Opinion ID: 2829241
Heading Depth: 2
Heading Rank: 3

Heading: The Law the Parties Chose

Text: Three of the arbitration agreements state that disputes arising out of the contract “shall be resolved by mandatory and binding arbitration administered . . . pursuant to the arbitration laws in your state . . . .” Courts rarely read such general choice-of-law provisions to choose state law to the exclusion of federal law. See Mastrobuono , 514 U.S. at 59; L & L Kempwood , 9 S.W.3d at 127 n.16 . Further, just as the FAA is part of the substantive law of Texas, the FAA would be part of the arbitration laws in Texas. See L & L Kempwood , 9 S.W.3d at 127 n.15 (quoting Capital Income Props. , 843 S.W.2d at 23) . The language of the arbitration clause designating arbitration pursuant to “the arbitrations laws in your state” includes the FAA. See id. at 127–28. Thus, the FAA applies to the three agreements that include the “arbitration laws in your state” language, and the FAA preempts the provisions of section 171.002(a )( 2) of the TAA that would otherwise render the agreements unenforceable. The trial courts abused their discretion in denying Olshan’s requests to compel arbitration based on the unenforceability of the arbitration under section 171.002(a )( 2) in the Kilpatrick, Tisdale and Tingdale cases. In contrast, the Waggoner agreement states that disputes arising out of the contract “shall be resolved by mandatory and binding arbitration . . . pursuant to the Texas General Arbitration Act . . . .” This provision distinguishes the Waggoner agreement from the other agreements and the agreements in L & L Kempwood and Mastrobuono . This is not the same general choice-of-law provision. This provision chooses a state’s substantive law, specifically the TAA, to govern disputes under the agreement. A valid choice-of-law provision makes a conflicts-of-law analysis unnecessary; this provision expresses a preference between federal and state law. Id. The FAA is part of the arbitration laws of Texas and can be applied to arbitration administered pursuant to the laws of Texas. However, the FAA is not part of the TAA, at least to the extent the two are inconsistent. The Fifth Circuit has likewise interpreted an arbitration clause specifically invoking the TAA as designating the TAA to govern all aspects of arbitration under the agreement, to the exclusion of the FAA. Ford v. Nylcare Health Plans of the Gulf Coast, Inc. , 141 F.3d 243, 246 (5th Cir. 1998) (applying Texas law). The court stated the parties may “specify the law governing interpretation of the scope of the arbitration clause.” Id . at 248. The focus of the determination is on the parties’ choice. Thus, the court held that the parties intended the TAA to govern the scope of the arbitration clause. Id. at 249. The language of the Waggoner agreement also indicates the parties’ intention that the TAA govern the scope of their arbitration agreement. The plain language clearly indicates that the parties intend their arbitration to be governed by the TAA rather than merely “the law of the state” or “Texas law.” The parties’ intention that arbitration be administered pursuant to the TAA would be thwarted if the FAA preempted the TAA’s specific provisions. Thus, an agreement specifying that arbitration occur “pursuant to the Texas General Arbitration Act” excludes the FAA’s preemption of section 171.002(a )( 2) of the TAA. 3 Because the TAA would render the Waggoners ’ arbitration agreement unenforceable, and because the FAA was not chosen by the parties, the trial court correctly denied Olshan’s plea in abatement, seeking to compel arbitration of Waggoner’s action against Olshan . However, because the parties in the Kilpatrick, Tisdale, and Tingdale contracts chose to arbitrate pursuant to the laws of Texas, which include the FAA, the FAA preempts section 171.002(a )( 2) of the TAA and precludes those requirements from barring arbitration.