March 23, 2016 Practice Points

Appellate Decision Compelling Arbitration Must Address All Defenses

By Karl Bayer

The Supreme Court of Texas has overturned an order compelling arbitration that was issued by the El Paso Court of Appeals. The decision turns on the appellate court’s failure to address all of the defendant’s arguments supporting her position that the parties’ arbitration agreement was invalid.

In Cardwell v. Whataburger Restaurants LLC, No. 14-1019 (February 26, 2016), Yvonne Cardwell, an El Paso dishwasher, signed a pre-employment acknowledgement stating she understood that any work-related or injury disputes with her employer, Whataburger, would be resolved by arbitration in Dallas. After becoming injured at work, Cardwell filed a lawsuit against her employer in El Paso.

In response to her complaint, Whataburger filed a motion to compel arbitration. Cardwell responded by arguing that the parties’ arbitration agreement was invalid, procedurally unconscionable, and illusory. In addition, Cardwell argued the Federal Arbitration Act did not apply to the dispute, and the arbitral agreement was unenforceable under state law. Although Whataburger eventually agreed to hold the arbitration in El Paso, the trial court denied the company’s motion to compel arbitration. According to the trial court, the parties’ agreement to arbitrate was unconscionable.

Whataburger filed an interlocutory appeal with the Eighth District Court of Appeals in El Paso. The appellate court found that Cardwell failed to demonstrate the parties’ arbitration agreement was unconscionable, reversed the lower court’s decision denying Whataburger’s motion to compel arbitration, and remanded the case with instructions to compel arbitral proceedings. You can read more about the Eighth District’s decision in a previous Disputing blog post.

On appeal to the Supreme Court of Texas, Cardwell claimed the appellate court failed to address each of her asserted grounds for denying Whataburger’s motion to compel arbitration. In a per curium decision that was issued without oral argument, the state high court ruled that Texas’ appellate court committed error when it remanded the case with instructions to compel arbitration.

Since “Cardwell’s various arguments were briefed by both parties,” the Texas Supreme Court stated:

The court of appeals “must hand down a written opinion that . . . addresses every issue raised and necessary to final disposition of the appeal.” TEX. R. APP. P. 47.1. The court of appeals could not order arbitration without either addressing Cardwell’s arguments or remanding the case to the trial court to address them. See Cincinnati Life Ins. Co. v. Cates, 927 S.W.2d 623, 626 (Tex. 1996).

Accordingly, we grant Cardwell’s petition for review and without hearing oral argument, TEX. R. APP. P. 59.1, reverse the judgment of the court of appeals and remand the case to that court for further proceedings.

However this case is ultimately decided, it is clear that arbitration’s goals of being faster and less expensive than litigation will not be achieved. When faced with a decision that is favorable but incomplete, future Texas litigants may wish to consider preempting an appeal by moving for reconsideration and asking the court to address any significant arguments its opinion has omitted.

Keywords: alternative dispute resolution, adr, litigation, unconscionable, every issue raised, incomplete opinion, remand

Karl Bayer is the founder of Karl Bayer Dispute Resolution in Austin, Texas.

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