Robinson v. Home Owners Mgmt. Enters., Inc.

• Decision Date: 22 November 2019
• Docket Number: NO. 18-0504,18-0504
• Parties: Nathan ROBINSON and Misti Robinson, Individually and as Representatives of All Persons Similarly Situated, Petitioners, v. HOME OWNERS MANAGEMENT ENTERPRISES, INC. d/b/a Home of Texas and Warranty Underwriters Insurance Company, Respondents
• Court: Texas Supreme Court

590 S.W.3d 518

Nathan ROBINSON and Misti Robinson, Individually and as Representatives of All Persons Similarly Situated, Petitioners,

v.HOME OWNERS MANAGEMENT ENTERPRISES, INC. d/b/a Home of Texas and Warranty Underwriters Insurance Company, Respondents

NO. 18-0504

Supreme Court of Texas.

Argued September 18, 2019

OPINION DELIVERED: November 22, 2019

Justice Guzman delivered the opinion of the Court.

The Federal Arbitration Act embodies a "liberal federal policy favoring arbitration agreements,"¹ but because arbitration is "a matter of consent, not coercion,"² parties cannot be compelled to arbitrate any dispute absent an agreement to do so.³ In this arbitration case, the ultimate issue is whether the parties agreed to arbitrate class-action claims, but the threshold issue is whether a court or arbitrator is empowered to make that determination. The trial court declined to compel arbitration of class claims under the parties' arbitration agreement, and the court of appeals affirmed.⁴

We hold that (1) arbitrability of class claims is a "gateway" issue for the court unless the arbitration agreement "clearly and unmistakably" expresses a contrary intent; (2) "[a] contract that is silent on a matter cannot speak to that matter with unmistakable clarity";⁵ and (3) an agreement to arbitrate class claims cannot be inferred from silence or ambiguity—an express contractual basis is required.⁶ The lower courts correctly applied these principles in declining to compel class arbitration. We affirm.

I. Background

This arbitration dispute between homeowners and their home-warranty company began as an individual action for construction-defect damages and evolved into a putative class action complaining about "deliberately overbroad" releases the warranty company allegedly "demanded" before making covered repairs. Only the class claims are at issue in this appeal.

The homeowners, Nathan and Misti Robinson, purchased a newly constructed residential home that was enrolled in a limited warranty program operated by Home Owners Management Enterprises, Inc. d/b/a HOME of Texas, and Warranty Underwriters Insurance (collectively, HOME). When construction-related defects were discovered, the Robinsons sued HOME and other defendants alleging the defects were not promptly or properly resolved. Over the Robinsons' vigorous opposition, the trial court abated the case and compelled arbitration in accordance with the terms of the limited warranty and its addendum.

The limited warranty requires "mandatory binding arbitration of Unresolved Warranty Issues" and provides that "[t]his binding arbitration is governed by the procedures of the Federal Arbitration Act [FAA]."⁷ The addendum requires the same: "All Unresolved Warranty Issues will be submitted to binding arbitration ... [and] [t]his binding arbitration is governed by the procedures of the Federal Arbitration Act." Both contracts broadly define "Unresolved Warranty Issue" using identical language:

All requests for warranty performance, demands, disputes, controversies and differences that may arise between the parties to this [Limited Warranty or Addendum] that cannot be resolved among the parties. An Unresolved Warranty Issue may be a disagreement regarding:

a. the coverages in this [Limited Warranty or Addendum];

b. an action performed or to be performed by any party pursuant to this [Limited Warranty or Addendum]; [or]

c. the cost to repair or replace any item covered by this Limited Warranty [or Addendum].

The addendum further defines "Unresolved Warranty Issue" as including "any other complaint or controversy regarding this TRCC Addendum between the parties to the Addendum."

Notably, neither the limited warranty nor the addendum mentions delegation of arbitrability questions. Nor does either contract reference class arbitration. And though the American Arbitration Association (AAA) has promulgated rules pertaining to both matters, neither the limited warranty nor the addendum references or incorporates the AAA rules or any others.⁸

Yet, with less than a month before the scheduled arbitration, the Robinsons filed an amended statement of claims seeking to add class-action claims against HOME to the arbitration proceeding. The new—and entirely independent—claims alleged that HOME routinely demanded overbroad releases as a precondition to fulfilling its warranty obligations.

