Texas Judiciary Online - HTML Opinion

Importantly, all the=20 homeowners=3D specific evidence = regarding=20 arbitration costs rely on estimates of costs and fees of = arbitration=20 conducted by the AAA.^{^[13]} =20 However, while there is some indication in our record that = Trendmaker may=20 prefer arbitration through the AAA, the=20 arbitration provision at issue in this case does not = require that=20 the AAA determine this dispute. Instead, the clause states = disputes=20 Ashall be=20 decided by arbitration in accordance with the Construction = Industry=20 Arbitration Rules of the American Arbitration Association = promulgated by=20 the American Arbitration Association@ =20 (emphasis added). Such language may authorize the AAA to = administer=20 the arbitration,^{^[14]}=20 but it does not mandate arbitration by the American = Arbitration=20 Association.^{^[15]} =20 Indeed, Trendmaker provided affidavit evidence that a dispute = involving=20 other homeowners in the same subdivision, bringing similar claims = under=20 the same purchase agreement containing the same arbitration = provision as=20 we have here was resolved through arbitration by an independent = arbitrator=20 at a significantly lower cost than the AAA costs attested to by = the=20 homeowners=3D = experts.^{^[16]} =20 Because less expensive alternate methods of resolving this dispute = are=20 available, we need not consider whether the appellees=3D = affidavits regarding the cost of arbitration by AAA arbitrators = will be=20 incurred for purposes of determining the substantive = unconscionability of=20 the arbitration clause.

In sum,=20 the homeowners have identified no evidence or legal authority that = this=20 dispute must be arbitrated through the AAA or that they will = actually be=20 charged the fees they have identified. Cf. In re = FirstMerit=20 Bank, 52 S.W.3d at 757 (concluding there was legally = insufficient=20 evidence the plaintiffs would be denied access to arbitration = based on=20 excessive costs largely due to a lack of evidence the AAA = would =20 actually conduct the arbitration). Moreover, if the parties = are=20 unable to agree on an arbitrator or if the agreed method fails or = cannot=20 be followed, the TGAA authorizes the trial court to appoint an=20 arbitrator. See Tex.=20 Civ. Prac. & Rem. Code Ann. ' = 171.041(b)(1), (2) (Vernon 2005). Under these circumstances, the = trial=20 court erred in finding this arbitration provision substantively=20 unconscionable. Thus, we sustain Trendmaker=3Ds third=20 point of error.

Conclusion

Having=20 sustained Trendmaker=3Ds second=20 and third points of error, we need not address the remaining = issues. =20 Because Trendmaker proved the existence of an arbitration = agreement=20 encompassing the claims at issue and the homeowners failed to = prove their=20 unconscionability defense, we hold the trial court erred in = denying=20 Trendmaker=3Ds motion=20 to compel arbitration of the homeowners=3D = claims.

Accordingly, we = reverse the=20 trial court=3Ds May 13, 2005 = order and=20 remand this case for further proceedings consistent with this = opinion.=20 Because we find there exists an adequate remedy by appeal,=20 Trendmaker=3Ds petition for writ = of=20 mandamus is denied.

/s/ =20 John S. Anderson

Justice

Petition for Writ = of Mandamus=20 Denied; Reversed and Remanded and Substitute Opinion filed May 10, = 2007.

Panel consists of = Chief=20 Justice Hedges and Justices Yates and Anderson.

^{^[1]} The plaintiffs sued Woodwind = Lakes=20 Partnership #3 Ltd., Woodwind Lakes Partnership, Lakeland = Development=20 Company, Mapani, Inc., Kentner P. Shell, Chicago Title Insurance = Company,=20 Centennial Homes, Inc., d/b/a Trendmaker Homes, TMI, Inc., Windham = Holdings, L.P., 422S, Limited Liability Company, Aderus Company, = Mapani=20 Homes, Actington Company, and Actington of Texas Corporation=20 (collectively, the Adeveloper defendants@) and Chevron USA, Inc. d/b/a = ChevronTexaco=20 Corporation and Amerada Hess Corporation (collectively, the = Apetroleum defendants@). The additional defendants are = not=20 material to Trendmaker=3Ds motion to compel arbitration or this=20 appeal. The The homeowners will litigate their claims = against the=20 additional defendants in the trial courtstatus of these additional = defendants and plaintiffs=3D suit against them is not found in the = appellate=20 record.

^{^[2]} Prior to this suit, another group = of=20 homeowners litigated the arbitrability of substantially the same=20 contamination issues, pursuant to the same purchase agreement with = Trendmaker, in cause No. 2002-55598, Bernie Milligan, Hank = Williams,=20 and Brian and Donna Kibler v. Centennial Homes, Inc., d/b/a = Trendmaker=20 Homes, in the 281st District Court of Harris County (the = AMilligan case@). The parties consisted of five = claimants=20 who purchased three homes from Trendmaker. The Milligan case = was=20 referred to arbitration.

^{^[3]} We refer to husband and wife = claimants=20 collectively by last name.

