Texas: Court of Appeals Reversed and Remanded to Grant Motion to Compel Arbitration created by Colleen S.

Austin Brown & Wood, LLP v. J.A. Green Dev. Corp., 327 S.W.3d 859, 866 (Tex. App.—Dallas 2010, no pet. h.), The Court of Appeals of Texas, Fifth District, Dallas, reversed and remanded with instructions to grant the motion to compel arbitration.  Green argued against the enforcement of an arbitration provision based on the defense that it was unconscionable because the provision (1) violated public policy as part of a criminal fraud, (2) was obtained by economic duress, and (3) was obtained in violation of ethical standards issued by the State Bar of Texas. The Court of Appeals of Texas, Fifth District, Dallas, concluded that defendant failed to establish unconscionability as a defense to the arbitration provision.  For that reason, the trial court abused its discretion by denying a motion to compel arbitration. 

 

The Court of Appeals of Texas applied the standard of appeals under Tex. Civ. Prac. & Rem. Code Ann. § 51.016 to the first unconscionability argument but nothing related specifically to the arbitration provision as opposed the engagement agreement.  Under the Federal Arbitration Act, a written provision in a contract to settle by arbitration a controversy shall be valid, irrevocable, and enforceable . . .”  9 U.S.C.S. § 1-16. 

Green relied on an ethics opinion stating that an attorney should normally explain the advantages and disadvantages of arbitration before entering into an engagement letter with an arbitration clause. Tex. Comm. On Prof’l Ethics, Op. 586, 2008.  Such opinions are concerned with matters regarding attorney discipline and are advisory rather than binding. Labidi v. Sydow, 287 S.W.3d 922, 929 (Tex. App.—Houston [14^th Dist.], 2009, orig. proceeding).  The commission recognized it was beyond its authority to address law relating to validity of arbitration clauses between lawyers and clients. Tex. Comm. On Prof’l Ethics, Op. 586, 2008. 

This case established the unfounded claim of unconscionability because the ethics opinion regarding disclosures attorneys should make to clients about arbitration agreements in their engagements letters is not binding in courts and does not reflect Texas public policy, which favors arbitration.  This case made it clear that a party who asserts not knowing there was an arbitration provision in the contract is not a valid defense because the clause was not hidden or obscured. In re Bank One, N.A., 216 S.W.3d 825,826 (Tex. 2007) (per curiam).