easier to prove that an arbitration 

agreement is unconscionable than any other type of contract.” We need not do 

so here, however, because Shattenkirk’s evidence falls short of the evidence 

necessary to hold an arbitration agreement unenforceable under our existing 

unconscionability precedent. We express no opinion on the applicability of the 

unconscionability defense beyond the facts and circumstances presented. 
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Our analysis of arbitration costs in In re Poly-America, an 

employment-retaliation case, is also instructive. The agreement in that 

case provided that the costs would be split, with the employee’s share 

capped at an amount tied to his earnings. 262 S.W.3d at 344. We 

explained that the claimant “has not demonstrated that the ability to 

pursue his claim in the arbitral forum hinges upon his payment of the 

estimated costs; to the contrary, depending upon the circumstances, [the 

claimant] may not have to bear any cost at all.” Id. at 356. Further, we 

saw “nothing that would prevent arbitrators from fairly adjusting 

employee cost provisions when necessary to allow full vindication of 

statutory rights in the arbitral forum,” particularly in light of the 

agreement’s provision that “the arbitrator may modify unconscionable 

terms.” Id. at 357. 

Finally, we find guidance in Olshan, in which homeowners who 

sued Olshan for improper foundation repairs had signed contracts 

requiring arbitration of disputes to be administered by the AAA and in 

accordance with the AAA’s commercial arbitration rules. 328 S.W.3d at 

886–87. In arguing that the prohibitive cost of arbitration rendered the 

agreement unenforceable, the homeowners provided AAA invoices for 

other arbitrations in allegedly similar cases. Id. at 897. We held that a 

showing of the arbitration costs incurred by other claimants “falls well 

short of specific evidence that these particular parties will be charged 

excessive fees” given the absence of evidence that the homeowners’ 

claims were similar in amount or difficulty or that the homeowners had 

“made any effort to reduce the likely charges” through, for example, 

requests for fee waivers or pro bono arbitrators. Id. Further, the 
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homeowners provided no evidence of the comparison of arbitration and 

litigation costs or their ability to pay. Id.

B. Analysis

With this guidance in mind, we turn to the evidence Shattenkirk 

presented to support his assertion that excessive arbitration costs 

prevent him from effectively pursuing his discrimination and retaliation 

claims in the arbitral forum. First, Shattenkirk presented an invoice 

from the AAA charging $34,104 for an unrelated employmentdiscrimination case that included a three-day hearing. In an 

accompanying affidavit, Shattenkirk’s attorney averred that 

Shattenkirk’s case is more complicated and the trial will likely be longer. 

By contrast, the attorney attested that the cost to litigate in court “would 

likely be a few hundred dollars.” He further averred that conducting the 

arbitration in conformity with the Federal Rules of Civil Procedure and 

the Federal Rules of Evidence, as the agreement requires, will make the 

arbitration even more costly. Finally, Shattenkirk presented his own 

affidavit in which he stated that he was unemployed from November 

2017 until February 2020, that he currently earns significantly less than 

when he worked for AutoNation, that he has incurred significant debt, 

and that incurring costs “above what it would cost me to litigate in Court 

will pose even further significant hardship on my family and will push 

my finances further into debt.” AutoNation did not object to 

Shattenkirk’s evidence or present any responsive evidence regarding 

arbitration costs.

As in FirstMerit Bank, Poly-America, and Olshan, this evidence 

falls short of demonstrating that Shattenkirk will actually be charged 
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fees that would prevent him from effectively vindicating his statutory 

rights in the arbitral forum. 

First, as we recognized in Olshan, “the crucial inquiry is whether 

the arbitral forum in a particular case is an adequate and accessible 

substitute to litigation.” 328 S.W.3d at 894. The AAA invoice submitted 

by Shattenkirk, together with the attorney’s affidavit, arguably provides 

a reasonable estimate of the fees associated with the arbitration itself. 

However, we cannot assess whether those fees are what would prohibit 

Shattenkirk from pursuing his rights without knowing (1) how that 

amount relates to the overall expense of litigating versus arbitrating

and (2) Shattenkirk’s ability to afford the former but not the latter. On 

those points, the evidence is quite vague and conclusory. Shattenkirk 

broadly attested that paying “anything above” the cost to litigate would 

cause him financial hardship, but the anticipated cost to litigate, which 

Shattenkirk indicates he can afford, is itself unclear. Shattenkirk’s 

attorney summarily stated that litigation “would likely be a few hundred 

dollars,” but that statement appears to take no litigation costs into 

account other than filing fees associated with initiating the suit. Again, 

absent concrete evidence that the increased cost associated with 

arbitration, compared to litigation, is what forecloses a party from 

pursuing his claims, the party cannot show that those costs are what 

make the expense of arbitrating “prohibitive.”3 

3 Perhaps Shattenkirk and his attorney have entered into a 

contingency-fee agreement pursuant to which the attorney will cover litigation 

costs and Shattenkirk will owe no costs or attorney’s fees unless and until he 

recovers damages from AutoNation. But no evidence of such an agreement is 

in the record. 
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Second, to the extent Shattenkirk has demonstrated that paying

even half the anticipated arbitration fees would prohibit him from 

pursuing claims that he could otherwise afford to litigate, nothing in the 

record indicates that Shattenkirk will actually incur those costs. See 

Poly-Am., 262 S.W.3d at 356 (noting that the claimant “has not 

demonstrated that the ability to pursue his claim in the arbitral forum 

hinges upon his payment of the estimated costs”). As Shattenkirk 

recognizes, arbitration organizations like the AAA and JAMS have 

“standard and customary [employment arbitration] rules” requiring the 

employer to pay all costs except an initial filing fee. Shattenkirk argues 

that because the arbitration agreement at issue fails to similarly 

allocate arbitration fees to the employer, the agreement on its face 

renders the arbitral forum inaccessible. As discussed below, that 

assertion misstates the burden of proof and reads language into the 

agreement that simply is not there. A court may not nullify an otherwise

valid agreement to arbitrate based on purely speculative assumptions 

about the burdens of compelling arbitration.

