Taylor Morrison of Tex., Inc. v. Skufca

• Decision Date: 30 December 2021
• Docket Number: 01-20-00638-CV
• Citation: 650 S.W.3d 660
• Parties: TAYLOR MORRISON OF TEXAS, INC. and Taylor Woodrow Communities-League City, Ltd., Appellants v. Jack Richard SKUFCA, Jr. and Erin Skufca, Appellees
• Court: Texas Court of Appeals

650 S.W.3d 660

TAYLOR MORRISON OF TEXAS, INC. and Taylor Woodrow Communities-League City, Ltd., Appellants

v.Jack Richard SKUFCA, Jr. and Erin Skufca, Appellees

NO. 01-20-00638-CV

Court of Appeals of Texas, Houston (1st Dist.).

Opinion issued December 30, 2021

Carl J. Wilkerson, Bush Rudnicki Shelton, P.C., Arlington, for Appellant.

A. Craig Eiland, Patrick Gurski, Law Office of A. Craig Eiland, Galveston, Shaun Hodge, Hodge Law Firm, PLLC, Galveston, for Appellee.

Panel consists of Justices Kelly, Hightower, and Farris.

Richard Hightower, Justice

Related to the construction of their new home, Jack and Erin Skufca signed an arbitration agreement. The agreement contained a provision delegating to the arbitrator the authority to determine gateway issues of arbitrability, including enforceability of the arbitration agreement. Pursuant to the Federal Arbitration Act (FAA) and the arbitration agreement's delegation provision, homebuilders Taylor Morrison of Texas, Inc. and Taylor Woodrow Communities-League City, Ltd. filed a motion to compel arbitration, seeking to arbitrate gateway questions of arbitrability.

After signing and vacating a series of orders, the trial court ultimately signed an order severing the language of the delegation provision requiring gateway issues of arbitrability to be decided by the arbitrator and modifying the provision to give the trial court, rather than the arbitrator, the right to determine those issues. Concomitantly, the trial court considered questions of the arbitration agreement's enforceability raised by the Skufcas. They argued that certain provisions in the arbitration agreement were unconscionable, including the delegation provision, rendering the arbitration agreement unenforceable. Based on the Skufcas’ arguments, the trial court severed additional provisions of the arbitration agreement, including a provision requiring arbitration with the American Arbitration Association (AAA). Rather than with the AAA, the trial court ordered the parties to arbitrate with an arbitrator selected by the court.

Given its function when viewed in the context of the record, the trial court's order effectively denied Taylor Morrison's and Taylor Woodrow's motion to compel arbitration of gateway issues of arbitrability. Taylor Morrison and Taylor Woodrow (referred to hereafter as Appellants) appeal the order. Because, as discussed below, the trial court abused its discretion in denying Appellants’ motion to compel arbitration, we reverse the order and remand to the trial court.

Background

On September 27, 2016, Jack and Erin Skufca signed a purchase agreement, agreeing to purchase a new home in the Mar Bella subdivision to be constructed by Taylor Woodrow. The Skufcas closed on the home in April 2017 and moved in with their two minor children.

In August 2019, the Skufcas sued Taylor Woodrow. They also sued Taylor Morrison of Texas, Inc., which the record reflects had an ownership interest in Taylor Woodrow. Jack filed suit individually, and Erin filed suit individually and as next friend of their two children. In their petition, the Skufcas alleged that, after living in their new home for less than a year, they developed concerns that mold growth in the home was making their children ill. Testing revealed elevated levels of mold and mold-related toxins in the home. They claimed that their home was defectively constructed, causing moisture problems, which led to mold growth. The Skufcas also alleged that Appellants were aware of mold issues in other Mar Bella homes constructed by Taylor Woodrow but had failed to disclose the issues to them.

