Some Points of Interest at the Intersection of Arbitration and
the Judicial System
Royston Rayzor Vickery & Williams L.L.P.
stated in Prima Paint Corp. v. Flood & Conklin
Introduction Manufacturing Co.3 Because an arbitration
As virtually every appellate practitioner provision is severable from the rest of a
eventually realizes, the intersection of contract, courts may only consider validity
arbitration and the judicial system is hardly a challenges “directed specifically to the
simple crossroads. Appellate opinions too agreement to arbitrate” – and not challenges
often show that, by focusing too narrowly on aimed at the contract as a whole.4
“general” rules and “typical” issues relating to Rent-a-Center recognized a second layer of
arbitrability and confirmation, lawyers have “severability.” If a “delegation provision”
missed outcome-changing issues. allows an arbitrator to decide arbitrability,
This article briefly discusses some recent, the delegation provision is itself severable
noteworthy cases at that intersection. While from the arbitration agreement. In other
this article is not comprehensive, these cases words, the delegation provision is an
may stimulate some thoughts about how to agreement to arbitrate, separately
better preserve and present arbitrability and enforceable, contained within a larger
confirmation issues. agreement to arbitrate.5
Faced with a delegation provision, the
Don’t assume that the court must Rent-a-Center plaintiff could not merely
assert unconscionability of the arbitration
agreement as a whole. He needed to make a
The Supreme Court’s 2010 opinion in challenge “specific to the delegation
Rent-a-Center West Inc. v. Jackson provides provision.” Because he did not, his
valuable lessons regarding the arbitrability of unconscionability arguments were for an
the arbitrability question itself.1 arbitrator to decide.6
The default rule is that courts determine Counsel trying to compel arbitration
“‘gateway’ questions of ‘arbitrability,’” such as should look carefully at whether the
the existence of an arbitration agreement, arbitration agreement supports submission
whether the agreement covers the dispute, of arbitrability issues to an arbitrator. Failing
and defenses to enforcement of the to assert a delegation provision may result in
agreement. This default rule does not apply, waiver of the provision.
however, where “clear and unmistakable” Counsel opposed to arbitration must look
evidence shows that the parties agreed to carefully at whether appropriate grounds are
submit gateway questions to arbitration too.2 raised in opposition to a delegation provision.
Most arbitration practitioners are familiar
with the “severability” concept famously
3 388 U.S. 395 (1967).
1 _ U.S. _, 130 S.Ct. 2772 (2010). 4 Rent-a-Center, at 2778 (discussing Prima Paint).
2First Options of Chicago Inc. v. Kaplan, 514 U.S. 5 Id. at 2778-2779.
938, 944 (1995), discussed in Rent-a-Center, at
2777 fn. 1. 6 Id. at 2779-2781.
Failing to do so may result in the same waiver partiality if he does not disclose facts that
of arguments as seen in Rent-a-Center. might, to an objective observer, create a
reasonable impression of the arbitrator's
Is there “evident partiality” because partiality.”10 Under this test, as applied by the
the arbitrator didn’t disclose that? court, “evident partiality is established from
the nondisclosure itself, regardless of whether
Karlseng v. Cooke is a cautionary tale for the nondisclosed information necessarily
arbitrators and counsel with pre-existing establishes partiality or bias.”11
social and professional relationships.7 In that The court concluded that the arbitrator’s
Texas Court of Appeals case, the relationship failure to disclose the relationship was
had grown from a mere acquaintance sufficient to require a finding of “evident
between a magistrate judge and another partiality.”12
judge’s law clerk. During the calendar year The standard for “evident partiality” is not
before the arbitration: the arbitrator and universal. Some federal courts, for example,
counsel treated each other and their wives to apply a higher standard that requires a
two dinners at private clubs and a third at an showing that “a reasonable person would
expensive restaurant; counsel took the have to conclude that an arbitrator was partial
arbitrator to a basketball game with tickets to one party to the arbitration.”13
worth a $1,200 face value; and counsel and The standard for “evident partiality” can
his wife sent a $75 basket of wine to the also vary by context. Industry-specialist
arbitrator and his wife. The relationship was arbitrators are more likely to have social and
suspended during the arbitration but business relationships with counsel and the
resumed afterward. parties. When party-appointed arbitrators sit
Two additional factual findings may help on a panel, prior relationships are even more
distinguish this case. First, the court found likely. But the parties may anticipate this
that the relationship “clearly had business when agreeing to arbitrate, thereby justifying
overtones.” For example, the arbitrator had a higher standard for “evident partiality.”14
sought counsel’s help in making contacts “for One lesson from Karlseng is to tend in
business development purposes.” Second, the favor of disclosing relationships between
court credited evidence that the arbitrator counsel and arbitrator. Another lesson is to
and counsel “presented themselves … as carefully watch the disclosure process to
complete strangers” when they introduced make sure that an arbitrator does not omit
themselves at the start of the arbitration.8 information known to counsel. Arbitrators
The arbitration ended with an award of and counsel also need to prepare themselves
$22 million in favor of counsel’s client. The for “evident partiality” challenges to
opposing party challenged the award’s arbitration awards, so that such challenges do
confirmation on grounds of “evident not appear as after-the-fact surprises.
partiality.” The trial court confirmed the
award, but the challenging party was
successful on appeal.9 10 Id. at *8 (emph. added).