^{^[4]} This damages estimate is based on = a=20 statement by the homeowners=3D counsel at the May 13, 2005 hearing and = from=20 Trendmaker=3Ds reply brief in this court; the = homeowners did=20 not allege a specific damages amount in their = petitions.

^{^[5]} See Tex. Civ. Prac. & Rem. = Code=20 Ann. '' 171.001 - .098 (Vernon 2005). The = parties=20 agreed by signing the purchase agreements containing the = arbitration=20 agreement that such agreement to arbitrate Ashall be enforceable under the = prevailing Texas=20 arbitration law.@

^{^[6]} In contrast, when an arbitration = provision=20 is governed by the Federal Arbitration Act (the AFAA@), a petition for writ of mandamus is = the proper=20 mechanism to challenge a denial of arbitration. See In re = Halliburton=20 Co., 80 S.W.3d 566, 567 (Tex. 2002); Am. Med. Techs., Inc. = v.=20 Miller, 149 S.W.3d 265, 269 (Tex. App.CHouston [14th Dist.] 2004, no = pet.). =20 Trendmaker has alternatively filed a petition for writ of mandamus = in the=20 event the FAA is held to be the governing statute.=20

When the FAA applies to a specific = contract, it=20 preempts the TGAA and governs the agreement unless the parties=20 specifically excluded its application in the contract. = Am. Med.=20 Techs., Inc., 149 S.W.3d at 269. Here, the arbitration = provision=20 in the purchase agreement does not exclude application of the = FAA. =20 However, the FAA applies to all suits in state or federal court = when the=20 dispute concerns a Acontract evidencing a transaction = involving=20 commerce.@ Jack B. Anglin Co. v. = Tipps, 842=20 S.W.2d 266, 269B70 & n.6 (Tex. 1992) (citing = Perry v.=20 Thomas, 482 U.S. 483, 489, 107 S. Ct. 2520, 2525 (1987)); = Am.=20 Med. Techs., Inc., 149 S.W.3d at 269. A contract evidences = interstate=20 commerce if it affects interstate commerce. Am. Med. = Techs.,=20 Inc., 149 S.W.3d at 269; In re Educ. Mgmt. Corp., 14 = S.W.3d=20 418, 423B24 (Tex. App.CHouston [14th Dist.] 2000, orig.=20 proceeding). When, as here, an agreement is silent as to = whether the=20 FAA applies, the question of whether the transaction affects = interstate=20 commerce is one of fact. See In re Educ. Mgmt. Corp., = 14=20 S.W.3d at 422.

Interstate commerce is evidenced by, = inter=20 alia, location of headquarters in another state, manufacture = of=20 components in a different state, transportation of goods across = state=20 lines, and billings prepared in another state. Stewart = Title=20 Guar. Co. v. Mack, 945 S.W.2d 330, 333 (Tex. App.CHouston [1st Dist.] 1997, writ = dism=3Dd w.o.j.). Here, it is undisputed = Trendmaker=20 is a Texas corporation selling real property located within Texas = via=20 purchase agreements executed solely in Texas. The = only evidence Trendmaker offers that purports = to show a=20 transaction in interstate commerce are two earnest money checks = drawn on=20 out-of-state banks by homeowners LeBlanc and Woodard. This = isolated=20 factor is insufficient to constitute interstate commerce and = invoke the=20 FAA. See Jack B. Anglin Co., 842 S.W.2d at 270 &=20 n.6.

^{^[7]} The arbitration provision at = issue here is=20 broad form in nature, evidencing the parties=3D intent to be inclusive rather than=20 exclusive. See Pepe Int=3Dl Dev. Co. v. Pub Brewing = Co., 915 S.W.2d 925, 928, 930 (Tex. = App.CHouston [1st Dist.] 1996, no writ) = (construing=20 arbitration clause containing language providing Aany controversy or claim arising out of = and/or=20 related to this contract, or to the breach thereof, shall be = settled by=20 binding arbitration@ as broad form in nature). =

^{^[8]} We recognize fraudulent = inducement is=20 generally a separate defense from unconscionability. See = In re=20 FirstMerit Bank, 52 S.W.3d at 756-58. However, the = parties have=20 incorporated fraudulent inducement into the discussion of the=20 unconscionability defense. See Universal Computer = Consulting=20 Holdings, Inc. v. Hillcrest Ford Lincoln-Mercury, Inc., Nos.=20 14-04-00819-CV, 14-04-01103-CV, 2005 WL 2149508, at *2 n.6 (Tex.=20 App.CHouston [14th Dist.] Sept. 8, 2005, no = pet.) (not=20 designated for publication).