Paragraph 11 of the purchase agreement contained an arbitration agreement, which provided in relevant part as follows:

11) Dispute Resolution—Arbitration:

Any and all claims, controversies, breaches or disputes by or between the parties hereto, arising out of or related to this Purchase Agreement, the property, the subdivision or community of which the property is a part ... whether such dispute is based on contract, tort, statute, or equity, including without limitation, any dispute over [an (a)–(h) list of specific causes of action] or (i) any other matter arising out of or related to the interpretation of any term or provision of this Purchase Agreement, or any defense going to the formation or validity of the agreement, or any provision of this Purchase Agreement, including earnest money disputes, this arbitration agreement, allegations of unconscionability, fraud in the inducement, or fraud in the execution, whether such dispute arises before or after closing (each a "Dispute"), shall be arbitrated pursuant to the Federal Arbitration Act and subject to the procedures set forth a follows:

a. This arbitration agreement shall be deemed to be a self-executing arbitration agreement. Any Dispute concerning the interpretation or the enforceability of this arbitration agreement, including without limitation, its revocability or voidability for any cause, any challenges to the enforcement or the validity of the agreement, or this arbitration agreement, or the scope of arbitrable issues under this arbitration agreement, and any defense relating to the enforcement of this arbitration agreement, including without limitation, waiver, estoppel, or laches, shall be decided by an arbitrator in accordance with this arbitration agreement and not a court of law.

b. In the event that a Dispute arises between the parties, such Dispute shall be resolved by and pursuant to the arbitration rules and procedures of American Arbitration Association in effect at the time the request for arbitration is submitted. In the event the American Arbitration Association is for any reason unwilling or unable to serve as the arbitration service, then the parties shall select another reputable arbitration service. If the parties are unable to agree on an alternative service, then either party may petition any court of competent jurisdiction in the county in which the property is located to appoint such an alternative service, which shall be binding on the parties. the rules and procedures of such alternative service in effect at the time the request for arbitration is submitted shall be followed.

c. The Buyer and Seller expressly agree and acknowledge that this Purchase Agreement involves and concerns interstate commerce and is governed by the provisions of the Federal Arbitration Act ( 9 U.S.C. § 1 et seq. ) now in effect and as the same may from time to time be amended, to the exclusion of any different or inconsistent state or local law, ordinance, regulation, or judicial rule. Accordingly, any and all Disputes shall be arbitrated – which arbitration shall be mandatory and binding – pursuant to the Federal Arbitration Act.

....

e. In the event any Dispute arises under the terms of the Purchase Agreement or in the event of the bringing of any arbitration action by a party hereto against another party hereunder by reason of any breach of any of the covenants, agreements or provisions on the party of the other party arising out of this Purchase Agreement, then all fees and costs shall be borne separately between the parties, including but not limited to all attorneys’ fees and expert witness costs resulting from the Dispute. The foregoing provision does not modify any provision of any contract between Seller and any third-party requiring indemnification or establishing a different allocation of fees and costs between Seller and such third party. In the event Buyer is an entity and not a natural person and Seller is the prevailing party the individual signing this Purchase Agreement on behalf of such entity shall also be personally liable for Seller's fees and costs as aforesaid notwithstanding any indication that such individual is signing in a corporate capacity. The provisions of this paragraph shall survive closing or termination of this Purchase Agreement.

f. The Arbitrator shall be authorized to provide all recognized remedies in law or in equity for any cause of action that is the basis of the arbitration.

.... h. To the extent that any state or local law, ordinance, regulation, or judicial rule is inconsistent with any provision of the rules of arbitration service under which the arbitration proceeding shall be conducted, the latter rules shall govern the conduct of the proceeding.

....

l. If any provision of this arbitration agreement shall be determined to be unenforceable or to have been waived, the remaining provisions shall be deemed severable therefrom and enforceable according to their terms.¹

Appellants filed a motion to abate the proceedings and to compel arbitration, seeking "to compel [the Skufcas] to arbitration and, specifically, to submit the determination of the arbitrability of their claims against [Appellants] to arbitration" pursuant to the FAA. Appellants’ motion specifically sought to arbitrate "the gateway determination of arbitrability." They asserted that the trial court "must compel [the Skufcas] to arbitration for the determination of any gateway or threshold issues of arbitrability." Appellants stated that the motion was based on subparagraph (a), which contained a delegation provision, delegating to the arbitrator, among other things, the authority to determine threshold issues of arbitrability, including enforceability of the arbitration agreement and defenses to enforcement.

The Skufcas responded to the motion to compel, opposing it. They claimed that the children were not required to arbitrate their claims because they were non-signatories to the arbitration agreement. They alleged that the children's "injuries [were] brought on by negligence and a breach of duty by the Defendants, not from a contract provision that the children are seeking to enforce."

The Skufcas claimed that the arbitration agreement was substantively unconscionable because it deprived them "of any available remedies afforded to them under applicable Texas Law including statutory laws that would likely not...