In Bonded Builders Home Warranty Association of Texas, Inc. v. Smith, the Fifth District Court of Appeals (Dallas) reversed the trial court’s denial of a motion to compel arbitration. In objecting to the motion to arbitrate, Smith asserted that the arbitration clause inserted in a warranty was unconscionable because “(1) it requires Plaintiffs to ask an arbitrator to award damages against a company that is sending business to the arbitration company; (2) the rules that govern the arbitration are unknown until a pre-approved arbitration company is selected;…and (3) to date, Plaintiffs are unable to access the pre-approved companies or their rules.”
The Fifth District Court of Appeals outlines the standard of review in denying a motion to compel arbitration, the legal standards applicable to a motion to compel arbitration, and Texas law relating to the substantive or procedural unconscionablilty of an arbitration agreement. Unconscionablilty in Texas “is not satisfied by speculation but by specific proof in the particular case of the arbitral forum’s inadequacy.”