^{^[9]} There is some slight variation = among the=20 affidavits filed by the homeowners. For example, several of = the=20 homeowners=3D affidavits state Trendmaker=3Ds Aagent@ represented to them that arbitration = applied only=20 to construction defects. They also contain statements to the = effect=20 that, had they known Trendmaker would attempt to compel = arbitration in a=20 case such as this, involving fraud and nondisclosure of = environmental=20 issues, they would never have agreed to the arbitration = provision. =20 Additionally, homeowner Garth, an attorney with extensive = experience in=20 construction defect cases, including several involving similar = arbitration=20 clauses, further states in one of his affidavits, = AUpon inquiry, Trendmaker=3Ds agent specifically represented to me = that the=20 arbitration clause would only apply to claims for defects in = the=20 construction of the home which would be covered by the Warranty = Plus=20 Program.@ Ultimately, however, none of = these=20 variations in the language of the affidavits affect our = disposition of=20 this issue.

^{^[10]} Additionally, other = than a=20 statement in Garth=3Ds affidavit, there = was no=20 evidence from the other homeowners that they asked any questions = or=20 requested any explanations of the arbitration provision. See In = re=20 Rangel, 45 S.W.3d at 787 (noting that the lack of questions or = requests for explanations of a contract supported the trial=20 court=3Ds finding that = there was no=20 showing of procedural unconscionability).

^{^[11]} Nor have the homeowners provided = any=20 attachments to the purchase agreement supporting their=20 claims.

^{^[12]} See, e.g., = Olshan Found.=20 Repair Co. v. Ayala, 180 S.W.3d 212, 214 -16, & n.4 (Tex.=20 App.CSan Antonio 2005, pet. denied) = (determining that=20 the trial court properly denied arbitration where a family = conclusively=20 established (1) they had filed a claim with the AAA , (2) the AAA = had=20 determined that three structural engineers would conduct the = arbitration,=20 and (3) the AAA had provided the m with an invoice in the amount = of=20 $33,150, which was over twenty-five percent of the = family=3Ds annual gross income, as their portion = of the=20 arbitration expenses, in addition to a $4,130 filing fee); In = re=20 Luna, 175 S.W.3d 315, 328 (Tex. App.CHouston [1st Dist.] 2004, orig. = proceeding [mand.=20 pending]) (finding the trial court abused its discretion by = compelling=20 arbitration between an employer and employee largely due to the = high costs=20 of arbitration, amounting to more than one-half the = employee=3Ds annual compensation, imposed on the = employee=20 and the limitations on his remedies under the arbitration=20 agreement, which rendered the agreement Aso one-sided in [the = employer=3Ds] favor and so oppressive to [the = employee] as to=20 be substantively unconscionable, given the strong legislative = policy=20 behind the Worker=3Ds Compensation Act@). In contrast, the homeowners = here have not=20 initiated arbitration with any arbitrator at all, the arbitration=20 provision does not limit the homeowners=3D remedies or provide for any fee = splitting=20 arrangement, the homeowners have not presented any specific = evidence=20 regarding their inability to afford arbitration other than = conclusory=20 statements in their affidavits that they cannot afford the=20 experts=3D estimated AAA costs and fees, and this = case=20 presents no public policies countervailing the fact that Texas law = strongly favors arbitration.

^{^[13]} Moreover, the AAA construction = arbitration=20 rules in effect here provide that the AAA may reduce or defer=20 administrative fees in the event of extreme hardship on any party. = See=20 Am.=20 Arbitration Ass=3Dn,=20 Constr. Indus. Arbitration Rules & Mediation, = R‑50: =20 Administrative Fees (eff. Sept. 15, 2005), available at=20 http://www.adr.org/sp.asp?id=3D22004#R50; cf. FirstMerit Bank, 52 S.W.3d = at 757=20 (noting that one of the factors militating against the party = seeking to=20 avoid arbitration by showing excessive fees charged by the AAA was = the=20 AAA=3Ds commercial arbitration rule regarding = deferral=20 or reduction of fees in the event of extreme = hardship).

^{^[14]} See = Am.=20 Arbitration Ass=3Dn,=20 Constr. Indus. Arbitration Rules & Mediation, = R‑2: AAA and=20 Delegation of Duties (eff. Sept. 15, 2005), available at=20 http://www.adr.org/sp.asp?id=3D22004#R2; see also Ambulance = Billings=20 Sys. Inc. v. Gemini Ambulance Servs. Inc., 103 S.W.3d 507, 515 = (Tex.=20 App.CSan Antonio 2003, = no pet.)=20 (noting that a trial court did not abuse its discretion by = ordering=20 arbitration by the AAA when similar language was included in the=20 arbitration provision).

^{^[15]} Likewise, an agreement = authorizing the=20 purchase of Gucci loafers does not prevent the parties from = deciding to=20 buy cheaper shoes. In fact, evidence of the high relative = cost of=20 Gucci shoes may create a bias in favor of less expensive = footwear. =20

^{^[16]} Moreover, as discussed above, the = initial=20 court order compelling arbitration (that was later withdrawn after = various=20 plaintiffs were added and a motion to reconsider was filed) = prescribed=20 arbitration proceedings Aconsistent with the terms and conditions = of the=20 Purchase Agreements . . . or as otherwise agreed upon by the=20 parties.@ (Emphasis added). =20