Again, the agreement is silent on arbitration costs. Shattenkirk’s 

reliance on case law invalidating agreements that affirmatively split 

such costs, assuming those cases were correctly decided, is thus 

misplaced, at least at this stage. See, e.g., AOF Servs., LLC v. 

Santorsola, No. 13-14-00641-CV, 2016 WL 1165829, at *3–4 (Tex. 

App.—Corpus Christi–Edinburg Mar. 24, 2016, no pet.) (holding that a 

fee-splitting provision rendered an arbitration agreement 

unconscionable where there was no cap on the amount the claimant 

would be required to pay, no allowance for the arbitrator to modify the 
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percentage of compensation owed by either party, and some evidence 

that paying the likely cost would prevent the claimant from enforcing

his statutory rights). Shattenkirk seems to assume that he will be 

responsible for half the arbitration fees, and the court of appeals 

similarly viewed the evidence as establishing that AutoNation “would 

require Shattenkirk to split the costs of arbitration.” 657 S.W.3d at 336. 

The only support for that conclusion is an email from AutoNation’s 

counsel stating that “AutoNation and the Claimant usually agree to 

split the arbitration costs.” That email is a far cry from establishing 

that AutoNation even could, let alone would, require Shattenkirk to split 

arbitration costs. See FirstMerit Bank, 52 S.W.3d at 756 (noting the 

Supreme Court’s holding that “an arbitration agreement’s mere silence 

with respect to costs and fees, by itself, is a ‘plainly insufficient’ basis for 

invalidating the agreement” (quoting Green Tree, 531 U.S. at 91)).

We emphasize that our holding should not be understood to 

encourage silence in arbitration agreements regarding payment terms, 

much less to imply that such silence entails no consequences. Our 

holding is far more limited. Assuming that Shattenkirk signed the 

agreement (a question on which we express no opinion), he clearly 

agreed to arbitrate. He cannot leverage the contractual silence about 

who would pay to summarily avoid the arbitration agreement he made. 

See Green Tree, 531 U.S. at 91. However, a bare agreement to arbitrate 

does not in and of itself necessarily include an agreement about what 

Shattenkirk will pay. 

For this reason, it is premature for us, or any court, to assess 

unconscionability—or, said differently, why Shattenkirk cannot, at this 
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stage, meet his burden to defeat arbitration on that ground. When one 

party, like AutoNation, invokes its right to arbitrate a dispute, it must 

show some basis grounded in a contract or other binding law to compel 

the other party, like Shattenkirk, not only to submit to arbitration but 

also to pay some particular amount toward the costs of that arbitration. 

Here, if the court of appeals determines on remand that Shattenkirk 

signed the arbitration agreement, perhaps AutoNation will decide to pay 

for the arbitration itself, thus eliminating any dispute about payment 

terms and, in turn, foreclosing unconscionability as a ground for 

avoiding arbitration. If AutoNation insists on some payment from 

Shattenkirk, and Shattenkirk resists arbitration on that ground, only 

then will the court have to address the legal basis for Shattenkirk’s 

obligation to pay and, if so, what amount. And only once that question 

is answered would an assessment of unconscionability be ripe for 

judicial consideration.4 In other words, the question Shattenkirk 

presents to us today may never even arise, and if it does, it will be 

because of how several antecedent questions are resolved. Had the 

arbitration agreement not been silent, none of these problems would 

have arisen.

4 If the parties in fact reach this point, the resulting analysis would no 

longer depend on speculation but would be grounded on a factual record 

regarding Shattenkirk’s actual obligations. For example, if the parties proceed 

with “standard” cost allocation as reflected by the AAA and JAMS rules 

governing employment arbitrations, the vast majority of the costs will be

allocated to AutoNation, the employer. Based on the evidence presented, 

concluding that costs will likely be allocated in such a way as to make 

arbitration prohibitively expensive for Shattenkirk would be, at best, 

premature now, but further development of the case would convert that 

speculation into something more certain.
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We describe this analytical pathway only to explain why our 

decision today is as limited as it is: that, as the party opposing 

arbitration, Shattenkirk has not met his burden of proving the 

likelihood of incurring prohibitive arbitration costs. See Olshan, 328 

S.W.3d at 897. At least at this stage, “the ‘risk’ that [Shattenkirk] will 

be saddled with prohibitive costs is too speculative to justify the 

invalidation of [the] arbitration agreement.” Poly-Am., 262 S.W.3d at 

356 (citation omitted). As explained, the agreement’s silence on 

arbitration costs does not foreclose the “risk” that Shattenkirk will be 

saddled with prohibitive costs, but neither does it indicate that he will 

actually be charged such costs. The silence cuts both ways, so it is no 

evidence of either. Accordingly, we hold that, at this point, the evidence 

is legally insufficient to support a finding that excessive arbitration fees 

prevent Shattenkirk from effectively pursuing his claims in the arbitral 

forum. See id.

III. Conclusion

Because the court of appeals erroneously held that the evidence 

supports the trial court’s finding that the arbitration agreement is 

unconscionable, we reverse the court of appeals’ judgment. We remand 

the case to that court to address in the first instance the parties’ issues 

regarding whether Shattenkirk signed the agreement.

Debra H. Lehrmann

Justice

OPINION DELIVERED: May 26, 2023