The Court of Appeals applied this test: “a
neutral arbitrator selected by the parties or 11 Burlington Northern R.R. Co. v. TUCO Inc., 960
their representatives exhibits evident S.W.2d 629, 636 (Tex. 1997), quoted in Karlseng,
at *8 (emph. in op.).
7 _ S.W.3d _, 2011 WL 2536504 (Tex. App. – Dallas 12 Karlseng, at *14.
June 28, 2011, no pet. hist.).
13See, e.g., Nationwide Mut. Ins. Co. v. Home Ins. Co.,
8 2011 WL 2536504 at *2-7, 10-13. 429 F.3d 640, 645 (6th Cir. 2005) (emph. added).
9 Id. at *1. 14 Id. at 645-648.
Nothing is “uniform” about enforcing to conclude that Hall Street’s analysis of the
agreements for judicial review. FAA provides a persuasive basis for
construing the Texas act the same way.20
In Hall Street Associates L.L.C. v. Mattel Inc., The Texas Supreme Court concluded that
the Supreme Court held that the Federal the Texas act allows the parties to agree to
Arbitration Act’s grounds for vacating and expanded judicial review of an award.21
modifying arbitration awards are exclusive The court found itself unable to follow the
and may not be modified by contract.15 As a Texas act’s policy of uniformity with other
result, the FAA does not allow enforcement of states’ arbitration laws. The problem, the
an agreement for judicial review of an award court said, was that the states are deeply
for evidentiary support and errors of law.16 divided. With the Texas court’s decision, four
The Supreme Court left the door open for states now permit agreements for expanded
expanded judicial review through other laws. judicial review and five do not.22
The court said that “parties wanting review of With this split among jurisdictions, choice
arbitration awards … may contemplate of law and forum-selection issues become
enforcement under state statutory or more important in drafting and litigating
common law, for example, where judicial arbitration agreements with expanded review
review of different scope is arguable.”17 clauses. Absent such provisions, parties may
The Texas Supreme Court’s recent opinion forum-shop in an effort to find a venue more
in Nafta Traders Inc. v. Quinn shows that the or less favorable to expanded judicial review.
lack of FAA pre-emption has resulted in a
split among the states on the enforcement of Conclusion
agreements for expanded judicial review.18
The line between a court’s authority and
The Texas Arbitration Act, like the
an arbitrator’s discretion is too often
Uniform and Federal Arbitration Acts, lists
simplified by general rules. Skilled counsel,
specific grounds for vacating and modifying
with an open mind and familiarity with key
awards. Like those acts, the Texas act allows
appellate opinions, can recognize the limits of
vacating awards because arbitrators
those general rules and maximize the
“exceeded their powers.”19
likelihood of success in arbitrability and
The Texas Supreme Court criticized Hall
Street for not carefully considering this
ground. The Texas court argued, “When
Brian Miller is Of Counsel to the Corpus Christi,
parties have agreed that an arbitrator should
Texas, office of the 49-lawyer firm Royston Rayzor
not have authority to reach a decision based
Vickery & Williams L.L.P. He is board certified in
on reversible error[,] … a motion to vacate for
civil appellate law by the Texas Board of Legal
such error as exceeding the arbitrator’s
Specialization. His appellate practice focuses on
authority is firmly grounded in the text” of
commercial litigation and on the defense of
§10 of the FAA. The Texas court was “unable
personal injury and civil rights cases. He is a vice-
chair of the Appellate Advocacy Committee of the
ABA Tort Trial and Insurance Practice Section and
15 552 U.S. 576, 578 (2008).
has served in the ABA House of Delegates.
16 Id. at 579.
17 Id. at 590. 20 Nafta Traders, at *4, 6.
18_ S.W.3d _, 2011 WL 1820875 (Tex. May 13, 21 Id. at *7.
22Id. at *7 and fn. 62 (citing Ala, Calif., and N.J.
19TEX. CIV. PRAC. & REM. CODE §171.088; compare cases allowing review), fn. 63 (citing Ga., Me., N.D.,
UNIF. ARB. ACT §23, and 9 U.S.C. §10. Tenn., and Wash. cases refusing review).