HOME promptly filed written objections to the amended statement and moved to strike the class claims from the arbitration proceeding. HOME objected that the putative class claims were "beyond the scope" of the order referring the case to arbitration, were untimely under that order, and were untimely under the arbitrator's scheduling order. HOME's motion also addressed the merits of class certification, arguing a class could not properly be certified under the rules of civil procedure.

The following week, mere days before the arbitration began, the arbitrator denied HOME's objections and motion to strike "in its entirety," but bifurcated the class claims from the Robinsons' construction-defect claims.

After arbitration on the Robinsons' individual claims had concluded, but before the arbitrator had issued a decision, HOME asked the trial court to clarify the "scope of the issues" referred to the arbitrator and, in the alternative, to strike the Robinsons' class claims. While HOME's motion was pending in the trial court, the arbitrator ruled against HOME on the warranty claims and awarded the Robinsons substantial damages, costs, and fees.⁹ Further, and in accordance with the arbitration agreement's terms, the arbitrator awarded HOME the costs and fees it had incurred compelling arbitration over the Robinsons' resistance.¹⁰

With the arbitrator's award in hand, the Robinsons returned to the trial court to file a "Statement of Claims, Individually and as the Representatives of All Persons Similarly Situated." Once again, the Robinsons' putative class action alleged HOME refused to pay for home repairs unless the homeowners executed overbroad releases. But this time, the Robinsons did not resist arbitration; they demanded it, asserting HOME was required to arbitrate the class claims under the broad arbitration provisions in the limited warranty and addendum.

HOME responded with a motion to dismiss, disputing that the arbitration agreement authorized class arbitration and arguing that only the court, not the arbitrator, could make that determination. The trial court ruled in HOME's favor, concluding that:

1. The question of whether the parties agreed to class arbitration is a question of arbitrability for [the court].

2. The Parties did not "clearly and unmistakably" provide that the arbitrator is to decide issues of arbitrability; thus, [the court] shall determine the issue of class arbitrability.

3. The Court determines and finds that the Warranty Agreement between the Parties does not permit class arbitration.¹¹

On interlocutory appeal,¹² the court of appeals affirmed, holding the trial court applied the correct legal standards and did not abuse its discretion in refusing to compel arbitration.¹³

Affirming the trial court's conclusion that availability of class arbitration is a gateway issue for the court, the appeals court declined to follow our In re Wood decision, which held that an arbitrator should rule on class certification issues when an arbitration agreement is governed by the FAA and the parties have agreed to submit all disputes arising out of the agreement to the arbitrator.¹⁴ After surveying federal authority issued after Wood , the court concluded that Wood "was based entirely on presumably binding [Supreme Court] authority that has since proved to be a chimera" and thus was not binding authority because it "did not really ‘squarely decide’ the issue."¹⁵ The court observed that post- Wood federal authority effectively abrogated the legal premise on which Wood was based. Deciding the "who decides" issue anew, the court explained that (1) the United States Supreme Court has clarified that the matter Wood took to be settled law is actually an open question; (2) every federal circuit court to consider the matter in light of the Supreme Court's clarification has held that class arbitration presents a gateway issue presumptively for determination by the court; and (3) a "bilateral arbitration agreement [that] says nothing about delegating the question of class-arbitration availability to an arbitrator" is not a "clear and unmistakable delegation" to the arbitrator.¹⁶

"Having concluded the trial court properly assumed the role of ‘decider,’ " the court then examined the arbitration agreement's text to determine whether the agreement evinced the parties' plain intent that class-based claims would be arbitrated.¹⁷ Adhering to the Supreme Court's mandate that a party " ‘may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so,’ " the appeals court found no agreement to arbitrate class claims because the agreement contained "not one word about class arbitration."¹⁸

The Robinsons' petition for review presents three issues: (1) who decides whether parties have agreed to class arbitration; (2) whether the Robinsons and HOME agreed to class arbitration; and (3) whether HOME otherwise consented or acquiesced to arbitration of the class claims. Though an order denying an arbitration demand is reviewed for abuse of discretion,¹⁹ the issues on appeal present only questions of law, which are subject to de novo review.²⁰

II. Discussion

Arbitration is "simply a matter of contract between the parties; it is a way to resolve those disputes—but only those disputes—that the parties have agreed to submit to arbitration."²¹ Arbitration is thus governed by two fundamental principles: arbitration agreements are contracts that must be enforced according to their terms, and a party cannot be compelled to arbitrate any dispute absent an agreement to do so.²²

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